Oct 30 2011

French > English Financial Glossary: Accord de compensation > Netting Agreement

Category: Financial GlossaryFinancial Translator @ 11:15 am

Plain English explanation:

What exactly is an “Accord de compensation”? There is really little dispute as to the translation of this term, with “Netting Agreement” the almost universal choice. The more relevant question, especially for those who are unfamiliar with financial terminology, is what exactly does a “Netting Agreement” do. Put simply it is a contractual arrangement that allows payables (sums going out) to be offset against receivables (sums coming in). So if Company A owes 100 to Company B and Company B owes 50 to Company A then, if Company B is unable to pay its debts, a netting agreement limits Company A’s exposure to 50. Without a netting agreement Company A would be required to pay its debt to Company B in full even if the latter can’t pay its own debt.

Definition:
Accord de compensation: Convention visant l’extinction d’obligations mutuelles entre deux ou plusieurs parties par balance des positions débitrices et créditrices, le règlement effectif devant être limité au solde net.
Source: Dictionnaire de la comptabilité et de la gestion financière anglais-français (version 1.2)
Author: L. Ménard, J.J Lavoie, M. Arsenault, J.F Joly
Date: 2006

More technical stuff:
English translation: Netting Agreement
Source: Commission Regulation (EC) No 2237/2004
Author: Official Journal of the European Union
Date: 2004

Context:
Lorsque un accord de compensation globale réduit de façon importante le risque de  crédit afférent aux actifs financiers non compensés par des passifs financiers avec la même contrepartie, une entité fournit des informations complémentaires concernant l’effet du contrat. (Commission Regulation (EC) No 2237/2004)

Tags: financial term, legal term, Netting Agreement

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