Banking/Related Articles

Glossary

• "Bad bank" [r]: Add brief definition or description
• Basel I & Basel II [r]: international banking regulations put forth by the Basel Committee on Bank Supervision of the Bank for International Settlements requiring banks' minimum capital adequacy ratios to be related to the riskiness of their loans. ^[e]
• Bill of Exchange [r]: A written order to pay the holder a stated sum of money at a stated date (otherwise known as a "draft", the person who is paid being termed the "drawer"). ^[e]
• Capital adequacy ratio [r]: The ratio of a bank's capital to its risk weighted credit exposures. May be defined in terms of tier 1 (core) or tier 2 capital. ^[e]
• Central Bank [r]: A government agency that is responsible for monetary policy and the support of the banking system (for example the Federal Reserve Board and the Bank of England). Usually responsible for controlling a country's monetary policy and preserving the value of its currency. ^[e]
• Commercial paper [r]: unsecured debt_instruments that are issued by corporations to meet short term financing needs (usually repayable after 3 months). ^[e]
• Credit easing [r]: A method of making credit more available to individuals and businesses by changing the composition of the assets of the central bank towards less liquid and riskier private sector assets. Unlike quantitative easing, it may be done without expanding the money supply. ^[e]
• Credit risk [r]: The risk that the value of a loan-based security will fall as a result of defaults on the part of borrowers (as distinct from interest rate risks and exchange rate risks). ^[e]
• Debt_instrument [r]: A formal obligation assumed by a borrower to replay the lender in accordance with the terms of an agreement, including bonds, debentures, promissory notes, leases and mortgages. ^[e]
• Derivative [r]: An asset whose value depends upon the expected value of another asset. ^[e]
• Discounting [r]: (i) The action of selling a bill of exchange before its due payment (or "maturity") date "at a discount": that is to say after paying the purchaser a fee for accepting it. (ii) The practice of calculating the current equivalent of a future cost or benefit by the application of a chosen discount rate. ^[e]
• Discount_rate [r]: (i) The percentage by which current value exceeds value in a year's time. (ii) The rate at which banks may borrow at their central bank's discount window. ^[e]
• Discount window [r]: A facility provided by central banks that enables a bank to make secured short-term loans at its central bank's discount rate. ^[e]
• Draft (finance) [r]: Another name for a bill of exchange (termed "bank draft" if issued by a bank: otherwise "trade draft"). ^[e]
• Federal funds rate [r]: The overnight interest rate at which banks lend balances at the Federal Reserve to other banks. ^[e]
• Fiat money [r]: money whose value is determined solely by government order, or "fiat" (as distinct from commodity money that has value because of its scarcity or cost of production). ^[e]
• Interbank market [r]: a market in which a group of banks lend to each other (for example, see LIBOR). ^[e]
• Interest rate risk [r]: The risk that the value of a fixed-rate security or loan will fall as a result of a rise in interest rates. ^[e]
• Leverage [r]: (i) The use of borrowing to increase the amount of money that is available for investment or consumption. (ii) A proportional measure of indebtedness, such as the ratio of a company's debt to its shareholders' equity (the same as British "gearing"), or the ratio of the indebtedness of a household to the net value of its assets (ie net of its debts). ^[e]
• LIBOR [r]: (London Interbank Offer Rate) the rate of interest at which a group of banks (16 banks from seven countries, including the United States, Switzerland and Germany) are willing to lend to each other for periods ranging from a day to a year . ^[e]
• Liquidity [r]: (i) The quantity of available assets in its possession that an organisation could rapidly exchange for cash (assets that cannot be exchanged for cash at a particular time are considered to be "illiquid" at that time); (ii) the funding that is unconditionally available to settle claims through monetary authorities (termed "official liquidity"). ^[e]
• Liquidity risk [r]: the risk that assets cannot be sold at time when cash is needed to meet a commitment. ^[e]
• Liquidity trap [r]: a state of the economy in which an expansionary monetary policy has no effect upon output. ^[e]
• Margin account [r]: an arrangement that enables customers to buy securities with money borrowed from a broker, subject to a minimum maintenance level related to the market values of the securities. ^[e]
• Monetary base [r]: currency in circulation plus bank vault cash plus deposits held by banks at the central bank (termed "high-powered money" in the US, and referred to as M0 in the UK). ^[e]
• Money supply [r]: Add brief definition or description
• Margin call [r]: Add brief definition or description
• Market risk [r]: Add brief definition or description
• Monetary base [r]: currency in circulation plus bank vault cash plus deposits held by banks at the central bank (termed "high-powered money" in the US, and referred to as M0 in the UK). ^[e]
• Money market [r]: Add brief definition or description
• Moral hazard [r]: Add brief definition or description
• Open market operation [r]: Add brief definition or description
• Prime rate [r]: Add brief definition or description
• Qualitative easing [r]: Add brief definition or description
• Quantitative easing [r]: Add brief definition or description
• Reserves (banking) [r]: Add brief definition or description
• Reserve ratio [r]: Add brief definition or description
• Run (banking) [r]: Add brief definition or description
• Securitisation [r]: Add brief definition or description
• Sterilisation, monetary [r]: Add brief definition or description
• Structured investment vehicle [r]: Add brief definition or description
• Value at risk [r]: Add brief definition or description
• Wholesale banking [r]: Add brief definition or description