The voluntary act of receiving something or agreeing to certain terms in various contexts such as banking, contract law, and real property law.
Account balance refers to the amount of money available in a financial account at a given point in time. It is an essential concept in personal and business finance, indicating the net value of the account.
An instruction printed on a cheque that makes it non-transferable, ensuring that the cheque can only be deposited into the account of the individual or entity named on the cheque, adding an additional layer of security.
An Account Statement is a detailed record of financial transactions for a specific period. It provides a summary of all activities within an account, showing the resulting balances and transactions.
A guarantee that ensures any advance payments made by a customer will be reimbursed if the company cannot fulfill its contractual obligations.
An affiliated company refers to a business entity wherein one company owns less than a majority of the voting stock of the other, or both entities are subsidiaries of a third company. In banking, it involves organizations that a bank owns or controls through stock holdings, or where the bank's shareholders and officers hold significant control or interlocking directorships.
An affinity card is a credit card issued to members of a specific group, such as a club or college, or to supporters of a certain charity. The credit card company donates a portion of each transaction to the affiliated organization.
An annual fee paid to an agent for the work and responsibility involved in managing a loan after it has been signed.
The American Bankers Association (ABA) is a trade organization dedicated to serving the interests of commercial banks and other financial institutions. It is known for its advocacy, education, and publication efforts within the banking industry.
An Asset Protection Scheme (APS) is a program designed to safeguard assets, particularly in the banking sector, by providing guarantees against a portion of an institution’s non-performing or risky assets.
An Automated Teller Machine (ATM) is an electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller.
An Automated Teller Machine (ATM) is a computerized terminal that allows individuals to perform banking transactions, such as cash withdrawals and deposits, without the need for a bank teller. ATMs provide 24-hour electronic access to bank accounts.
The Average Daily Balance is a method commonly employed by banks to compute interest charges, such as on credit card balances, when issuing monthly statements. It involves summing the amount owed on each day of the month and dividing by the number of days in the month.
Bank or brokerage house departments not directly involved in selling or trading. The back office sees to accounting records, compliance with government regulations, and communication between branches.
A Back-to-Back Letter of Credit (L/C) is a secondary letter of credit issued to a different beneficiary, supported by a primary letter of credit. This financial instrument is used in complex, three-party transactions to provide assurance and liquidity to trading partners.
A bad check is a check that cannot be processed due to insufficient funds or a closed account, also known as an NSF (Non-Sufficient Funds) check or rubber check.
A commercial institution that takes deposits and extends loans, concerned mainly with making and receiving payments, accepting deposits, and making short-term loans to private individuals, companies, and other organizations.
A bank charge refers to the amount charged to a customer by a bank for specific transactions, such as depositing a cheque or making a withdrawal from an automated teller machine (ATM). While personal account holders may frequently enjoy periods of commission-free banking, business customers usually incur various tariffs.
A bank deposit is a sum of money placed by a customer with a bank, which may attract interest and have specific accessibility terms. Deposits allow banks to extend loans to other customers, existing mainly on paper in the bank's books.
A preprinted paper slip used to pay cash or cheques into a specified bank account. It is commonly found at the back of chequebooks and utility bills.
Bank Giro Credit (BGC) is a method used to transfer funds electronically from one bank account to another, often used for personal payments, utility bills, and other financial transactions.
A bank line, also known as a line of credit, refers to a bank's moral commitment to lend to a particular borrower up to a specified maximum during a specified period, usually one year. Unlike a legal commitment, it does not involve charging a commitment fee.
A bank mandate is a formal document issued by a bank customer that authorizes the bank to perform specific transactions on the customer's behalf, including opening an account, honoring cheques, and validating other payment orders.
A bank overdraft occurs when an account holder withdraws more money than is available in their bank account, creating a negative balance.
A bank transfer is a method of transferring funds from one bank account to another, either within the same financial institution or between different institutions, through electronic means.
A banker's cheque, also known as a bank draft, is a payment instrument issued by a bank on behalf of a payer, which provides a guarantee of the funds because the bank holds the amount before issuing the cheque.
A banker's draft, also referred to as a bank draft, is a payment on behalf of an individual that is guaranteed by the issuing bank.
A blank cheque is a negotiable instrument with the amount left unspecified by the drawer. It can be used when the drawer wishes to permit the bearer to fill in the amount of money they choose up to an authorized limit.
The concept of a borrowed reserve involves funds that member banks borrow from a Federal Reserve Bank to maintain their required reserve ratios, ensuring they meet regulatory requirements while managing liquidity needs.
A modern method of transferring funds or other assets internationally in an expeditious manner. Typically involving electronic communication channels rather than physical wires.
A call is a financial term used in various contexts, including banking, bonds, and options, signifying the right or action to demand repayment, redeem or buy securities under specific conditions.
A measure of possible worst-case losses in excess of the average used in banking to calculate both capital adequacy requirements and certain performance measures, such as risk-adjusted return on capital (RAROC). It is usually based on the value-at-risk (VaR) methodology.
Cash at Bank refers to the total amount of money held in bank accounts by an individual or company. This can be in the form of current accounts or deposit accounts and is reflected in the balance sheet under current assets.
A cash card is a plastic card that enables customers of retail banks to obtain cash from automated teller machines (ATMs) using a personal identification number (PIN). Many cash cards also function as cheque cards and debit cards.
An important liquidity ratio indicating the extent of a bank's cash reserves relative to its total liabilities. Essential for ensuring a bank's ability to meet short-term obligations.
A cashier's check is a secure payment instrument issued by a bank, which provides a guarantee that the payee will receive the check amount upon demand. It is drawn from the bank's own funds and is widely accepted in financial transactions.
A Certificate of Deposit (CD) is a time deposit offered by banks, credit unions, and other financial institutions with a predetermined interest rate and maturity date.
A depositor's check certified by a bank, promising that the account holder has sufficient funds for the amount, ensuring that the recipient will receive the payment.
A check is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.
A check register is a log, book, or journal where each check issued is posted sequentially.
Check truncation refers to the process of converting a physical check into a digital image for electronic processing and clearing. This method enhances the speed and efficiency of check handling, reduces costs, and mitigates the risks associated with physical check transportation.
A cheque is a preprinted form on which instructions are given to an account provider such as a bank or building society to pay a stated sum to a named recipient. It's a common method for paying debts of various kinds.
A plastic card issued by a retail bank to its customers to guarantee cheques drawn on the customer's current account up to a specified limit. Cheque cards have largely been replaced by multifunctional cards which also function as cash and debit cards.
In various financial contexts, the term 'clear' refers to the process of validating and finalizing transactions, whether in banking, finance, or securities markets. This ensures accurate and timely settlements.
Cleared balance refers to the funds in a bank account that have been processed and are available for withdrawal or use. It excludes any deposits that have not yet been confirmed or cleared by the bank.
Refers to the date when the payer's bank confirms that the funds for a transfer are available and the instructions in a cheque have been processed.
A clearinghouse is an essential financial institution that functions to facilitate the exchange, balancing, and settlement of payments or securities transactions, reducing the complexity and risk associated with such transactions.
A committed facility is an agreement between a bank and a customer that ensures the bank will provide funds up to a specified maximum at a pre-agreed interest rate, typically for a specified period.
A confirmed irrevocable letter of credit adds an additional layer of security for the beneficiary by employing a second bank's confirmation, ensuring payment even if the initial issuing bank fails.
The contract interest rate, also known as the face interest rate or nominal interest rate, is the stated annual interest rate on a loan or bond, before any adjustments for compounding or inflation.
In financial contexts, a correspondent refers to a financial organization that regularly performs services on behalf of another institution within markets that the latter finds inaccessible. This commonly involves a depository relationship to cover expenses and streamline transactions.
Cost of funds refers to the interest cost paid by a financial institution for the use of money, including various liabilities such as money market accounts, passbook savings accounts, and CDs.
A credit card is a plastic card issued by a bank or finance organization allowing the holder to make purchases in shops, hotels, restaurants, petrol stations, etc., on credit.
Credit rationing refers to the allocation of loans to creditworthy borrowers by means other than pure market mechanisms. This often occurs when interest rates are maintained below the level that an unregulated market would set, resulting in excess demand for loans.
A crossed cheque is a cheque that has two parallel lines drawn across its face with the purpose of instructing the bank that the cheque should only be deposited directly into a bank account and not immediately cashed by the bank over the counter.
Currency in circulation refers to the paper money and coins that are circulating within an economy and are counted as part of the total money supply, which also includes demand deposits in banks.
A current account serves as an active account in the banking system where you can deposit and withdraw money via various mediums. It's crucial for personal, business, and international financial management.
A custodial account is a type of account created for a minor by a parent or guardian, often held at a bank or brokerage firm, where the minor cannot make securities transactions without the approval of the account trustee.
A demand deposit is an account balance that can be drawn upon without prior notice to the bank, utilizing various methods such as checks, cash withdrawals from ATMs, or electronic transfers.
A demand loan is a type of loan that must be repaid upon the lender's request, rather than on a predetermined date.
A deposit is a sum of money paid upfront for various purposes, such as reserving a purchase, saving in a bank, or as a security in trading.
A deposit account is a bank account that allows a person to deposit money and earn interest while keeping the funds accessible for withdrawals and transactions.
A certificate issued by a depository, bank, or other company stating what has been deposited for safekeeping.
A discount house, typically a specialized financial institution or bank, focuses on operating in the discount market, primarily dealing with the discounting of bills of exchange, including Treasury bills.
Documentary credit, also known as a letter of credit, is a financial instrument commonly used in international trade transactions to reduce risk. It guarantees that a buyer's payment to a seller will be received on time and for the correct amount.
Domicile refers to the country or place of an individual's permanent home, influencing their civil status and tax liabilities. It is distinct from nationality and residence, encompassing both physical presence and an intention to remain.
Drawdown refers to the drawing of funds against a bank loan or other credit facility. It involves disbursing the loan amount provided by the lender to the borrower in full or in parts over a specific period.
Understanding the role of the drawee in financial transactions, including bill of exchange, cheques, and bank drafts.
The drawer refers to a person or entity who issues a financial instrument such as a bill of exchange or a cheque, instructing the drawee to pay a specified sum of money either immediately or at a later date.
An early-withdrawal penalty is a charge assessed against holders of fixed-term investments, such as certificates of deposit (CDs), when they withdraw their funds before the maturity date.
The Effective Date refers to the specific date on which an agreement, policy, or offering formally goes into effect and becomes enforceable.
In accounting, an endorsement refers to the act of signing the back of a negotiable instrument, such as a check, to transfer ownership or authorize payment.
Euribor is the rate of interest at which banks within the Eurozone lend to one another. It's crucial for determining interest rates for various financial products throughout the region.
A currency deposited in a bank outside its country of issue, providing a cheap and convenient form of liquidity for international trade and investment.
Exact interest is the interest paid by a bank or other financial institution, calculated on the basis of a 365-day year, as opposed to ordinary interest, which is based on a 360-day year.
Excess reserves refer to the funds that a bank holds over and above the required reserve set by the central bank (e.g., Federal Reserve). These funds can be kept on deposit with the central bank, an approved depository bank, or in the physical possession of the bank.
A facility is an agreement between a bank and a company that grants the company a line of credit with the bank. This can either be a committed facility or an uncommitted facility.
Federal funds are reserve balances that private banks in the U.S. hold at Federal Reserve banks. These funds are used for various types of inter-bank transactions, including lending to other banks that have insufficient reserves.
Non-interest-bearing deposits held at the US Federal Reserve System that are traded between member banks. The Federal funds rate or Fed funds rate is the overnight rate paid on these funds.
The Federal Funds Rate is the interest rate at which depository institutions (such as banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. This rate is pivotal in the financial system as it influences many other interest rates, such as those for savings accounts, loans, and mortgages, and it's a key indicator of monetary policy direction in the United States.
The Federal Reserve Board, often referred to simply as the Fed, is the governing body of the Federal Reserve System, the central bank of the United States. Its major responsibilities include overseeing monetary policy, regulating banks, maintaining financial stability, and providing financial services.
FedWire is a high-speed, computerized communications network that facilitates electronic funds transfers between U.S. banks and the Federal Reserve System. It is essential for the transfer of reserve balances and customer transactions.
A niche segment within the advertising industry, focused on the promotion of financial products and services such as mutual fund shares, limited partnership units, and products offered by banks, brokerage firms, and insurance companies.
Financial assets include stocks, bonds, rights, certificates, bank balances, and other securities, distinguishing themselves from tangible, physical assets like real property.
Enacted on November 12, 1999, the Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act, repealed parts of the Glass-Steagall Act of 1933 and the Bank Holding Company Act of 1956, thereby eliminating remaining firewalls between banks, securities firms, and insurance companies.
A company that offers a wide range of financial services under one roof. For example, some large retail organizations offer stock, insurance, and real estate brokerage as well as banking services.
A floating-rate loan has an interest rate that is not fixed and can fluctuate over the loan's tenure. These loans are often tied to short-term market indicators like the London Inter Bank Offered Rate (LIBOR).
Fractional reserve banking is a regulation in the banking industry whereby banks (and other similar institutions) keep reserves that are less than their total deposits.
A Giro is a banking arrangement for clearing and settling small payments, commonly used in Europe. It includes systems like the National Girobank in the UK, Bank Giro, and Bancogiro, along with a colloquial use related to social security payments.
High credit refers to the maximum amount of credit that has been extended to a customer or a company within a specific time frame. This can apply both to banking loans and trade credit from suppliers in different financial contexts.
Understanding Hypothecation: A comprehensive guide to its definitions, applications, and implications in banking, shipping, and tax allocation.
An insured account is a type of account maintained at banks, savings and loan associations (S&Ls), credit unions, or brokerage firms that are protected by federal, state, or private insurance organizations. These accounts are safeguarded against losses, subject to certain limits.
The Inter Bank Offered Rate (IBOR) is the average interest rate at which a selection of banks on the interbank market is prepared to lend to one another.
The interbank rate is the interest rate that banks charge one another for short-term loans, enabling them to manage liquidity and meet regulatory requirements.
An interest-only loan is a type of loan where the borrower is required to pay only the interest for some period of the term, usually until the loan reaches maturity. At the end of that period, the principal is due in full. Unlike traditional loans, it does not require regular principal amortization during the term.
Earnings from international transactions involving services such as insurance, banking, shipping, tourism, and accountancy.
Irrevocable refers to something that is incapable of being recalled or revoked and is unchangeable. For instance, an irrevocable letter of credit issued by a bank guarantees that the bank will lend the money requested if the terms of the contract are met.
A certificate of deposit with a minimum denomination of $100,000, commonly utilized by large institutions. Jumbo CDs often offer higher interest rates compared to smaller-denomination CDs.
A letter provided to a bank by the parent company of a subsidiary applying for a loan, offering informal assurance without a formal guarantee of repayment responsibility.
A letter of credit (L/C) is a financial instrument issued by a bank or other financial institution that guarantees a buyer's payment to a seller will be received on time and for the correct amount.
