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    Banking VocabulariesPosted byAdministrator on Sun, Mar 20 2011 05:08 pm

    BankInfoBD.com is committed to provide general knowledge based information for those who want to

    build their career in banking sector. Gaining overall general knowledge on banking terms and

    vocabularies will improve the chance to stand out form the crowd and will help to carry your banking

    job more appropriately.

    As part of our effort, we will add commonly known banking terms and dafination of those banking

    terms in this FAQ type page. This page will be updated with new terms and vocabularies as time goes

    by.

    Contribute us: Let us make this page more informative together. Please share any vocabulary

    with defination you think we should add to this list.

    Common Banking Vocabularies

    ATM

    ATM is an abreviation of "Automated Teller Machine". A bank account holder can withdraw money

    out of his/her bank account through an ATM machine using a special ATM card. ATM machines are

    often located outside of the bank providing offshore banking facility. Today, An ATM not only

    provides money withdrawal facility but also act as a hub of self banking activities. Bank account

    can perform various banking activities including money transfer, check account balance, view

    account statements, send queries to banks, utility bill payments etc.

    Accommodation Maker

    The term is used for a co-make of an agreement who agrees to sign a note to make a loan, but

    he/she receives no direct gain from the agreement or the loan.

    Absorption

    Absorption is the process of renting up newly build or renovated real estate. The term is general ly

    used by estate lenders and developers. Absorption period is the time used to describe the period

    of time required for absorption.

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    Abstract of Title

    It is a written report briefing the history of title transactions and also conditions of title which

    influences a piece of land. It generally is a method to verify the ownership of real estate, parcels

    etc.

    Acceleration Clause

    Acceleration clause is a provision in a document of a loan saying that the full amount of unpaid

    money owed to the lender may get immediately due and payable if the debtor fails to pay.

    Actual Delay Days

    Actual delay days are known as delay days. They are the actual days of the lag times, which is

    the time period which starts after the expiry of the last date of repayment.

    Article of Agreement

    It is a contractual provision where a buyer buys real estate from a seller over a period of time.

    The buyer pays the amount in instalments. Article of agreement is also known as a land contract.

    Account Reconciliation Services

    An account reconciliation service is also known as ARPs, Recons or account recs. This is a service

    that banks provide to a deposit customer in helping reconcile bank account balance. It is a cash

    management service. Basically, it may be simply a listing of paid checks according to serial

    number. At a more advanced level, it may combine electronic data provided by the customer with

    the banks records to reconcile any discrepancies.

    Accumulated Benefit Obligation

    It is the present value of the pension benefits that a person has earned till date. It uses the

    historical compensation rates for income-related benefit plans. The accumulated benefit

    obligations need to be stated in a footnote to the financial statements.

    Adjusting Trading

    Adjusting trading is to sell securities without identifying any or all of the loss from a sale. An

    investor, to hide a loss, pays more for a newly bought security in exchange for a brokers or a

    dealers contract to pay more for a security that an investor intends to sell.

    A broker is not at a loss because s/he purchases an investors underwater bond at above market

    price and sells that investor a new bond at above market price. Such transactions are banned for

    federally insured financial institutions and may also be termed illegal. They are sometimes

    referred as free trading.

    Authenticated Security

    It is an agreement of security between a debtor and a bank that is acceptable to the borrower.

    The acceptance process can be done online where the agreement can be downloaded and printed

    by the parties.

    Affinity Card

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    An affinity card is a card that is jointly offered by two companies, one being a credit card company

    and the other being a special interest group, a professional association, a company etc.

    Accommodation Maker

    An accommodation maker is a person who signs the note of application and renders his credit

    history during the process of application of a loan. The accommodation maker gets no direct

    financial benefit from the loan. This term, accommodation maker, is also used when more than

    one person help each other by rendering liquidity of a negotiable instrument.

    Accretion

    The process of periodic increases in the book value or the balance sheet value of an asset is

    known as accretion. In banking, accretion is a process where the price of a bond that is bought at

    a discount is changed to its par value.

    Aging

    Aging is a report of all outstanding accounts payable or receivable. It shows the

    names of all account debtors or creditors, lists the amount due for each debtor, andalso shows the time periods within which the amount to each debtor is due.

    Allowance for Double Accounts

    It is the reserve for accounts receivable that may not be collectable. These allowances

    are always presented as a reduction from gross receivables that are used to calculate

    net receivables.

    Automatic Stay

    This is an order that becomes active automatically when a person or an organization files for

    bankruptcy. Automatic stay prevents a bank or a creditor from taking the proArrears

    Arrears are the unpaid dividends or bond interest a corporation or the government

    owes its employees, bond holders or stockholders after the due date of the payment of

    the interest is over. Party of the debtor.

    Attrition Analysis

    Attrition analysis is the evaluation of the reduction in the amount of an asset or a

    liability. For example, there might be a reduction in saving account balance because of

    many withdrawals over a period of time.

    Availability Schedule

    This schedule states when a bank will receive credit after the check clearing process

    and when the depositor will be able to access or withdraw the funds. A standard time

    is taken because a bank cannot evaluate every check clearing process.

    Ascending Rate Bond

    Ascending rate bond is a security that has a coupon rate that increases after certain intervals.

    Asset Backed Security

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    Asset backed security is a security which is backed by a valuable asset. That is why this type of

    security is also known as monthly rate of repayment of a secured loan.

    Assignment

    In banking terms, an assignment is the transfer of a contractual agreement between two or more

    parties. The assigner is the party that assigns the contract and the assignee is the party that

    receives the contract.

    Average Daily Balance

    An average daily balance is a computation of average amount that is held in an

    account over a specified period of time. It is usually calculated by adding daily

    balances over a particular period of time and dividing it by the total number of days in

    that particular period.

    Accepting House

    It is banking or a financial organization that specialises in the service of acceptance and

    guarantee of bills of exchange. It specializes in facilitating different negotiable instruments andmerchant banking.

    Account Aggregation

    Account aggregation is an online facility that is made available by some banks or financial

    organizations where an account holder can access his/her account. Transactions such as credit

    facilities, debts and investments etc. can be operated in a single interface or account.

    Asset-Backed Security (ABS)

    ABS is used to express the rate of pre-payments as a percentage of the original number of loans

    in securitized loans that created the security. It is expressed as a monthly rate.

    Adjustable-Rate Mortgages (ARM)

    ARM is also known as variable-rate mortgages or tracker mortgage. It is a mortgage loan with an

    interest rate usually below that of conventional fixed-rate loans. The interest rate may vary

    according to market conditions or a lender may increase or decrease the interest at their

    discretion. That is why they are called variable-rate mortgages.

    ARM are preferred by the borrowers where unpredictable interest rates makes it difficult to obtain

    and manage fixed-rate loans.

    Annuity

    An annuity is the termination of any stream of fixed payments over a specified period of time.

    Usually, it is a life insurance contract sold by insurance companies, financial institutions and

    brokers.

    Annuities may be in the form of regular deposits in ones savings account, monthly insurance

    payments and monthly home mortgage payments. Payments can be weekly, monthly, yearly etc.

    An annuity may be of the following types:

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    Fixed annuities - These are no risk annuities used for low-risk investments such as

    corporate bonds or government securities. Fixed annuities provide a fixed rate, but are not

    regulated by the Securities and Exchange Commission.

    Annuity-due - Under it, payments are made at the beginning of each period. Some

    examples of annuity-due are deposits in savings, insurance payments, rent or lease

    payments etc.

    Equity-indexed annuities - Under it, lump sum payments can be made to an insurance

    company.

    Ordinary annuity (also annuity-immediate) - Payments are made by the end of each

    period.

    Variable annuity - These annuities are regulated by the SEC and allows you to invest in

    portions of money markets.

    Application

    An application is a written statement that requests a change, a proposal etc. from a financial and

    is signed by the person giving the application.

    Automated Clearing House (ACH)

    ACH is an electronic network or a computerized facility used for financial transactions in the U.S.

    ACH electronically combine, sort and distribute interbank credit and debit in batches.

    ACH credit transfers include direct deposit payroll, vendor payments etc. ACH debit transfers

    include consumer payments on insurance premiums, mortgage loans, new applications etc.

    Government and businesses use ACH payments to pay customers instead of using credit cards or

    debit cards.

    Account Reconciliation Services

    These are cash management services where a single or multiple bank services are created to aid

    a depositor in the reconciliation of its bank account balance. It lists paid checks and in some casescombines electronic data given by a customer with the banks records to see whether everything

    matches.

    Account Analysis

    Account analysis is done to check the profitability of each demand account to the bank. It is

    usually done by the bank, but can also be done by anybody provided he/she has enough

    information at hand. The analysis includes net earning that is calculated on the basis of the

    average daily ledger balance minus reserved requirements and float. Net earnings are then

    compared to various activity service charges.

    Administrated Rates

    Administrated rates are interest rates that a bank or a creditor is contractually allowed to change

    at any time and by any amount. A bank can anytime change rates on a savings account or a

    creditor can change the interest rates of the loan anytime s/he wants if not under a binding

    contract.

    All interest rates are categorized into three groups: fixed, administered or floating. As the names

    suggest, fixed interest rate does not change over a long period of specified time. Administered

    interest can change anytime depending on the financial markets, the policy etc. Floating rates

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    change at contractually specific times by contractually specific amounts. Variable rates, on the

    other hand, may change at the creditors discretion.

    Administrative Float

    Administrative float is the total elapsed time for processing checks or other related paperwork. It

    may range from a day to more than a week. It is also known as payment processing float or

    internal float.

    Affirmative Covenant

    It is a provision in a creditors document that requires the debtor to do a task such as providing

    annual audited financial statements to the bank during the term of the loan etc.

    Automatic Bill Payment

    This is a bill payment method that does not use checks. An authorization statement from a

    financial institution is used for paying recurring bills. For example, a customer will need to provide

    a single authorization form or letter to pay for the cable bill each month. Debits and credits are

    made through an ACH (Automated Clearing House).

    Annuity

    An annuity is a life insurance contract usually sold as a retirement investment. It is sold by

    insurance companies, brokers and other financial institutions. An annuity is a long-term

    investment and early withdrawals may be charged with heavy penalties.

    Accretion Bond

    It is a bond that is purchased at a discount and whose book value is increased to the face value.

    Amortization Period

    Amortization period is the time period that starts from the inception of the investment, credit or

    negotiable instruments, and ends upon expiry or maturity of the instrument.

    Usually, the amortization period is considered to calculate interest rate, timeline of instalments

    and the amount of instalments.

    Analytical Solution

    Also known as closed form solutions, analytical solution is simple mathematical techniques and

    models that are used for calculating projections and interest rates by lenders such as banks and

    other financial institutions.

    Analytical solutions are so simple to calculate that they are many times done orally.

    Arbitrage

    It is simultaneous purchase and sale of an instruments or merchandise in different markets. This

    is done to take advantage of price variations in two different markets. For example, some

    purchase gold from a nation where its prices are down or lower than in most places and

    simultaneously sell it in another nation where its prices are high.

    Automatic Stay

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    It is a ban that automatically comes into being after a person or an organization files for

    bankruptcy. The ban prevents the creditors from taking over the property and other assets of the

    debtor.

    Audited Statements

    As its name suggest, audited statements are considered to be reliable because they have been

    carefully examined. Audited statements are financial statements whose reliability has been

    verified, cross-checked and confirmed by auditors. Audit means careful examination.

    Account Analysis

    It is an analysis done to establish the profitability of demand account to the bank or it may be

    used to establish the profitability of a group of demand accounts of a particular owner. The

    analysis is done to identify net earnings based on the average daily ledger balance minus

    reserved requirements and float. Net earnings are then compared with many activity service

    charges.

    Account analysis is usually done by a bank, but it can also be performed by any organization in

    which the deposits are if they have sufficient information to carry on account analysis.

    Account Value

    Account value is the total value of accounts when a person has more than one account within the

    same bank or financial institutions. It is the total value expressed in monetary terms.

    AAA

    AAA is a grade used to rate individual bonds. AAA is the highest rate a bond can have. It is given

    to bonds that give maximum returns at the time of maturity. Usually, this highest grade is given to

    the best debt obligation or a security by a credit rating agency.

    Accepting House

    An accepting house is banking or a finance organization specializing in the acceptance and

    guarantee of bills of exchange. An accepting house specializes in two basic functions which are:

    facilitating the different negotiable instruments and merchant banking.

    Account Aggregation

    This facility is made available to customers of some banks or financial organizations where they

    can handle and operate transactions related to the bank accounts, credit facilities, debt and

    investments etc. through a single interface or account. It is a form of Internet banking, which is

    provided to customers for ease of transaction.

    Account Reconciliation

    It is a process of reconciliation of account balance. Various instruments such as ATM notes, bank

    statements, receipts etc. are considered. It is done at the end of a week, month, financial year or

    at the end of any financial period.

    Bond

    A bond is a debt security authorized by an issuer for a specific period of time and at a fixed

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    interest. Think of it as a loan. When a company is in need of money, it issues bonds which people

    can buy. They are mostly long-term debt securities. What do the buyer of bonds get? They get

    interest. Interest rate of bonds and their time of maturity differ from issuer to issuer.

    Bonds are different from stocks. A bond holder of a company or an organization does not have a

    stake in it whereas a stockholder has an equity stake in it. A bond has a defined term called

    maturity after which it is redeemed. Stocks, on the other hand, can have no such deadline.

    There are various types of bonds such as government bonds, corporate bonds, municipal bonds,treasury bonds and so on.

    Bank Account

    A bank account is where a customer of a bank keeps his money. Funds can anytime be withdrawn

    or deposited in a bank account. There are various kinds of bank accounts such as savings account,

    current account and so on. It is usually denoted by the figures A/c on a bank check.

    Bank Statement

    A bank statement is a printed summary of all the financial transactions over a period of time for a

    particular account. It tells an account holder how much money was spent and deposited, and at

    which particular date it took place. It also calculates the remaining balance in the account.

    Bank statements are available to account holders. Typically, it is printed on sheets of paper and is

    either mailed to the account holder or kept at the local branch for the customer. Some banks also

    offer a shortened form of a bank statement to be printed at ATMs.

    Bankruptcy

    Bankruptcy is a situation when a debtor is unable to return the money of creditors. In some cases,

    bankruptcy is declared by the debtor himself when he knows that he will be unable to return the

    money owed to him by creditors. However, in some other cases, the creditors file a petition when

    a debtor is unable to return their money.

    A person or an organization is officially declared bankrupt when during the legal proceedings

    his/her affairs are turned over to a trustee or a receiver of administration under the bankruptcy

    laws. In most countries, bankruptcy is imposed by a court order.

    Beneficiary

    A beneficiary is a person who receives the benefits of a will, insurance policy, trust, annuity,

    retirement plan etc. from a benefactor. In other words, s/he is a person who receives the money

    or assets of the owner through legal means.

    In case of trusts, beneficiaries of a trust share the equitable ownership of the assets of a trust

    although the legal title is held by the trustee.

    In the case of inheritance, the heir or the heiress receives the property of the owner. The

    beneficiaries of a will are called devisees or legatees.

    Bank Reserves

    Bank reserves are a banks holding of deposits in accounts with their central bank along with

    currency that is held in a banks vault. In some countries, the central bank puts a restriction to

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    how much reserve a bank can keep. Even if there are no restrictions, a bank wishes to hold

    reserves in case of a bank run.

    Bank Run

    A bank run or run on the bank happens when a large number of customers withdraw their money

    from the bank because they believe that the bank might become insolvent.

    The news of insolvency might be a rumor or it might be true, but it does damage a bank when

    their customers believe it and take their money out before the bank supposedly becomes

    insolvent. Because of that, a banks deposits go down drastically and there is greater likelihood of

    default. This increases withdrawals. If the process does not stop, a bank might face bankruptcy.

    A banking panic or bank panic occurs when many banks in a country have a bank run. It can very

    quickly destabilize an economy.

    Billing Error

    Billing error can occur when a charge appears regarding the extension of credit, for example credit

    card, without the knowledge of the cardholder, without the acceptance of the cardholder or when

    it was not properly identified.

    A billing error can also occur due to negligence of accountants or clerks. It may also happen due

    to a creditors failure to credit a payment etc. to an account.

    Balance Transfer

    It is a process of transferring an outstanding balance from one credit card to another. This is

    generally done to lower interest rate on the outstanding balance. Sometimes, transfers may be

    charged with a Balance Transfer Fee.

    Bridge Financing

    Bridge financing is a kind of loan and is also called gap financing. In bridge financing the time and

    cash flow between a short-term loan and a long-term loan is bridged. It generally begins at the

    finish of the time period of the first loan and begins with the beginning of the time period of the

    second loan. That is how it fills up the gap between two loans.

    Balloon Loan

    The final, lump sum payment of a loan after all the previous regular payments is called a balloon

    loan. It is paid before a loan is fully amortized.

    Bank Services Contract

    It is a contract with a bank that states the responsibilities of a bank and the banks customer.

    Bank Specific Liquidity Risk

    It is also known as internal liquidity risk or bank name risk. A bank experiences this risk when it

    loses the confidence of funds providers in a bank because of internal or external problems. It

    results in the crisis of funding.

    Bankers Acceptance

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    It is a short-term financial instrument that involves transactions of import, export, transit, storage

    of goods. It also includes domestic and international transit. Bankers Acceptance is created when

    a bank accepts its obligation to pay the holder of the draft. It is done at a later stage and is not

    relevant to the credit quality or the liquidity of the instrument.

    For an investor, a Bankers Acceptance has the same credit strength as that of a CD issued by a

    bank. They are safe and short-term money market investments.

    Basel II

    Basel II is a common name used for capital guidelines issued by the Bank for International

    Settlements. It is located in Switzerland. These guidelines come from an international committee

    of banking regulators and implemented by rules issued by national regulators.

    Basic Indictor Approach

    Banks that use basic indictor approach need to hold capital for operational risk that is

    equal to the average over the last 3 years of fixed percentage of annual gross income.

    In other words, losses from operational risk are close to the gross income.

    Basic Swap

    Basic swap are a kind of interest rate swap. The net cash flow that the parties agree

    upon in basic swap is based on the difference between two different interest rate

    indexes. Basic swaps are used by banks to hedge basic risks by bolting a net interest

    rate spread between a variable rate cost of funds of one index to a variable rate asset

    of another index.

    Beneficial Owner

    A beneficial owner is one who receives all the benefits or rights of an owner of a

    security when the security is not in his/her name. The security might be in the name

    of a bank or a broker.

    Bounced Cheque

    A bounced cheque is a check that cannot withdraw funds from a bank because there are not

    enough funds in the bank account of the person who signs the cheque. Under these

    circumstances, the beneficiary of the check does not receive funds. Usually, a fee is charged by

    the bank for a bounced cheque.

    Beta-Adjusted Gap

    All interest rates do not change by the same amount, but there is a connection between changes

    in many interest rates. Some rate are sensitive, some are not. In beta-adjusted gap, the volume

    of assets and liabilities that are subject to re-pricing are investigated to see the sensitivity of their

    yields or costs of those assets and liabilities to a benchmark yield or cost.

    Buckets

    Buckets are the predefined time interval groups in gap reports. They represent the time units a

    bank wants to see in their gap reports. It can be a month or years. Small buckets such as a month

    long bucket provide more detail that can be used for getting a more accurate measure of interest

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    rate risk. Small buckets need more number of buckets to reveal the interest rate risk. Usually, a

    bucket for a month is used for the first six months or so and large buckets are used for later years.

    Bridge Loan

    The bridge loan is a real estate loan or a home loan where the current residence or real estate is

    pledged by a borrower as collateral so that the borrower can buy a new residence.

    Check (Cheque)

    A check (or cheque in British English) is a document, usually a piece of paper issued by a bank,

    which orders a payment of money from a bank account. The person whose name appears on the

    check receives the money and the person who owns the check pays the money through his/her

    bank account.

    On a check, the name of the person receiving the money and the amount of money being paid to

    the receiver needs to be specified. For authenticity, the signature of the payer is also required on

    a check along with the date of payment.

    A Check can be used to pay someone where cash or draft is not used.

    Collateral

    Collateral is the security that a borrower pledges of an owned property or other assets to secure a

    loan or other credit. It can be an owned house, company, land or other assets. Typically, a banks

    collateral is your house (only if it is owned by you) for giving a loan. If the money is not repaid

    according to the agreed specifics, the collateral is seized and the ownership is transferred to the

    bank. This legal process to obtain real estate from a borrower who defaults on a mortgage loan

    obligation is called foreclosure.

    Credit Bureau

    Credit Bureau is an agency that collects credit information from various sources and provides it to

    banks, mortgage lenders, credit card companies, individuals etc.

    It is an organization that helps lenders know about the ability of a borrower to pay back the loan.

    Based upon the information provided by a credit bureau, a bank or a lender can vary the rate of

    interest and other terms of a loan.

    A credit bureau is called credit reference agency in the U.K.

    Charge-off

    Charge-off is the declaration made by a creditor that the amount of money being lent cannot be

    recovered. The creditor writes if off as bad debt. Such a situation occurs when the borrower is not

    in a situation to return the money borrowed (as in bankruptcy etc.).

    A charge-off is made to give the bank tax exemption on the debt. However, a charge-off does not

    mean that that debtor is free not to pay the debt or the creditor will not try to collect the money

    borrowed.

    Credit Card

    A credit card is a small square card issued to account holders of a bank to use as a convenient

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    system of payment. Credit cards have a number that is unique to a bank account.

    While shopping, an electronic verification system allows merchants to verify quickly that the card

    is authentic. The person who owns the credit card gives his signature to the merchant. A credit

    card allows a person to remain in a continuing balance of debt, on which s/he will have to pay

    interest.

    Credit cards are of two types: Personal credit cards and business credit cards.

    Co-Maker

    A co-maker is a person who signs a note to guarantee a loan or a promissory note and assumes

    equal responsibility to return it. A co-maker signs his/her name along with the name of the

    original borrower and promises to pay the money in full if the other person defaults.

    A co-maker is also called co-signer.

    Collection Agency

    A collection agency is an agency that recovers loans or other debts from the borrower when the

    creditor (typically banks) fails to recover it from the borrower themselves. Usually when a loan isnot paid back by the borrower on time, the creditor sends reminders through letters and

    telephone calls for the recovery of the loan. When that does not affect the borrower, the credit

    takes the help of collection agencies to recover the loan.

    Collection agency charges a fee or takes a percentage of the total amount owed for their services.

    The rules and regulations for collection of debt by a collection agency differ from country to

    country.

    Credit Card Residual Interest

    Residual interest is the interest that continues to pile up on your credit card balance from the time

    the credit card company sends out a bill to the time when you pay it. The residual interest is

    added to the next payment.

    The biggest drawback of using a credit card is the penalty in interest a user needs to pay when

    the payment becomes late. Even if payment is made on time, if you carry a balance, you need to

    pay penalties in the form of accruing interests. In order to avoid paying penalties, a credit card

    holder needs to pay the bill on the due date and not carry a balance.

    Cashiers Check

    Cashiers Check is a check drawn on the fund of a bank and not against those in a depositors

    account although the depositor paid for the cashiers checks with funds from his/her account. Acashiers check is the guarantee that the recipient gets that there are funds available in the

    account of a person.

    Collective Investment Funds (CIFs)

    CIF is a trust managed and created by a bank or a trust that pool assets from many clients. In the

    United States, the Federal securities laws requires institutions that pool securities to register them

    with the SEC, but the Congress exempted the CIFs from these rules as long as the institution

    offering funds is a bank or an authorized entity and the customers participating are covered by the

    exemption. As far as these limitations are met, CIFs are exempt from SEC registration and

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    reporting.

    Consumer Reporting Agency (CRA)

    The CRA is an agency that collects and evaluates an individuals credit information or other

    information about consumers for the purpose of selling consumer reports to creditors for a fee.

    Usual clients of the CPA are banks, credit card companies, mortgage lenders and other financial

    companies.

    Conventional Fixed Rate Mortgage

    Conventional fixed rate mortgage is fixed rate and offers you a fixed interest rate and payments

    that do not change throughout life or the term of the loan. Fixed rate loan is to be paid back with

    the same interest after 15, 20 or 30 years, as specified in the terms of the loan.

    Cardholder Agreement

    The cardholders agreement includes many elements such as billing dispute remedies, rate of

    service charges, communications with service providers etc. It is a written statement showing all

    the terms and conditions of a credit card agreement.

    Credit Counselling

    Credit counselling is done by credit counsellors where they suggest debt relief solutions and debt

    management solutions to those who seek consultation.

    Closing

    Closing an account is the final state of transaction with the bank holder where both the bank and

    the account holder mutually agree to close an account. To close an account, both debit and credit

    sides need to be equal.

    Cashback

    As an offer, many stores, restaurants etc. let you have cashback when you use your debit card to

    pay, so that you do not have to go to an ATM machine for cash. For example, if you buy something

    for $15 and get $30 cashback, a total of $45 will be deducted from your account.

    Cap

    A cap is the upper limit that regulates the increase or decrease in the interest rates and

    instalments of an adjustable rate mortgage.

    Foreign Currency Surcharge

    It is a charge that is put by some banks and credit card companies when a credit card or a debit

    card or an ATM is used in a foreign country.

    Cash Advance Fee

    When a person uses a credit card to get cash, a basic fee is charged for it, then it is known as

    cash advance fee. Mostly, the fee is fixed as the percentage to the cash advance.

    Cash Letter

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    Cash letter is the letter that accompanies the checks and other financial items with specific

    amounts and directions regarding the transactions etc. Cash letters are sent to a bank for transfer

    to other banks for clearing checks drawn on other banks.

    Capital

    A banks equity accounts are common and preferred stock, surplus and undivided profits.

    Capital Markets Disruptions

    It is a risk of funding problems that arises from problems in secondary markets for financial tools.

    For a bank, capital market disruptions come into being when a bank is only able to sell investment

    assets at undesirable prices.

    Cash and Due from Banks

    This is a banking expression that describes the total sum of assets in cash, funds on deposit with

    other banks, funds on deposit with the Federal Reserve Bank and items in transit with those

    banks.

    Cash Instrument

    Cash instruments are financial instruments/commodities whose value is dependent upon the

    coupon rate, the term or other characteristics. Its value is partly reliant upon prices of an

    underlying cash instrument.

    Some of the cash instruments are municipal securities, corporate securities, government

    sponsored enterprise securities, syndicated loans, credit card receivables, bankers acceptances

    and negotiable certificates.

    Clearing Bank

    A clearing bank is one that can clear funds between banks. Any bank or a provider of banking

    services can fulfil this purpose.

    Cash Management

    Cash management includes many techniques that are used for accelerating cash

    receipts, utilization of banking services effectively, delaying of cash payments,

    increasing the amount of cash for investing purposes, management and expansion of

    liquidity, increase in return from liquid investments.

    Certificate of Deposit

    It is a deposit of funds in a bank that earns interest at a specific rate. Certificate of

    deposit can be secured or unsecured, can be for short-term (a week) or long-term (10

    years), and may have fixed or floating rates.

    Certificate of deposit can also be issued in non-negotiable or negotiable form in book

    entry form or physical form.

    Charges

    Charges are the money paid to the bank for the services is gives. These include overdraft fee,

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    charges for bounced cheques, interest on overdrafts and other similar charges.

    Chattel Paper

    Also called dealer paper, it is a document that has a monetary obligation and a

    security interest. It can be for goods or a lease. An sales contracts that is to be paid in

    instalments and includes a retail purchasers promise to pay along with a security

    interest becomes a chattel paper for a bank when the seller transfers it to another

    party.

    Collected Balances

    Collected balances are also called good funds, available balances or usable funds. These are bank

    ledger balances without any checks in the process of collection.

    Collection Guaranty

    It is a guaranty in which a signer agrees to pay the bank only if the bank is not able to get

    repayment through other means.

    Commercial Letter of Credit

    It is also known as trade letter of credit. Commercial letter of credit is issued by a bank on behalf

    of their customer to a third party. It is a bank promise that payment will be made to the third

    party for the purchase of goods by their customer. If the bank is not paying immediate ly, then the

    transaction can later lead to banks acceptance.

    Compensating Balance

    Compensating balance is a way of paying the bank for providing services. A bank asks a customer

    to maintain a minimum balance in their account to facilitate the banks credit facility. These

    minimum balances are known as compensating balance.

    Compensating balance is also the amount of deposit balances required to counterbalance the cost

    of deposit, cash management or other bank services. The bank service charges for services used

    by a customer are used to determine the level of balances to be left with a bank. Modifications

    are made to reduce the total deposit for reserve requirements and float.

    Consideration

    Consideration in legal terms means the benefit that a borrower gets in exchange of a repayment,

    a guarantee or a pledge security to a bank. More often than not, the consideration is the proceeds

    of a loan. The value of the consideration needs to be directly or indirectly beneficial and

    meaningful.

    Contagion

    Contagion is the risk of a crisis in a bank, market, currency spread or a country. Both upward

    contagion and downward contagion are worrying for regulators. In upward contagion, problems in

    a single financial institution spread to others to create problems in the entire system. In

    downward contagion, the systemic problems go down to individual banks, accelerating the

    problem because individual banks are relatively more vulnerable to such crisis.

    Continuing Guaranty

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    In this type of guaranty, a guarantor agrees to guarantee all future loans made to the borrower of

    a bank. There are not only loans that are part of the transaction under which the guarantee is

    given, but all loans.

    Continuous Repo

    Continuous Repo, also known as open repo, is a series of overnight repos that are renewed

    everyday. It does not have a specified term and is terminated whenever either party requests a

    termination. Continuous repos are generally used with bank sweep accounts.

    Cardholder Agreement

    It is a written statement that depicts all the terms and conditions of a credit card agreement. The

    cardholder agreement has many elements like billing dispute remedies, rate of service charges,

    communications with credit card companies/service providers etc.

    Controlled Disbursement Bank

    This kind of bank is usually located outside the local area and provides better management

    control over checks being presented.

    Covenants

    Covenants are also known as indenture covenants or protective covenants. They are restrictions

    placed upon a debtor through a bank loan agreement or bond indenture agreement. It is created

    to protect creditors from unsecured credits. There are four common covenants namely issuing new

    debt, merging with another company, selling corporate assets and paying dividends if some

    minimum financial standards are not maintained.

    Credit Counselling

    Credit counselling is a counselling session where the counsellor advises on debt relief solutions

    and debt management solutions.

    Current Liabilities

    Current liabilities are liabilities that are considered for the shortest period. They are

    accounts payable, bank overdrafts, short-term accounts, short-term bank debt and

    other items of short duration.

    Custodial Account

    A custodial account is a bank account that is opened by a guardian or a parent of a

    child who is not yet of legal age. The account is maintained by the adult until the child

    reaches the legal age of holding a bank account.

    Central Bank

    A central back, reserve bank or monetary authority is a public institution that manages a nations

    currency, money supply and interest rates. Usually, central banks also watch over the commercial

    banking systems of their country.

    Unlike commercial banks, a central bank creates the nat ions money, prints the nat ional currency,

    sets the reserve requirement, acts as a lender of last resort to the banking sector at the time of

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    crisis etc.

    Central banks also keep a watch on the behaviour of commercial banks to prevent them from

    reckless or fraudulent behaviour. In most countries, central banks are independent from politi cal

    interference.

    Some of the examples of central banks around the world are: The Federal Reserve of the United

    States, European Central Bank, Reserve Bank of India and the Peoples Bank of China.

    Commercial Bank

    A commercial bank is also called a business bank. It is a financial mediator that provides facilities

    to the businesses such as instalment loans, business loans, issue bank checks and bank drafts.

    They, like other banks, provide transactions through internet banking, telegraphic transfer and

    other similar means.

    Other than that, commercial banks also provide standby and documentation letter of credit,

    private equity financing, cash management, safekeeping of documents, insurance, brokerage, unit

    trusts, performance bonds etc. Large commercial banks have their own investment bank arms.

    Commercial banks also offer their services to the general public.

    Compound Interest

    Compound interest is interest paid on the principal amount and on the interest built up over the

    years. Interest compounds when the original amount and the interest earned on that are

    reinvested. You earn more money on compound interest than you would with simple interest.

    For example, if you have the original amount of $50,000 and the interest rate is 5%, compounded

    over 3 years. During the first year, you will receive $50,000 x .05, which is $2,500 in interest. In

    the second year, your original amount would have increased to $52,500. So, $52,500 x .05, which

    is $2625 in interest. In the last year, your original amount has increased to 55,125 x .05 or 2756 in

    interest.

    Cash Flow

    It is the liquid balance of cash and the bank balance available with an organization or a

    corporation. Sometimes, the cash flow is also defined as the net amount of cash generated by the

    net income generated by a company or an organization during a particular duration of time.

    Debt

    A debt is something, usually money, which is owed and shall be returned. In simple words, it is

    borrowed money.

    When a person or an organization lending the money (called the creditor), gives a certain amount

    of money to another person or organization (called the debtor), it is called debt. The creditor

    usually asks for an interest on his money and fixes a deadline for the entire amount to be

    returned.

    Debt can be taken from banks in the form of loan, and from friends, contacts or family on mutual

    understanding. Companies take debt for expansion and growth mostly through shares and bonds.

    Debt allows people to do what they would not be able to do through personal savings.

    Debts can be monetary, of good and services, or even of moral obligations.

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    Debit

    Debit is the amount of money that a person borrows from another to be returned back at a

    specified date. It indicates the amount that needs to be returned along with the interest to the

    lender. The term originated from the concept of debit side of a ledger account.

    Debt Consolidation Loan

    It is a kind of loan where a bank or a lending institution provides the borrower with a loan that

    helps him/her to pay off debts.

    Discount

    In banking terms, the word discount means that any negotiable instrument is converted into

    cash. For instance, a person can exchange a bearer check for cash with the amount being less

    than its face value. This method is only used by those who are in an instant need for cash.

    Debt Recovery

    Debt recovery is a process through which debt is collected when its due date has expired. It is

    initiated by the banks or lending institutions to recover the debt by various procedures such as

    debt settlement or selling of collaterals.

    Direct Debit

    Direct debit is a method of paying regular bills directly from your account on a regular basis. If

    you give the payee permission to take money from your account directly, it is called direct debit.

    Deposit Account

    A deposit account can be a current account, a saving account or other types of bank accounts at a

    bank where money can be deposited and withdrawn by the account holder. Every financial

    transaction is recorded with the bank and is available to the account holder.

    Some of the types of deposit accounts are: saving accounts, time deposits, money market

    deposits and checking accounts.

    Delinquency

    When a debt is not paid when it is due, then it is called delinquency. A person who fails to pay a

    debt or other financial obligation is called a delinquent.

    Discount Window

    The discount window is a facility through which eligible institutions can borrow money from the

    central bank to meet temporary shortages in liquidity due to internal or external disruptions.

    The interest charged on such loans by a central bank is called discount rate, repo rate or base

    rate. The discount window functions as a safety measure to relieve the pressure in reserve

    markets. It helps to ensure that financial markets remain stable.

    The term discount window originated because of the practice of sending a bank representative to

    a reserve bank teller window to borrow money.

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    Debt Instrument

    Debt instrument allows the transfer of debt obligations between parties who are involved and

    between markets. Transfer of debt obligations improves liquidity and makes it possible for

    creditors to sell debt obligations to others in the market.

    Generally, debts are bought and sold to raise funding. Debt transferability makes it possible for a

    party to buy a debt and a party to sell a debt. Debt obligations are electronic or paper obligations

    that promise that the obligation will be repaid to creditors according to the contracts terms and

    conditions.

    There are many kinds of debt instruments such as mortgages, bonds, certificates, leases, notes

    etc. Municipal bonds, treasury bills, certificates of deposit and commercial paper also fall into the

    category of debt instruments.

    Depository Bank

    A bank that accepts cash receipts is known as depository bank.

    Deposit Notes

    Deposit notes are issued for two to five years. They are issued at specific rates or specific rate

    formulas. Deposit notes are similar to a deposit, but they are sold in pre-determined amount for a

    pre-determined period of time.

    Interest rates for deposit notes are calculated using accrual methods that take the number of days

    in a year as 360 with every month being of 30 days each. This is the difference an investor takes

    into account when choosing between a bank CDs and a bank deposits.

    Depreciation

    Depreciation is the degradation or wear and tear of a fixed asset such as a house, a car etc. in the

    course of time. It reduces the principal price of the asset at which it was bought. The cost of old

    assets is calculated after reducing the depreciation from the original price at which it was bought.

    Deposit Slip

    It is a bill that includes the amount of paper money, check numbers or coins being deposited into

    a bank account.

    Direct Lease

    Direct lease is a kind of lease financing where a bank acquires property from a supplier and leases

    it directly to a user.

    Discount Securities

    Discount securities do not pay periodic interest. They earn the difference between the

    discount issue price and the full face value that is paid at the time of maturity. Some

    of the discount securities are zero coupon bonds, treasury bills, bankers acceptances

    etc.

    Disintermediation

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    It is the investment of funds into investment instruments by bypassing banks and

    other financial institutions. Mostly, funds are placed in a bank or other financial

    intermediaries, but when investors and borrowers do financial business directly

    without the banks and other financial institutions, it is called disintermediation.

    Dominion of Funds

    Dominion of funds is also called ledgering or detail method financing. The word

    dominion means control. In dominion of funds, a bank needs that the borrower give

    the bank control over his/her accounts receivable collections when lending from that

    bank.

    Double Leverage

    Double leverage is the leverage in bank holding companies that utilize borrowed

    funds to finance the holding companys equity investments in its subsidiaries.

    Downstream Funding

    Downstream funding is the practice of borrowing funds at the level of bank holdingcompany. The bank holding company then lent out these funds to a subsidiary.

    Duration of Equity

    Duration of equity is seen by a banks equity as a bond. It measures the interest rate

    sensitivity of the bank and has obligation for future cash inflows from the banks

    assets.

    The present value for asset cash flows is reduced by the total present value cash flows

    from the liabilities, then the duration of the equity bond is calculated.

    Decay Analysis

    Decay analysis is the statistical analysis of the rate of attrition. It is used for analyzing

    unpredicted core deposit volumes that specifically includes rates for withdrawals and

    account closures. Deposit decay rates are calculated by studying a sample of accounts

    over a period of time that includes at least one interest rate cycle.

    This analysis has been used by banks to determine effective maturity assumptions

    that are used for calculated core deposit value for bank acquisitions, branch

    acquisitions and deposit purchases.

    Data Warehouse

    Data warehouse is a database that is composed of data extracted from data

    processing and accounting systems that is computerized. Data is taken from many

    product systems and is balanced and converted into a standardized format. It is used

    for loan, bank deposits etc.

    Deed

    Deed is an important document that reveals the ownership of an asset, mostly real estate.

    Debentures

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    A debenture is a long-term unsecured corporate bond. A debenture holder is not protected by

    collateral and is treated like an ordinary creditor.

    Debt Service Coverage Ratio

    This is a simple comparison of the cash available to make principal and interest payments to the

    bank or to bond holders. The ratio of debt service coverage is calculated by taking the annual net

    income divided by annual debt service requirement.

    Debt Service Coverage

    Debt service coverage is the margin by which all principal payment of a borrower or a bond issuer

    are exceeded by the total of a firms cash flow, and all principal repayments and interest expense

    deducted in the process of making the calculation of that cash flow.

    Digital Wallet

    A digital wallet is a software program that stores the financial information of a customer such as

    bank account number, social security number and credit card number in a secure and encrypted

    program. It is also called e-wallet. The user enjoys a safe and fast transaction in the cloud. Paypalis a digital wallet. Many job platforms such as vworker and odesk also have digital wallets for their

    users.

    Data Warehouse

    Data warehouse is a computerized database for data processing, accounting systems

    etc. It is used by bank deposits, loans and other services. In data warehouse, data is

    balanced and converted into an accessible format.

    E-Cash

    E-cash is digital cash or electronic cash and is an equivalent of paper currency notes. E-cash came

    into being because of the Internet. It is a technology where banks use electronics, computers and

    other electronic networks to execute transactions. It is also used for transfer of funds.

    Endorsement

    The handing over the rights of a legal document or a financial document or a negotiable

    instrument to another individual is known as endorsement. An endorser is the one who hands

    over the rights to another person. The person who receives the rights is known as the endorsee.

    Earning Assets

    Earning assets are called so because they generate returns either in the form of returns, in cash

    or in the form of interest. In the case of earning assets, the owner does not have to make any

    daily effort to get returns.

    Education Loan

    An education loan provides the borrower with funds for his/her education. Therefore, it is also

    known as education loan. In many countries, education loans have lower rate of interest.

    Moreover, the payment of repayment of the loan starts after the completion of the period of the

    loan.

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    Exchange Rate

    Exchange rate is the rate at which the currency of one country is exchanged with the currency of

    another country.

    Encryption

    It is a process used to ensure the privacy and security of a persons personal and financial

    information. The process of encryption is used for any sensitive data that needs to be kept secret

    such as bank account numbers, credit card numbers, passwords, certain documents etc.

    The process involves scrambling of a persons data so that it can only be viewed by him/her. Many

    online websites that needs to keep their customers personal and financial information use

    encryption to keep it safe.

    Equity

    Equity is the balance left after taking the market value of a property and the outstanding property

    debt that is yet to be paid. It is a risk that the lender has to bear.

    Escrow

    When funds are held by a third-party on behalf of the payer and the payee in a financial

    transaction than it is called escrow. The funds are held safely in escrow by the third-party till it

    receives appropriate oral or written instructions or until some obligations have been fulfilled. Apart

    from money, securities and other assets can also be held in escrow.

    Encoding

    Encoding is a process that i s used to inscribe MICR (Magnetic Ink Character Recognition)

    characters on deposits, checks and other such financial mediums. MICR is a technology that

    recognizes unique characters and is mainly used by banks to facilitate the processing of checks.

    Electronic Check Conversion

    It is a process through which a check is used to identi fy information such as your account number,

    your banks name, your check number etc. This information is then used to make a one-time

    electronic payment from your account. The electronic check itself is not used in the payment, but

    is only used to gather information regarding the legitimacy of the person and the bank.

    Electronic Fund Transfer

    Electronic funds transfer is the exchange or transfer of funds between accounts across different

    institutions or within a single institution. Electronic funds transfers are always made through an

    online payment system. Electronic benefit transfers, wire transfers and direct deposit payroll

    payments are kinds of electronic funds transfer.

    Wire transfers are carried out through international banking networks where funds of an individual

    are transferred from one bank in a country to a bank in another country using a special code of

    the bank.

    Electronic Benefit Transfer is used in the United States to allow governments to provide material

    and financial benefits through a debit card. Cash and food benefits are allowed through electronic

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    benefit transfer.

    In electronic funds transfer, funds are transferred directly from one bank account to another. Direct

    deposit is used to directly deposit funds into the bank account of employees.

    Equity

    Equity is the remaining balance between the market value of a property and the outstanding real

    estate debt that is still to be paid. The risk of equity is usually borne by the lender.

    Endorsement

    An endorsement is the handing over of rights of a financial/legal document or a negotiable

    instrument to another person. The endorser is the person who hands over his/her rights and the

    endorsee is the person to whom the rights have been transferred.

    Efficiency Ratio

    Efficiency ratio is a ratio that states the entire operating expenses as a percentage of the total

    income of the banks operations.

    Emergency Fund

    An emergency fund is one where money is kept liquid so that the customer can make withdrawals

    when necessary. They are usually savings account.

    Embedded Option

    An embedded option is a provision in a financial contract or instrument that gives the

    freedom to a party to change the timing or the amount of one of more cash flows that

    are connected to that contract or instrument.

    Embedded option is also known as hidden option, not because there is anything secret

    about them, but because they can only be used as a part/a feature of a transaction,

    not independently. Prepayment choice on loans, early withdrawal options on

    certificates of deposit, call options in bonds are some of the examples of embedded

    option.

    Earnings Credit Rate

    Earning credit rate is also known as allowance rate. It is the interest rate that is

    applied to account balances that are investable to determine how expense for bank

    services is utilized by a depositor and how much of it is compensated by the deposits

    maintained by a depositor.

    Earnings credit rate is expressed as an annual rate. The calculations might be done

    monthly.

    Enterprise-Wide Risk Management (ERM)

    ERM is used for measuring and managing risks within a financial institution. It sees

    risks as inter-related with common driving forces.

    Event of Default

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    Event of default is an event that is described in a promissory note, a loan agreement

    or a security agreement

    Event of Default

    An event of default is an event stated in a promissory note, loan agreement or security

    agreement that activates the rights of the lender to make alterations in the documents. Usually,

    when a debtor fails to pay the interest or the principal amount to the bank when it becomes due,

    the bank can, in the event of default, declare the debt to be payable in entirety. Loan agreements

    have many events of default.

    Financial Institution

    A financial institution is an organization where financial transactions are carried out. It includes

    commercial banks, investment banks, supranational and development banks, pension funds,

    insurance companies, asset management firms etc.

    Float

    Float is the funds generated because of timing difference in check clearing system.For banks, float happens when debits given by the Federal Reserve to a banks

    reserve account for the clearing of checks are received before the time the bank

    allows a customer to use the funds presented by the check of that customer.

    When depositing, float occurs when credits may be given for checks deposited in a

    bank before the depositing customers account is debited.

    Float Analysis

    A float analysis is the analysis of an organizations payment to find out the number of

    days between the issuance of a check and the presentation of the check for payment

    at a bank.

    http://bankinfobd.com/node/banking-vocabularies-2

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    Hasan said on Mar 21, 2011

    Md. Saiful Islam said on Oct 15, 2012

    2 Comments

    Its a great idea.

    reply

    This is a outstanding Idea. Many students and learners will be beneficial using it.

    Thank you.

    reply

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    BRAC Bank's online shopping

    facility in Bangladesh

    Prime Banks retail loan

    process can change the view

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    Career Tips

    Pubali Bank holds IT training

    New DMD for IFIC Bank

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    Bank Asia provides

    foundation training to its

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    Banking News

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    congress in Dhaka

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