Terms in Banking Business

  • Analyst Person who studies an industry sector and makes BUY, HOLD and SELL recommendations. Also, a different term referring to entry-level career position in many investment banks.
  • Service Provider The organization which provides the outsourced service.
    Settlement Date Date of electronic funds transfer that determines the availability of funds.
    Settlement Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivered, securities sold, and receive from the broker the proceeds of a sale.
    SEZ Special Economic Zone.
    SFC State Financial Corporation.
    Shadow Price It is an imputed value for a good based on the opportunity costs of the resources used to produce it such values are of particular significance in resolving problems of resource allocation with respect to the effect on welfare.
    Share Capita It is the amount of money raised by a company by issuing shares. The authorized share capital is the amount that a company is allowed to issue as laid down in its Articles of Association. The issued share capital is the amount actually issued i.e., the number of issued shares multiplied by their par value. Fully paid share capital is the amount raised by payment of the full par value of the issued shares.
    Short Covering Buying back securities that were previously sold, to make delivery on a short sale.
    Short Hedge A transaction that protects the value of an asset held by taking a short position in a futures contract.
    Short Position Investors sell securities in the hope that they will decrease in value and can be bought at a later date for profit.
    Short Sale The sale of a security that is not owned by the seller on the expectation that the security can be bought or borrowed. The short seller's intent is to profit by buying the security at a lower price than it sold for.
    Short selling When investors borrow an asset, such as shares, from another investor and then sell it in the relevant market hoping the price will fall. The aim is to buy back the asset at a lower price and return it to its owner, pocketing the difference.
    Short-term Loan Loan to a business for less than one year, usually for operating needs.
    Shoulder surfing The activity of anyone observing what you are doing on a computer or ATM. They may stand or sit closely behind you to watch you when you input personal details.
    SICA Sick Industrial Companies (Special Provisions) Act.
    Simple interest The interest calculated only on the principal funds that have been deposited in the account; no interest is earned on interest that has already been earned on the principal.
    Single Order Limit (SOL) for Trades SOL shall mean the maximum order quantity (in terms of face value) that can be placed by the concerned user through a single order.
    Single Tax System It is a system in which all tax revenues are raised from one form of taxation.
    Sinking Fund A reserve fund set aside over a period of time for the purpose of liquidating or retiring an obligation, such as a bond issue, at maturity.
    Site certificates Provide reassurance that the site being visited is genuine. A site certificate is required in the web browser and on the web server in order that a secure session can be started and communication can take place. To check the site certificate on a secure website, double-click the padlock symbol at the bottom right of your browser window to display site certificate information. For example, when you log on to the BoQ Internet banking site and double-click the padlock symbol, a window will appear that will show that the site certificate is issued to ‘www.boq.com.au’, issued by ‘verisign’ and the validity dates.
    Slippage Ratio (Fresh accretion of NPAs during the year/Total standard assets at the beginning of the year)*100
    SLR SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. Thus, we can say that it is ratio of cash and some other approved to liabilities (deposits). It regulates the credit growth in India.
    Social Insurance Number (SIN) An identification number provided by the government of Canada to every Canadian who earns income and pays taxes.
    Social Security Provision by the state out of taxation of welfare assistance to those in need as a result of illness, unemployment, or old age compare national insurance refers to social security.
    Socialism The political doctrine that the means of production (machines, materials and output) should be owned by society and specifically either by the state, as in the case of nationalized industries or by the workers directly, as in the case of producer co-operatives.
    Society for Worldwide Interbank Financial Telecommunications (S.W.I.F.T.) The major international financial telecommunications network that transmits international payment instructions as well as other international financial messages.
    Soft Currency A currency with limited convertibility into gold and other currencies, either because it is depreciating due to balance of payments difficulties or because controls have been placed on it to prevent the exchange rate falling.
    Spam Unwanted and unsolicited email. The electronic equivalent of paper junk mail.
    Special Assessment Bonds Bonds that are paid back from taxes on a property that is being improved with funds financed by the bonds. The issuing governmental entity agrees to make the assessments and to earmark the tax proceeds to repay the debt on these bonds.
    Special Drawing Rights (SDRs) It is a reserve asset (known as ‘Paper Gold’) created within the framework of the International Monetary Fund in an attempt to increase international liquidity, and now forming a part of countries official reserves along with gold, reserve positions in the IMF and convertible foreign currencies.
    Special Purpose Vehicle (SPV) An entity which may be a trust, company or other entity constituted or established by a 'Deed' or 'Agreement' for a specific purpose.
    Special Tax (Unit Tax) It is a tax imposed per unit of a commodity rather than on the value of the commodity compare ad-valorem.
    Special Tax Bond A bond secured by a special tax, such as a gasoline tax.
    Speculation The process of buying investment vehicles in which the future value and level of expected earnings are highly uncertain.
    Spread The difference between two figures or percentages. For example, the difference between the bid and asked prices of a quote or between the amounts paid when a security is bought and the amount received when it is sold.
    Spyware Any software which covertly gathers user information through the user's Internet connection without his or her knowledge, usually for advertising purposes. Spyware applications are typically bundled as a hidden component of freeware or shareware programs which can be downloaded from the Internet. Once installed, the spyware monitors user activity on the Internet and transmits that information in the background to someone else. Spyware can also gather information about email addresses and even passwords and credit card numbers. Also known as adware.
  • Tangible Assets Physical assets such as plant, machinery, factories, and offices.
    Tariff It is a tax or a duty on imports, which can be levied either on physical units, e.g., per tonne (specific), or on value (ad-valorem). Tariffs may be imposed for a variety of reasons including; to raise government revenue, to protect domestic industry from subsidized or low-wage imports, to boost domestic employment, or to ease a deficit on the balance of payments.
    Tax and Revenue Anticipation Notes (TRANs) Short-term notes issued by states or municipalities to finance current operations in anticipation of future tax receipts and revenue that will be used to repay the debt.
    Tax Anticipation Notes (TANS) Short-term notes issued by states or municipalities to finance current operations in anticipation of future tax collections that will be used to repay the debt.
    Tax Avoidance Lawful agreement or re-arrangement of the affairs of an individual or company intended to avoid liability to tax.
    Tax Deferred Earnings on investments in registered accounts (such as your RRSP or RESP) in the form of interest, dividends or capital gains are not taxable until the funds are withdrawn.
    Tax Evasion Fraudulent or illegal arrangements made with the intention of evading tax, e.g. by failure to make full disclosure to the revenue authorities.
    Tax Haven An international banking and financial centre providing privacy and tax benefits. Tax Incentives: Tax benefits. Most tax incentive measures fall into one or more of the following categories: tax exemption (tax holiday); deduction from the taxable base; reduction in the rate of tax; tax deferment, etc.
    Tax-Exempt Bonds Bonds for which the interest paid is usually exempt from federal taxes and, in some cases, from state and local taxes in state of issuance. The interest rate paid on these bonds is generally lower than rates on securities that are not tax-exempt.
    Tax-Free Savings Account (TFSA) A type of savings account that grows tax-free. You can save or invest up to a maximum of $5,000 per person, per year in TFSA without paying tax on the interest the money earns in the account. Withdrawals from this type of account are also tax-free.
    TCP/IP Transmission Control Protocol/Internet Protocol refers to the suite of communications protocols used to connect computer systems on the Internet.
    Technical Analysis A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future (usually short-term) market trends. Contrasted with fundamental analysis which involves the study of financial accounts and other information about the company. (It is an attempt to predict movements in security prices from their trading volume history.)
    Telegraphic Wire Transfer An electronic method of transferring money to another financial institution electronically.
    Telephone Banking Service provided by your financial institution allowing you to perform transactions over the telephone. Most telephone banking requires authentication (you have to prove who you are) and instructions are provided by a customer service representative or via an interactive voice response (IVR) system.
    Teller Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.
    Term Deposits Secure investments that you purchase for a fixed period of time. Term deposits generally offer a higher rate of interest than a simple savings account and are available in a variety of term lengths, currencies, and several redemption options.
    Term Issue A bond issue that matures all at once on a specific date.
    Term Loan A loan intended for medium-term or long-term financing to supply cash to purchase fixed assets such as machinery, land or buildings or to renovate business premises.
    Term A fixed period of time. When borrowing money, it is the period of time over which you agree to pay back a loan or mortgage. When depositing money, it is the length of time over which a financial institution keeps your money.
    Thin Market A market in which trading volume is low, with very few bids to buy or offers to sell.
    Tier 1 Capital Refers to core capital consisting of Capital, Statutory Reserves, Revenue and other reserves, Capital Reserves (excluding Revaluation Reserves) and unallocated surplus/ profit but excluding accumulated losses, investments in subsidiaries and other intangible assets.
    Tier 2 Capital Comprises Property Revaluation Reserves, Undisclosed Reserves, Hybrid Capital, Subordinated Term Debt and General Provisions. This is Supplementary Capital.
    Tiered A term that applies to interest rates, where the actual rate applied depends on the balance on the account.
    Time Deposit Time deposit is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term.
    Time deposit or CD An agreement to deposit a stated amount in the bank for a fixed length of time during which a fixed rate of interest will be paid (unless disclosed as a variable rate). Penalties are typically assessed if the funds are withdrawn before the end of the agreed-upon period.
    Time Horizon The duration of time an investment is intended for.
    Title Deeds Documents which prove who owns a property and under what terms.
    Token It is a hardware device that generates a random number as a secondary form of authentication for some Value Transactions carried out through Internet Banking. Also known as a BOQ Security Token.
    Total operating expenses Sum of interest expended, staff expenses and other overheads.
    Toxic debt Shorthand for types of assets that have caused severe problems for the financial institutions that held them since the onset of the credit crunch. US sub-prime mortgage debt was the original toxic debt.
    Trade Creditors Organizations, which are owed money for goods and services supplied.
    Trade Date The date when a security transaction is executed.
    Trade Debtors Organizations, which owe money for goods and services supplied.
    Trade Deficit The amount by which merchandise imports exceed merchandise exports.
    Trade Gap It signifies the size of the deficit (or surplus) in the balance of trade i.e., the difference in value between visible imports and exports.
    Trade Union It is an organization of employees who join together to further their interests. Trade Unions negotiate on behalf of their members in collective bargaining with employers, and in the event of a dispute may put pressure on employers by withdrawing labour (i.e. strike) or by some less drastic form of action (i.e. go-slow, working to rule).
    Trader Someone who buys and sells securities for a personal account or a firm's account for the purpose of short-term profit.
    Trading Book Investments in trading book are held for generating profits on the short term differences in prices/yields. Held for trading (HFT) and Available for sale (AFS) category constitute trading book.
    Trading Market The secondary market for bonds that have already been issued. See Secondary Market.
    Trading Rules Stipulation of parameters for opening and intra-day quotations, permissible spreads according to the prices of securities available for trading and board lot sizes for each security.
    Transaction date The date that a purchase was made or a cash advance was taken.
    Transaction limitations Refers to a Federal Reserve Board regulation that limits certain types of withdrawals and/or transfers you can make from your savings and / or money market deposit accounts. With such accounts, no more than 6 preauthorized or automatic transfers (including check, draft and point-of-sale transactions, if checks or debit cards are allowed on the account), or telephone / PC transfers (including bill payments) may be made each month. However, an unlimited number of withdrawals may be made at ATMs and teller windows.
    Transaction Action in a bank account. Could be a deposit, withdrawal, debit card payment, service charge or interest payment.
    Transactional User (GAH) These are GAH employees (GAH Users) who are authorized by PM to place, modify, cancel their bids, view status of their bids and view the limits set by the PM & along with the current utilization.
    Transfer Payment It is a payment made by public authority other than one made in exchange for goods or services produced. Transfer payments are not the part of National Income. Examples include unemployment benefit and child benefits.
    Transfer The movement of funds from one account to another.
    Traveler’s cheque/traveler's check Check issued by a financial institution which functions as cash but is protected against loss or theft. Useful when traveling.
    Treasury Bill (T Bill) An obligation of the U.S. government with a maturity of one year or less. T -bills bear no interest but are sold at a discount.
    Treasury Bonds and Notes Obligations of the U.S. government that bear interest. Notes have maturities of one to ten years; bonds have longer maturities.
    Trojan Programs (often malicious) which install themselves or run secretly on a victim's machine. They do not install or run automatically, but may entice users into installing or executing by masquerading as another program altogether (such as a game or a patch).
    Truncate To remove an original check from the forward collection or return process and send to a recipient, in lieu of such original check, a substitute check or, by agreement, information relating to the original check.
    Truncating Bank The Bank that truncates the original check. Also called: Converting Bank, but this is not the preferred term. See Truncate.
    Trust Deed (Settlement Deed, Declaration of Trust or Trust Instrument) Document that lays down the foundations of how the trustees are to administer and manage the trust assets and how they are to distribute and dispose of trust assets during the lifetime of the trust.
    Trust Deed A formal document that creates a trust. It states the purpose and terms of the name of the trustees and beneficiaries.
    Trust An entity created for the purpose of protecting and conserving assets for the benefit of a third party, the beneficiary- A contract affecting three parties, the settlor, the trustee and the beneficiary.
    Trustee A bank designated as the custodian of funds and the official representative of bondholders. In this capacity, the trustee is responsible for enforcing the bondholders' contract with the issuer.
    Truth in lending act A law that required a lender to inform a borrower of the amount financed, total finance charges, annual percentage rate, payment schedule, and many more important figures.
    Turnover Limits for Trades Turnover limits represent the gross amount in face value terms computed by aggregating individual "buys" + "sells" orders inputted on behalf of a GAH across all its users. This value is expressed in consideration terms of the underlying security instrument and shall reflect the total aggregate value that can be undertaken by the GAH for that trading session. This control shall be set for every GAH at the user level. This limit constitutes a trading limit which shall get reinstated at the beginning of every trading session for every GAH.
  • UCPDC Uniform Customs and Practice for Documentary Credit’ developed by the International Chamber of Commerce as the rules that govern the operation of Letter of Credit transactions worldwide. ICC publication No.500 contains details of the rules currently in use.
    Uncollected funds Refers to items deposited in an account that have not yet been collected (paid) by the bank on which they were drawn.
    Underlying Security The security subject to being purchased or sold upon exercise of the option contract.
    Undervaluation When a firm’s securities sell for less than their intrinsic, or potential, or long-run value for one or more reasons.
    Underwriter A bank or other financial institution that arranges for the sale and distribution of securities and assumes the responsibility for paying the net purchase price. In most instances, the underwriter deals in new issues and with the issuing entity. An investment underwriter guarantees the sale of a securities issue by purchasing the entire issue from the company and then selling it to the public. Underwriting is one function of an investment banker. See also Syndicate.
    Unit trust The trust issues units which represent holdings of the underlying shares. The fund is divided into units which investors trade with the fund management group.
    Universal Bank A bank or a financial institution that has the legal authority to offer all financial services and may, thus, be engaged in securities dealing, insurance, underwriting, and the full range of more traditional banking services.
    Universal Banking When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.
    Unlimited Tax Bond A municipal bond secured by the pledge of taxes that are not limited by rate or amount.
    Unlisted Securities Securities that are traded in the over-the-counter markets rather than through a recognized exchange.
    Unsecured Credit Card A credit card which does not require you to provide a cash deposit.
    Unsecured debt A credit source that is not guaranteed with collateral.
    URL Uniform Resource Locator is the specifying of the location of something on the Internet, eg, "http://www.boq.com.au" is the URL for the Bank of Queensland corporate website.
  • Validation Proceedings The legal proceedings required in some states whereby the courts decide the validity of proposed bond issues.
    Valuation Process by which an investor determines the worth of a security using risk and return concept.
    Value at Risk (VAR) VAR is a single number (currency amount) which estimates the maximum expected loss of a portfolio over a given time horizon (the holding period) and at a given confidence level. VaR is defined as an estimate of potential loss in a position or asset/liability or portfolio of assets/liabilities over a given holding period at a given level of certainty. The following are the three main methodologies used to calculate VaR: Parametric Estimates - Estimates VaR using parameters such as volatility and correlation. Accurate for traditional assets and linear derivatives, but less accurate for non linear derivatives. Monte Carlo simulation- Estimates VaR by simulating random scenarios and revaluing positions in the portfolio. Appropriate for all types of instruments, linear and nonlinear. Historical simulation- Estimates VaR by reliving history; takes actual historical rates and revalues positions for each change in the market.
    Value Creation The difference between the value of an investment and the amount of money invested by shareholders.
    Variable Expenses Costs of doing business that vary with the volume of business, such as advertising costs, manufacturing costs and bad debts.
    Variable rate A variable rate loan or credit agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the term.
    VAT (Value Added Tax) VAT seeks to tax the value added at every stage of manufacturing and sale, with a provision of refunding the amount of VAT already paid at the earlier stages to avoid double taxation. In other words, the tax already paid can be claimed at the next stage of value addition.
    Venture Capital Fund (VCF) A fund set up for the purpose of investing in startup businesses that is perceived to have excellent growth prospects but does not have access to capital markets.
    Venture Capital Commonly refers to funds that are invested by a third party in a business either as equity or as a form of secondary debt.
    Verifier The individual responsible for completing the funds transfer. An Office of the Treasurer staff member is the verifier on most electronic funds transfers.
    Vertical Merger A combination of firms, which operate at different levels or stages of the same industry manufacturer mergers with a type company (backward integration).
    View Only User (GAH) These are GAH employees (GAH Users) who have been provided with ‘View only’ rights by the PM. These employees have an aggregated view of all the activities and risk limits of all transactional users under the respective GAH. It also includes view of issuance details and aggregate view of bidding and allocation details of all transactional users.
    Virtual Banking Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's World Wide Web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.
    Virus A computer program usually hidden in an existing program. Once the existing program is executed, the virus program is activated and can attach itself to other programs or files. Viruses can range from benign activities such as attaching a harmless message to performing malicious activities such as destroying all the data on a computer hard drive. Viruses are commonly distributed as e-mail attachments which activate when the attachment is opened.
    Visible Supply The total dollar volume of new municipal bond issues coming up for sale within the next 30 days.
    Vital Statistics Vital statistics refers to those data which are associated with vital events of masses like birth, death, marriage divorce etc.
    VRS Voluntary Retirement Scheme.
  • Warrant An option for a longer period of time giving the buyer the right to buy a number of shares of common stock in company at a specified price for a specified period of time.
    Wealth Tax Wealth tax is that tax which is imposed on the value of total assets but the wealth upto a certain limit is exempted from such tax.
    Welfare State It refers to a nation that provides to all at least the minimum standards in respect of education, health, housing, pensions and other social benefits.
    When-Issued Basis (WIB) Describes securities that are traded before they are actually issued, with the stipulation that the transactions are null and void if the securities are not issued. Usually abbreviated to "w.i." following a market quotation for such securities.
    Wholesale Banking It is similar to retail banking with a slight difference that it mainly focuses on the financial needs of the institutional clients and the industry.
    Wholesale Price Index Wholesale Price Index is that index which is calculated on the basis of wholesale prices. It is calculated in a similar way to the Retail Price Index.
    Winding up Winding up of a company is done by paying the company’s creditors, and then distributing monies left (if any) among the members.
    Window Dressing Financial adjustments made solely for the purpose of accounting presentation, normally at the time of auditing of company accounts.
    Winning Bid The successful bid for a particular issue. Generally, it produces the lowest net interest cost (NIC) to a municipal borrower or offers the highest premium in a single coupon bid.
    Wire transfer An electronic payment service for transferring funds (for example, through the Federal Reserve Wire Network or the Clearing House Interbank Payments System).
    With the Standard Setting ATM withdrawals and every day, non-recurring debit card transactions (individual debit card purchases such as at the grocery store or a one-time online purchase), will only be authorized when we determine you have enough available funds in your account or in your linked Overdraft Protection account at the time of the transaction. Otherwise, we typically decline the transaction and we do not charge an Overdraft Item fee. For other types of transactions-like checks, Bill Pay and other electronic payments, as well as recurring debit card payments-we may pay transactions when you don't have enough available funds in your checking account or linked Overdraft Protection account at the time of the transaction. If we pay a transaction that's larger than your Available Balance and it overdraws your account, this typically results in a charge for each overdraft item, unless you deposit enough available funds that day to cover the overdraft. If we return the item unpaid, this typically results in a NSF: Returned Item fee.
    Withdrawal An amount of money taken out of an account.
    Worm A software program capable of reproducing itself and spreading from one computer to another. Worms take advantage of automatic file sending and receiving features found on many computers. Note: A virus requires human intervention to transport to other devices – Worms do not.
  • Yield (Internal rate of Return) The compound annual rate of return earned by an investment.
    Yield to maturity (YTM) or Yield The Yield to maturity (YTM) is the yield promised to the bondholder on the assumption that the bond will be held to maturity and coupon payments will be reinvested at the YTM. It is a measure of the return of the bond.
    Yield to Maturity The average annual yield on a security, assuming it is held to maturity; equal to the rate at which all principal and interest payments would be discounted to produce a present value equal to the purchase price of the bond.
    Yield The annual rate of return on an investment, expressed as a percentage of the investment. Income yield is obtained by dividing the current dollar income by the current market price for the security. Net yield, or yield to maturity, is the current income yield minus any premium above par or plus any discount from par in the purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
    Yield (1) A measure of the income generated by a bond. The amount of interest paid on a bond divided by the price. (2) The rate of discount which makes the present value of the stream of future returns plus the terminal value of the asset equal to the current market price of the asset.
  • Zero Coupon Bond A bond issued at a discount (i.e. below par value), earning no interest but redeemable at its par value, thus providing a guaranteed capital gain.
    Zero Liability Protection If your credit or debit card is lost or stolen, and you report the loss promptly, you may not be responsible for fraudulent purchases made with your card. There is no charge for the Zero Liability Protection program and it is available on all Bank of America consumer credit cards, debit cards, and Home Equity line of credit access cards. Claims may only be filed against posted and settled transactions subject to dollar limits and subsequent verification, including providing all requested information supporting fraudulent use claim. For debit card transactions, claims must be reported within 60 days of the statement.

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