What is an Official Settlement Account?

An official settlement account is an account that records transactions of foreign exchange reserves, bank deposits and gold at a central bank.

How Does an Official Settlement Account Work?

For example, the Federal Reserve uses official settlement accounts to keep track of its transactions in gold, dollars or other assets with other countries' central banks.

Why Does an Official Settlement Account Matter?

The official settlement account is a crucial component in the nation's balance of payments. Though the account may keep track of a specific transactions, it also helps record a country's assets with other banks, whether it is running a deficit or surplus in those assets, and the movement of dollars to foreign governments.