Glossary of Banking Terms and Definitions

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Glossary of Banking Terms and Definitions: Banking Terms that Begin With A

Banking Terms Banking DefinitionsBanking TermsGlossary: Notes and

References

AAA

AAA is a term or a grade that is used to rate aparticular bond. It is the highest rated bond that givesmaximum returns at the time of maturity. Usually thegrade AAA is given to the best debt obligation or asecurity, by a credit rating agency.

Acceleration

Acceleration is the process, where the lender demandsa full and final payment of the debt or loan, before the

allotted time period for repayment. A clause in thedocument of the debt usually empowers the lender toaccelerate the time period.

AcceleratedDepreciation

A method of depreciation of fixed assets, where theearly deductions are greater in monetary terms andlater ones are smaller.

Acceptance

Acceptance which is also known as the banker'sacceptance is a signed instrument of acknowledgmentthat indicates the approval and acceptance of all termsand conditions of any agreement on behalf of the

banker. It is a very wide term that is used in contextwith financial agreements and contracts.

Account

An account is a record of all financial transactions thatare related to an asset, individual, transaction or anyorganization. It is a major term in the field ofaccountancy and is conventionally denoted by the A/c.It can also be defined as a transaction between abuyer and a seller about payments and dues whichdevelop creditor-debtor relations.

Account BalanceThe total amount of money in a particular bankaccount, along with the debit and credit amounts, thenet amount is also termed as the account balance.

AccountReconciliation

Account reconciliation is a process with the help ofwhich the account balance can be easily verified.Account reconciliation is usually done at the end of aweek, month, financial year or at the end of any

To know more on accountreconciliation read: Stepsto Account Reconciliationand Purpose of Bank
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financial period. It is usually done with the help ofreceipts, ATM notes, bank statements etc.

Reconciliation Process

AccountStatement

A financial record that indicates the transaction and itseffect on an account (usually bank account), in termsof debit and credit. Sometimes, an account statementalso carries some precise details, like the date of

transaction, code of transaction, mode of transaction,sales, purchases, etc.

Account Value

An account value is the total value of any account,applicable when a person has many accounts andtransactions in the same bank or financial institution.The account value is a total value that is expressed inmonetary terms.

Acknowledge

Indicates the acceptance of a document, agreement,proposal or a negotiable instrument by authenticating

it with the help of a seal or a signature.Acknowledgment signifies that the terms andconditions of the contract have been accepted and the

agreement authenticated.

Account Analysis

The term 'account analysis' is used in basically twocontexts. First, it is used to define the study andconclusion of a single account. Second, it is also aprocedure, where the profitability of a single demandaccount or many demand accounts is projected andanalyzed.

Account ControlAgreement

An account control agreement is an agreement thatperfects the interests of the creditor in a securities

account.

Account Debtor

An account debtor is a person or an organization thatis in debt and is obliged to pay either on an account or

chattel paper or contract right. Account debtors are,sometimes, simply referred to as debtors.

AccountReconciliationServices

Account reconciliation services are basically servicesthat specialize in the compilation of reconciliationdocuments and statements. Reconciliation servicescater to the demands of individuals and hugeorganizations that have a large number of transactionstaking place everyday.

AccountsPayable

Accounts payable is a list of liabilities of anorganization or an individual that are due but not paidto creditors. Account payable, many a times, alsoappears as a current liability in the balance sheet. Onemust note that loans and liabilities to the bank which

have not maturated, are not a part of accountpayable.

Accrual Basis Accrual is the process of accumulation of interest ormoney. Accrual basis, which is also known as accrual
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convention, is the method by which, investors,economists and businessmen count the number ofdays in a month or a year(s). Of the most commonexamples of accrual basis is the 30/360 convention,wherein the accrual basis is calculated by assumingthat every month has 30 days. Accrual basis is often

used as the common parameter for the calculation ofinterests and returns.

Accrual Bond

An accrual bond is also known as range bond. Anaccrual bond is a bond that has a tendency to pay theinvestors, an above the market rate. Sometimes, anaccrual rate is also defined as a security that does nothave a period payment for the rate of interest. The

interest is accrued and then added later on at the timeof maturity.

AccrualConvention

It is the method of calculating the time period on aspecific investment by the investors. Accrualconvention is many a times calculated with the help ofdifferent interest calculation mechanisms. Accrual

convention is also known as accrual basis.

Accrued Interest

Accrued Interest is the interest, accumulated on aninvestment but is not yet paid. Often, accrued interestis also termed as interest receivable. Some bankingbooks prefer to call it as the interest that is earned,but not yet paid.

AccumulatedDepreciation

Accumulated depreciation is the total all the periodicreductions from the book value of fixed assets. It isalso termed as an allowance for depreciation.

Accumulator

Accumulator is also known as capital appreciationbond. The accumulator is a type of security that isrelated to capital and is issued on face value, but the

interest is not paid to the investor on the basis of thetime period. Instead, the total amount of accruedinterest is paid along with the face value upon thematurity of the security.

Administered

Rates

Administered rates are the rates of interest which can

be changed contractually by lender. In some cases,these rates can also be changed by the depositor and

also the payee. The laws and provisions that monitorthe concept of administered rates differ in eachjurisdiction.

AdministrativeFloat

Administrative float is the frame of elapsed time thatis required in order to complete the paper work, inorder to administratively sort the checks, or for thatmatter, any type of currency and negotiable


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instruments in the bank itself or in the clearing house.

AdministrativeReview

An administrative review is usually used in context tothe appraisal of the book value of a real estate andbasically, deals in the underwriting issues. Theadministrative review is usually written from the pointof view of loan underwriting during an estate

appraisal.

Read more on MortgageLoan Underwriting

AmericanDepositoryReceipt (ADR)

American depository receipts, also known as ADRs, aredepository receipts which are equal to a specificnumber of shares of a corporate stock that has beenissued in a foreign country. American depositoryreceipts are traded only the United States of America.

AmortizationPeriod

Amortization period is the time period that isconsidered from the inception of the credit, investmentor negotiable instrument and ends upon the maturity

or expiry of the instrument. The amortization period isbasically considered in order to calculate the rate ofinterest, time line of installments and also theappropriate amount of all the installments. The term'amortization period' is also used in the field ofaccountancy; however, in a different context.

The column 'What isAmortization?' will give aneven better explanationabout amortization period

AnnualPercentage Yield(APY)

The annual percentage yield or APY is basically a veryaccurate and calculated measure of yield that is paidon a standard bank deposit account.

Annuities

Annuities are contracts that guarantee income orreturn, in exchange of a huge sum of money that isdeposited, either at the same time or is paid with thehelp of periodic payments. Some of the common typesof annuities include the deferred, fixed, immediate orvariable variants.

To know more aboutAnnuities you may alsoread more on FixedAnnuities Explained andAnnuities Pros and Cons

Appraisal

An appraisal is basically a statement, document or an

estimated rise or drastic climb in the price of aparticular real estate. The term 'appraisal' is also usedin connection to raising the book value of a realestate.

AppraisalSurplus

An appraisal surplus is the difference between thehistorical cost and the appraised cost of the realestate.

Arbitrage Arbitrage is the simultaneous purchase and sale of two
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of banking.

Automatic Stay

The automatic stay is an injunction that automaticallybecomes effective, after any person or organizationfiles for bankruptcy. The automatic stay basicallyprecludes the creditors from taking the debtor or theproperty of the debtor.

Glossary of Banking Terms and Definitions: Banking Terms that Begin With B

BankingTerms

Banking DefinitionsBanking TermsGlossary: Notes andReferences

BalanceThe balance is the actual amount of money that is left in theaccount. Sometimes, the term balance also refers toamount of the debt that is owed.

BalanceTransfer

A balance transfer is the repayment of a credit debt with thehelp of another source of credit. In some cases, balancetransfer also refers to transfer of funds from one account toanother.

BalanceTransfer Fee

The balance transfer fee is charged by the bank for thetransfer of balances from one source of credit to another. Italso refers to the transfer of fees from one bank account toanother.

BankA bank is an establishment that helps individuals andorganizations, in the issuing, lending, borrowing andsafeguarding functions of money.

BankAccount

A bank account is an account held by a person with a bank,with the help of which the account holder can deposit,safeguard his money, earn interest and also make check

payments.

Bank Debt

A bank debt is basically any debt that is owed to a bank, byany kind of consumer, organization or corporation. The debtmay be anything from a bank loan to a credit card debt oran overdraft that has been used.

To know more on bankdebts, red more on BankDebt.

BankruptcyA bankruptcy refers to economic insolvency, wherein theperson's assets are liquidated, to pay off all liabilities withthe help of a bankruptcy trustee or a court of law.

To know more onBankruptcyread,Bankruptcy Code,Bankruptcy RecordsandBankruptcy Filings.

Billing CycleA billing cycle is a time period that covers the creditstatement, that usually lasts for 25 days.

BillingStatement

A billing statement is a summary of all transactions,payments, purchases, finance charges and fees, that takeplace through a credit account during a billing cycle.
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charged as a percentage to the cash advance.

Cash Flow

The cash flow is often defined as the liquid balance ofcash as well as the bank balance that is available withan organization or a corporation. In some cases, thecash flow is also defined as the net amount of cashthat is generated by the net income that has been

generated by an organization or corporation in aparticular time period.

To know more about CashFlow and related conceptsreadCash Flow

Cashier's CheckThe cashier's check is drawn by a bank on it's ownname to may payments other organizations, banks,corporations or even individuals.

Cash ReserveThe cash reserve is the total amount of cash that ispresent in the bank account and can also bewithdrawn immediately.

Certificate ofDeposit

The certificate of deposit is a certificate of savingsdeposit that promises the depositor the sum backalong with appropriate interest.

CheckA check is a negotiable instrument that instructs thebank to pay a particular amount of money from thewriters bank, to the receiver of the check.

Clearing

Clearing of a check is basically a function that isexecuted at the clearing house, when all amount ofthe check is subtracted from the payer's account andthen added to the payees account.

Clearing House

The clearing house is a place where therepresentatives of the different banks meet forconfirming and clearing all the checks and balanceswith each other. The clearing house, in most countriesacross the world, is managed by the central bank.

Central Bank A central bank is the governing authority of all theother banks in a country.

Closing

Closing of an account is the final stage of anytransaction where both the parties receive almostequal consideration from each other. The term 'closing'from ledger books where the two accounts are 'closeddown' i.e. both debit and credit sides become equal.

Co-borrower

The co-borrower is a person who signs a promissorynote as a guarantee that the loan would be repaid.Thus the co-borrower plays the role of a guarantor andis equally responsible for the loan.

Consumer Credit

Consumer credit is the credit and loan facility that is

provided to the consumer for the purchase of goods,services and real estate property. Most consumer

credit is unsecured with the help of a collateral

CompoundInterest

Compound interest is the interest that is 'compounded'on a sum of money that is deposited for a long time.The compound interest, unlike simple interest, iscalculated by taking into consideration, the principalamount and the accumulated interest.
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Credit Card DebtConsolidationLoan

Credit card debt consolidation loan is availed from abank in order to pay off all credit card debts.

To know more about creditcard consolidation readmore no, Credit Card DebtConsolidation

CreditCounseling

Credit counseling is a consultancy session where the

credit counselor suggests debt relief solutions and debtmanagement solutions to the clients.

To know more about creditcounseling you may read

more on Credit Counseling,Debt Relief Solutions andDebt Management.

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Glossary of Banking Terms and Definitions: Banking Terms that Begin With D

Banking Terms Banking DefinitionsBanking TermsGlossary: Notes andReferences

Debit

Debit is a banking term that indicates the amount ofmoney that is owed by a borrower. It also indicates theamount that is payable, or the amount that has beendeducted from an account. The origin of the term is fromthe concept of debit side of a ledger account.

DebtA debt is any amount that is owed by an individual,organization or corporation to a bank.

To know more about theconcept of debt read moreon: Debt

Debit Card

A debit card is an instrument that was developed withdigital cash technology, and is used when a consumermakes that payment first to the credit card company andthen swipes the card. The debit card operates in theexact opposite manner of the credit card.

To know more about debitcards, read more onReloadable Prepaid DebitCard and Universal PrepeidDebit Card.

Deed

A deed is a very important document that indicates theownership of an asset, especially a real estate. The deedis also used to convey the property from the seller to thebuyer.

DefaultA default is a scenario where the debtors of a bank areunable to repay the debt or the loan.

DemandDeposit

A demand deposit is an account that is used as achecking account.

Deposit SlipA deposit slip is a bill of itemized nature and depicts theamount of paper money, coins and the check numbersthat are being deposited into a bank account.

DepositorThe person who deposits money into a bank account iscalled a depositor.

DepreciationThe degradation in the book and monetary value of afixed asset as a result of wear and tear in the course of

time.

Debentures Debentures are long term corporate bonds that areunsecured in nature. It must be noted that debentureholders are not protected by any collateral and tend to
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be treated like ordinary creditors

Discount

In the terms of banking, in the term 'discount' is usedwhen any negotiable instrument is converted into cash.For example, a person can exchange a bearer check forcash with the amount being little less than the face valueof the check. This method is used by merchants who are

in a dire need for liquid finances. Tins definition iswritten fro the banking point of view but has a variablemeanings.

DividendA dividend is a part of the profit that is earned by acorporation or joint stock companies, and is distributedamongst the shareholders.

DebtManagement

Debt management is a process of managing debts andrepaying creditors. Debt management is a very broadconcept covering almost anything related to debts andtheir repayment.

To know more on debtmanagement read, Debtmanagement,Debt

Assistance and DebtAdvise.

DebtConsolidationLoan

A debt consolidation loan is a type of loan, where the

bank or the lending institution provides the borrowerwith a loan that helps the borrower to pay off all hisprevious debts.

More on: DebtConsolidation

DebtSettlement

Debt settlement is a procedure wherein a person in debtnegotiates the price with the lender of a loan, in order toreduce the installments and the rate of repayment, andensure a fast and guaranteed repayment.

To know more on Debtsettlement refer to DebtSettlement

DebtRepayment

Debt repayment is the total process repayment of a debtalong with the interest. Sometimes, the consolidationthat is provided is also included in debt repayment.

Debt Recovery

Debt recovery is the process that is initiated by the

banks and lending institutions, by various procedures

like debt settlement or selling of collaterals.

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E-Cash

Also known as electronic cash and digital cash, e-cash is atechnology where the banking organizations resort to theuse of electronics, computers and other networks to execute

transactions and transfer funds.

To more about theconcept you may referto: Digital Cash

Technology

EarlyWithdrawalPenalty

An early withdrawal penalty is basically a penalty that islevied by a bank because of an early withdrawal of a fixedinvestment by any investor. There can be several types ofearly withdrawal penalties, like forfeiting the promised

interest.

Earning Assets Earning assets generate returns, either in the form of returnsor in the form of interest or cash. One must note that in the
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case of earning assets, the owner does not have to take anydaily efforts to achieve returns.

Encryption

Encryption is a process that is used to ensure the privacyand security of a person's confidential financial information.The actual process involves scrambling of the data of theperson, in such a manner, so that only the person himself

can see the data.

ExchangeAn exchange is a trade of property, assets, goods or servicesfor consideration of any kind.

ElectronicFiling

Electronic filing is the method of filing of tax returns and taxforms on the Internet.

Earnest MoneyDeposit

An earnest money deposit is made by the buyer to thepotential seller of a real estate, in the initial stages ofnegotiation of purchase.

Equity

Equity is the remainder balance between market value of agiven property and the outstanding real estate debt that is toyet be paid. The equity is a risk that is basically borne by the

lender.

Expiration DateThis term indicates the invalidity of a financial document orinstrument, after a specified period of time.

Education Loan

An education loan, also known as student's loan, isspecifically meant to provide forthe borrower's expendituretowards education. In the majority of countries, educationalloans tend to have a low rate of interest. The period ofrepayment also starts after the completion period of theloan.

To know more oneducational loans read,Students Loan

Exchange RateAn exchange rate is a basically a rate, with the help of whichone country's currency can be exchanged with the currencyof another country.

Endorsement

Endorsement is basically the handing over of rights of afinancial/legal document or a negotiable instrument toanother person. The person who hands over his/her rights isknown as the endorser, and the person to whom the rightshave been transferred is known as the endorsee.

Banking Terms Banking DefinitionsBanking TermsGlossary: Notesand References

Face Value Face value is the original value of any security or negotiableinstrument.

Field Audits

Field audits are basically the audits that are conducted by bankofficials, on the site itself, in order to assess the status andcondition of the collateral. Many a times, field audits are alsoconducted in order to assess the financial situation of debtors,especially corporations, who have availed huge loans.

Final Maturity A final maturity is the date of maturity when a last, single loan
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matures from a pool of loans. The final maturity indicates thetotal and final payment of the pool of mortgage loans.

FinancialInstrument

A financial instrument is anything that ranges from cash, deed,negotiable instrument, or for that matter any written andauthenticated evidence, that shows the existence of atransaction or agreement.

FinancialIntermediary

A financial intermediary is basically a party or person who actsas a link between a provider who provides securities and theuser, who purchases the securities. Share broker, and almostall the banks, are the best examples of financial intermediaries.

FinancialStatement

A financial statement is a record of historical financial figures,reports and a record of assets, liabilities, capital, income andexpenditure.

Fixtures

The term 'fixture' is used in the context of a real estateproperty, when assets like furniture are attached to the realestate and are also included in its book value. Banks, in many acases, are known to include fixtures in the value, if the realestate property has been pledged as a collateral.

ForbearanceAgreement

A forbearance agreement is an authenticated agreementbetween a debtor and a creditor, and is utilized by the creditor,when the debtor initiates a debt settlement or the loan isdefaulted, or the former becomes bankrupt.

ForeclosureA foreclosure is a standardized procedure where creditors likebanks, are authorized to obtain the title of the real estateproperty that has been pledged as a collateral.

More on:Foreclosure andStop Foreclosure

Free Cash FlowA free cash flow is basically is a total of financially liquid assetsthat does not include capital expenditures and dividends.

Fixed RateMortgage

A fixed rate mortgage is a home loan, for which the interestrate remains constant and fixed throughout the lifetime of loan.

ForeignCurrencySurcharge

The foreign currency surcharge is is levied by some banks andcredit card companies, when a credit card or an ATM is used ina foreign country.

BankingTerms

Banking DefinitionsBanking TermsGlossary: Notesand References

Government

Bonds

A government bond, which is also known as a governmentsecurity, is basically any security that is held with the

government and has the highest possible rate of interest.

GrossDividends

Gross dividends are basically the total amount of dividends thatare earned by an individual, or corporation in a singleaccounting and tax year. It must be noted that capital gains arealso included in gross dividends.

Gross IncomeTest

A gross income test, is a kind of test, where one can prove toany government authority that a person is one's dependent.
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Contractis also the purchaser, pays a series of installments thatincludes the interest of the principal amount.

Interest

Interest is a charge that is paid by any borrower or debtor forthe use of money, which is calculated on the basis of the rateof interest, time period of the debt and the principal amountthat was borrowed. Interest is, sometimes, also titled as the

'cost of credit'.

Interest

Accrual Rate

The interest accrual rate is a percentage of interest that iscalculated on the basis of the rate of interest and is expressedin terms of annual percentage rate or APR.

InvestmentProperty

An investment property is a real estate property thatgenerates income for the owner, in terms of rent and lease.

TO know more youmay also refer toInvestment Property

Interest Rate

Interest rate is the percentage of principal amount that is paidas an interest for the use of money. Usually, the interest rateis decided by a country's central bank, on the basis of theeconomic conditions.

InternetBanking

Internet banking is a system wherein customers can conducttheir transactions through the Internet. This kind of banking isalso known as e-banking or online banking.

To know more aboutthe topic you can referto Internet Banking.

InstallmentCredit

Installment credit is a debt or loan that is to be returned tothe lender in a set of periodic installments. Auto loans, homeloans and other types of loans are included in installmentcredit.

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Glossary of Banking Terms and Definitions: Banking Terms that Begin With J

BankingTerms

Banking DefinitionsBanking Terms Glossary:Notes and References

Joint andSeveralLiability

This is a legal term utilized to point that two or moreentities are individually entirely responsible, instead ofbeing collectively responsible.

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Glossary of Banking Terms and Definitions: Banking Terms that Begin With L

BankingTerms


LeaseA contract, through which, the owner (lessor) of a certain property,allows another (lessee) to use the same for a specified period, inexchange for a value called the rent.

Letter ofCredit

A document issued by a bank (on behalf of the buyer or theimporter), stating its commitment to pay a third party (seller or the
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exporter), a specific amount, for the purchase of goods by itscustomer, who is the buyer. The seller has to meet the conditionsgiven in the document and submit the relevant documents, in orderto receive the payment. Letters of credit are mainly used ininternational trade transactions of huge amounts, wherein thecustomer and the supplier live in different countries.

LiquidatedDamages

A clause, which is commonly found in contracts, wherein the partiesagree to pay a fixed amount, in case of any breach of thecontractual provisions. The party, who violates the provisions has topay the amount to the aggrieved party.

Lock-inPeriod

A guarantee given by the lender that there will be no change in thequoted mortgage rates for a specified period of time, which is calledthe lock-in period.

Long TermDebt

An amount owed for a period exceeding one year, from the date oflast balance sheet/accounting year. Otherwise known as funded

debts, long term debts refers to those loans, which become due,after one year from the last balance sheet/accounting year. Suchdebts can be a bank loan, bonds, mortgage, debenture, or otherobligations.

BankingTerms


Mortgage

A mortgage is a legal agreement between the lender and

borrower where real estate property is used as a collateral forthe loan, in order to secure the payment of the debt. Accordingto the mortgage agreement, the lender of the loan is

authorized to confiscate the property, the moment theborrower stops paying the installments.

To know more about

mortgages you mayrefer to MortgageCompanies andMortgage Debt

Maturity

The term maturity is used to indicate the end of investmentperiod of any fixed investment or security. After maturity, theinvestor is repaid the invested amount along with the interestthat has been accumulated. For example, on the maturity of aone year fixed deposit, the invested sum along with theaccumulated interest, is transferred by the bank to the accountof the investor.

Maturity

Date

Maturity date is the date on which the investment or security

attains maturity.

MortgageRefinance

A mortgage refinance involves the replacement of current debtwith another debt with more convenient terms and conditions.

To know more onmortgage refinance,read Mortgage Refinance

MarketValue

Market value is the value at which the demand of consumersand the supply of the manufacturers decide the price of acommodity or service. The market value is the equilibriumpoint on the supply and demand graph, where the demand and
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supply curves meet. Thus, market value is decided on the basisof the number people who demand a commodity and thenumber of commodities that the sellers are capable of selling.

BankingTerms

Banking DefinitionsBanking Terms Glossary:Notes and References

NationalBank

A bank which is chartered by the federal government andis a member of the Federal Reserve System by default, iscalled a national bank.

NetOperatingLoss

A total loss that is calculated for a tax year and isattributed to business or casualty losses.

Net IncomeThe amount that is left after paying the taxes is called thenet income.

Non-LiquidAsset

A possession or asset which cannot be changed into cashvery easily is called non liquid asset.

NonRecourseLoan

A loan which is secured by collateral and for which theborrower is not personally liable, is called a non recourseloan.

Glossary of Banking Terms and Definitions: Banking Terms that Begin With O

BankingTerms

Banking Definitions Banking TermsGlossary: Notes andReferences

OriginalPrincipalBalance

The amount borrowed by any borrower is called the originalprincipal balance.

OwnerFinancing

When the seller loans the whole sum or a part of it to a buyer,it is called owner financing.

OnlineBanking

The accessing of bank information, accounts and transactionswith the help of a computer through the financial institution'swebsite on the Internet, is called online banking. It is alsocalled Internet banking or e-banking

OverdraftAs the name suggests, it is a check or rather an amount ofcheck ,which is above the balance available in the account ofthe payer.

OverdraftProtection

A service which permits a verification account to be connectedto other savings or line of credit for facilitation of protectionagainst overdrafts is called overdraft protection.

OrdinaryDividends

Dividends, which are a distribution of the profits of acompany, are called ordinary dividends.


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Range BondsBonds which cease the payments because the referencerate of the bond increases or decreases, as compared topredetermined rate on a given index.

RateA rate is a measure which forms the basis of anyfinancial transaction.

Rate CovenantRate covenant in a municipal bond determines the ratesto be charged to buyers.

RefinanceRefinance means clearing the current loan with theproceeds of a new one and using the same property forcollateral.

Revolving Lineof Credit

Revolving line of credit is a rule followed by the lender,which binds him to allow a certain credit to the borrower.

Rate RiskRate risk is the rate of return determined to attractcapital on a given investment.

Redemption FeeA commission or fee paid, when an agent or an individualsells an investment, such as mutual funds or annuity.

Reference AssetAn asset such as debt instrument which has a creditderivative is called as a reference asset.

Reference RateThe basis of floating rate security is called as thereference rate.

RefundingThe act of paying back the amount or returning thefunds is called as refunding.

ReinvestmentRisk

The risk that arises from the fact that dividends or anyyields may not be eligible for investment to earn the rateof interest is called as the reinvestment risk.

Relative ValueThe liquidity, risk and return of one instrument inrelation to another financial instrument is the relativevalue.

Repricing Repricing means a change in the rate of interest.

Reserve AccountAn account which is maintained by depositingundistributed parts of profit for future needs is called asa reserve account.

ReserveRequirements

Cash money or liquidity that member banks need to holdwith the Federal Reserve System.

Residual ValueThe anticipated value that a company calculates, to sellits asset at the end of its full life.

Return onCapital

A measure which determines how a company willoptimize its funds.

ReturnsThe yield or earning at the end of a given period at agiven rate of interest.

Risk The probability of threat, danger, damage, liability or


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loss is called as risk.

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Glossary of Banking Terms and Definitions: Banking Terms that Begin With S

BankingTerms


Safekeeping

An arrangement for holding and protecting a customer's assets,like valuables, documents, etc. Such arrangements arecommonly provided by banks and some financial institutions,usually for a fee. The customer is issued a safekeeping receipt,which indicates that the assets do not belong to the bank andthey have to be returned to the customer, upon his request.

Same DayFunds

This banking term refers to the funds or money balances, whichcan be transferred or withdrawn on the same day of presenting

and collection. In short, a transfer of money, which can be usedby the recipient on the same day of transfer and this provision issubject to the net settlement of accounts between the bank,through which the money is sent and the receiving bank. Thisterm is also used to refer to the transfer of federal funds fromone bank to another over Fedwire and the transfers through theClearing House Interbank Payments System (CHIPS) in NewYork.

Sale ContractA sale contract refers to a written agreement between the buyerand the seller of an asset (usually real estate), with detailsregarding the terms and conditions of the sale.

Sale

Leaseback

A sale of property, wherein the title is transferred to the buyer,on condition that the property will be leased to the seller on a

long-term basis, after the sale.

SecondMortgage

Otherwise known as 'second trust', a second mortgage is amortgage which is taken out on property, which has beenpledged as security to ensure payment (collateral) of an originalor first mortgage. A first mortgage has priority in settlement ofclaims, before all other subsequent mortgages. Unlike a firstmortgage, a second mortgage has a shorter repayment term,with higher interest rates.

SecuredLoan

A loan which is backed by a pledging of real or personal property(collateral) by the borrower to the lender. Unlike unsecuredloans, which is backed by a mere promise by the borrower thathe will repay the loan, in case of a secured loan, the lender can

initiate legal action against the borrower to reclaim and sell thecollateral (pledged property).

To know more aboutsecured loans readSecured Loans

SecurityProperty or assets, which are pledged to the lender by the

borrower, as a guarantee to the repayment of a loan.

Seller'sMarket

A market, which has more buyers, as compared to the number ofsellers. This condition leads to a rise in the prices, which isfavorable for sellers.

Sort Code A sort code is a specific number, which is assigned to a particular
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branch of a bank for internal purposes. Each branch is assignedwith a sort code, which makes it easier to designate thatparticular branch of bank, than writing down the whole address.

Smart CardsUnlike debit and credit cards (with magnetic stripes), smartcards possess a computer chip, which is used for data storage,

processing and identification.

To know more aboutsmart cards you mayalso refer Smart

Cards

SyndicatedLoan

A very large loan extended by a group of small banks to a singleborrower, especially corporate borrowers. In most cases ofsyndicated loans, there will be a lead bank, which provides a partof the loan and syndicates the balance amount to other banks.

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Banking Terms Banking DefinitionsBanking Terms Glossary:Notes and References

TermInsurance

It is the insurance for a certain time period which

provides for no defrayal to the insured individual,excluding losses during the period, and that becomesnull upon its expiration.

To know more about term

insurance, you may alsorefer to Term Life Insurance

Term NoteA legal notice offered by a particular organization toinvestors through a dealer.

Term Structureof InterestRates

This phrase relates to the relationship betweeninterest rates on bonds of different due dates,generally described in the form of a chart, oftenknown as a 'yield curve'.

Time DepositA kind of bank deposit which the investor is not ableto withdraw, before a time fixed when making thedeposit.

Time Draft This term relates to a draft that is collectible at aparticular future date.

Time NoteA 'time note' is a financial instrument, like a 'note ofhand', which stipulates dates or a date of defrayal.

Time ValueThis is the sum of money that an option's premiumsurpasses its intrinsic worth, and is also called as'time premium'.

Times InterestEarned

It pertains to a measure of the financialtrustworthiness of an organization, which is equal toEb divided by interest.

Trade Credit

It is the credit which a company gives to another

organization for the purpose of buying products orservices.

Total Risk-Based Capital

The finances that are provided for startup companiesand small businesses with prodigious growth abilities.

Trade DateThe day on which the actual transaction takes place;one to five days before the settlement period,according to the kind of transaction.
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Glossary of Banking Terms and Definitions: Banking Terms that Begin With U

BankingTerms Banking Definitions Banking Terms Glossary:Notes and References

UnderwriterAny investment or commercial financial firm or asecurities house that works with an issuing entity for thepurpose of selling a new issue.

UndividedProfits

This is a banking work for retained earnings.

Banking

TermsBanking Definitions

Banking Terms Glossary:

Notes and References

Value At Risk(VAR)

The sum or portion of the value that is at stake ofsubject to loss from a variation in prevalent interestrates.

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Glossary of Banking Terms and Definitions: Banking Terms that Begin With W

BankingTerms


WaiverIn banking terms, a waiver is relinquishing the rights.Sometimes also considered to be the exemption or settlementof a part of debt.

WarrantyDeed

A deed which states that the seller holds the clear title of the

goods or real estate to be sold. This gives him or her the rightto sell the title to a prospective buyer.

When-Issued(WI)

'When issued' or WI is a conditional transaction made due toits authorized security or debt obligation.

Whole LifeInsurance

A whole life insurance is a contract between the insurer andthe policy owner, that the insurer will pay the sum of moneyon the occurrence of the event mentioned in the policy to theinsured. Its a concept wherein the insurer mitigates the losscaused to the insured on the basis of certain principles.

To know more aboutwhole life insurancerefer to Whole Life

Insurance

WholesaleBanking

Wholesale banking is a term used for banks which offerservices to other corporate entities, large institutions andother financial institutions.

WireTransfers

Wire transfers is an Electronic medium used while transferringof funds.

With Recourse A term used to signify that a seller or a drawer will be liable in
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case of non-performance of asset or non-payment of aninstrument.

WithdrawalsRemoving of funds from a bank account is called as making awithdrawal.

WithoutRecourse

A term which signifies that the buyer is responsible for non-

performance of an asset or non-payment of an instrument,instead of the seller.

WorkingCapital

In banking terms, working capital is defined as the differencebetween current assets and current liabilities.

You can also readmore on workingcapital by referringWorking Capital

WraparoundMortgage

An arrangement, wherein existing mortgage is refinancedwith more money, with a rate of interest ranging between theold rates and current market rates.

WriterA writer is an entity or a financial institution which promisesto sell a certain number of shares or stocks at a price before acertain date.

BankingTerms


Yield CurveYield curve is a graph or a curve that shows the relationshipbetween maturity dates and yield.

YieldThe returns earned on a stock or bonds, as per the effectiverate of interest on the effective date, is called as a yield inthe banking terms.

Yield CurveRisk

Yield curve risk is the huge risk involved in a fixed incomeinstrument, due to major fluctuations in the market rates ofinterest.

Yield to Call(YTC)

The yield on a bond calculated on the supposition that theissuer will redeem the amount at the first call as stated onthe bond's prospectus is called as yield to call.

Yield-to-Maturity(YTM)

The average annual yield that an investor receives becausehe holds it for life or till the maturity date is called as theyield to maturity.

Glossary of Banking Terms and Definitions: Banking Terms that Begin With Z
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Banking Terms Banking DefinitionsBanking Terms Glossary:Notes and References

Zero BalanceAccount

A bank account which does not require anyminimum balance is termed as a zero balance

account.

Zero CouponYield Curve

Zero coupon yield curve is also called as spot yieldcurve, and is used to determine discount factors.

ZoningA government controlled area where only certainuses of the land are permitted is called zoning.

Glossary of Banking Terms and Definitions

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