# Settlement Risk

*Banking & Payments — Finicade finance glossary*

Settlement risk is the danger you deliver your side of a trade and the counterparty fails before delivering theirs. It's named Herstatt risk after a 1974 German bank failure that left counterparties having paid deutschmarks and never received dollars, because time zones meant the two legs settled hours apart. The remedy, payment-versus-payment settlement through CLS, now covers most major currency trades.

**Also known as:** Herstatt risk, principal risk, delivery risk

**Related terms:** [Settlement (T+1)](https://finicade.com/glossary/settlement), [Clearing House](https://finicade.com/glossary/clearing-house), [Counterparty Risk](https://finicade.com/glossary/counterparty-risk), [Wire Transfer](https://finicade.com/glossary/wire-transfer), [Cross-Border Payments](https://finicade.com/glossary/cross-border-payments)

Source: https://finicade.com/glossary/settlement-risk