Banking Terms and Phrases

Account Agreement: The contract governing your open-end credit account, it provides information on changes that may occur to the account. Account History: The payment history of an account over a specific period of time, including the number of times the account was past due or over limit. Account Holder: Any and all persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the bank. The signature authorizes that person to conduct business on behalf of the account. Accrued Interest: Interest that has been earned but not yet paid. Acquiring Bank: In a merger, the bank that absorbs the bank acquired. Adjustable-Rate Mortgages (ARMS):Also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change. There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement. If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well. Adverse Action: Under the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account. Adverse Action Notice: The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder. Affidavit: A sworn statement in writing before a proper official, such as a notary public. Alteration: Any change involving an erasure or rewriting in the date, amount, or payee of a check or other negotiable instrument. Amortization: The process of reducing debt through regular installment payments of principal and interest that will result in the payoff of a loan at its maturity. Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a percentage.

Annual Percentage Yield (APY):A percentage rate reflecting the total amount of interest paid on a deposit account based on the interest rate and the frequency of compounding for a 365-day year. Annuity: A life insurance contract sold by insurance companies, brokers, and other financial institutions. It is usually sold as a retirement investment. An annuity is a long-term investment and can have steep surrender charges and penalties for withdrawal before the annuity's maturity date. (Annuities are not FDIC insured.) Application: Under the Equal Credit Opportunity Act (ECOA), an oral or written request for an extension of credit that is made in accordance with the procedures established by a creditor for the type of credit requested. Appraisal: The act of evaluating and setting the value of a specific piece of personal or real property. Authorization: The issuance of approval, by a credit card issuer, merchant, or other affiliate, to complete a credit card transaction. Automated Clearing House (ACH):A computerized facility used by member depository institutions to electronically combine, sort, and distribute inter-bank credits and debits. ACHs process electronic transfers of government securities and provided customer services, such as direct deposit of customers' salaries and government benefit payments (i.e., social security, welfare, and veterans' entitlements), and preauthorized transfers. Automated Teller Machine (ATM): A machine, activated by a magnetically encoded card or other medium that can process a variety of banking transactions. These include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts. Automatically Protected: As of May 1, 2011, up to two months of Federal benefits such as Social Security benefits, Supplemental Security Income benefits, Veteran¶s benefits, Railroad Retirement benefits, and benefits from the Office of Personnel Management that are direct deposited to an account may be protected from garnishment. The amount automatically protected will depend upon the balance of the account on the day of review. Automatic Bill Payment: A checkless system for paying recurring bills with one authorization statement to a financial institution. For example, the customer would only have to provide one



authorization form/letter/document to pay the cable bill each month. The necessary debits and credits are made through an Automated Clearing House (ACH). Availability Date: Bank¶s policy as to when funds deposited into an account will be available for withdrawal. Availability Policy: Bank¶s policy as to when funds deposited into an account will be available for withdrawal. Available Balance: The balance of an account less any hold, uncollected funds, and restrictions against the account. Available Credit: The difference between the credit limit assigned to a cardholder account and the present balance of the account. Balance Transfer: The process of moving an outstanding balance from one credit card to another. This is usually done to obtain a lower interest rate on the outstanding balance. Transfers are sometimes subjected to a Balance Transfer Fee. Bank Custodian: A bank custodian is responsible for maintaining the safety of clients' assets held at one of the custodian's premises, a sub-custodian facility or an outside depository. Bank Examination: Examination of a bank's assets, income, and expenses-as well as operations by representatives of Federal and State bank supervisory authority-to ensure that the bank is solvent and is operating in conformity with banking laws and sound banking principles. Bank Statement: Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all checks paid, and other debits posted during the period (usually one month), as well as the current balance. Banking Day: A business day during which an office of a bank is open to the public for substantially all of its banking functions. Bankrupt: A bankrupt person, firm, or corporation has insufficient assets to cover their debts. The debtor seeks relief through a court proceeding to work out a payment schedule or erase debts. In some cases, the debtor must surrender control of all assets to a court-appointed trustee. Bankruptcy: The legal proceedings by which the affairs of a bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws. There are two types of bankruptcy:


Involuntary bankruptcy-one or more creditors of an insolvent debtor file a petition having the debtor declared bankrupt. y Voluntary bankruptcy-the debtor files a petition claiming inability to meet financial obligations and willingness to be declared bankrupt. Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Billing Cycle: The time interval between the dates on which regular periodic statements are issued. Billing Date: The month, date, and year when a periodic or monthly statement is generated. Calculations have been performed for appropriate finance charges, minimum payment due, and new balance. Billing Error: A charge that appears on a periodic statement associated with an extension of credit (e.g., credit card) that y was not authorized by the cardholder or the cardholders' designee, y is not properly identified, and y was not accepted by the cardholder or the cardholder's designee. A billing error can also be caused by a creditor's failure to credit a payment or other credit to an account as well as accounting and clerical errors. Bond, U.S. Savings: Savings bonds are issued in face value denominations by the U.S. Government in denominations ranging from $50 to $10,000. They are typically long-term, low-risk investment tools. Business Day: Any day on which offices of a bank are open to the public for carrying on substantially all of the bank's business. Canceled Check: A check that a bank has paid, charged to the account holder's account, and then endorsed. Once canceled, a check is no longer negotiable. Cashier's Check: A check drawn on the funds of the bank, not against the funds in a depositor's account. However, the depositor paid for the cashier's check with funds from their account. The primary benefit of a cashier's check is that the recipient of the check is assured that the funds are available. Cease and Desist Letter: A letter requesting that a company stops the activity mentioned in the letter.


Certificate of Deposit: A negotiable instrument issued by a bank in exchange for funds, usually bearing interest, deposited with the bank. Certificate of Release: A certificate signed by a lender indicating that a mortgage has been fully paid and all debts satisfied. Certified Check: A personal check drawn by an individual that is certified (guaranteed) to be good. The face of the check bears the words "certified" or "accepted," and is signed by an official of the bank or thrift institution issuing the check. The signature signifies that y the signature of the drawer is genuine, and y Sufficient funds are on deposit and earmarked for payment of the check. Charge-off: The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt. Check: A written order instructing a financial institution to pay immediately on demand a specified amount of money from the check writer's account to the person named on the check or, if a specific person is not named, to whoever bears the check to the institution for payment. Check 21 Act: Check 21 is a Federal law that is designed to enable banks to handle more checks electronically, which is intended to make check processing faster and more efficient. Check 21 is the short name for the Check Clearing for the 21st Century Act, which went into effect on October 28, 2004. Check Truncation: The conversion of data on a check into an electronic image after a check enters the processing system. Check truncation eliminates the need to return canceled checks to customers. Checking Account: A demand deposit account subject to withdrawal of funds by check. ChexSystems: The ChexSystems, Inc. network is comprised of member financial institutions that regularly contribute information on mishandled checking and savings accounts to a central location. ChexSystems shares this information among member institutions to help them assess the risk of opening new accounts. ChexSystems only shares information with the member institutions; it does not decide on new account openings. Generally, information remains on ChexSystems for five years. Closed-End Credit: Generally, any credit sale agreement in which the amount advanced, plus any

finance charges, is expected to be repaid in full by a specified date. Most real estate and automobile loans are closed-end agreements. Closed-End Loan: Generally, any loan in which the amount advanced, plus any finance charges, is expected to be repaid in full by a specified date. Most real estate and automobile loans are closed-end agreements. Closing a Mortgage Loan: The consummation of a contractual real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender. Closing Costs: The expenses incurred by sellers and buyers in transferring ownership in real property. The costs of closing may include the origination fee, discount points, attorneys' fees, loan fees, title search and insurance, survey charge, recordation fees, and the credit report charge. Collateral: Assets that are offered to secure a loan or other credit. For example, if you get a real estate mortgage, the bank's collateral is typically your house. Collateral becomes subject to seizure on default. Collected Funds: Cash deposits or checks that have been presented for payment and for which payment has been received. Collection Agency: A company hired by a creditor to collect a debt that is owed. Creditors typically hire a collection agency only after they have made efforts to collect the debt themselves, usually through letters and telephone calls. Collection Items: Items-such as drafts, notes, and acceptances-received for collection and credited to a depositor's account after payment has been received. Collection items are usually subject to special instructions and may involve additional fees. Most banks impose a special fee, called a collection charge, for handling collection items. Collective Investment Funds (CIFs): A Collective Investment Fund (CIF) is a trust created and administered by a bank or trust company that commingles assets from multiple clients. The Federal securities laws generally require entities that pool securities to register those pooled vehicles (such as mutual funds) with the SEC. However, Congress created exemptions from these registration requirements for CIFs so long as the entity offering these funds is a bank or other authorized entity and



credit card companies. (Also known as a Co-signer. credit history or credit rating.) Community Reinvestment Act: The Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate. This is optional coverage. Consumer Credit Counseling Service: A service which specializes in working with consumers who are overextended with debts and need to make arrangements with creditors. income. It also includes a person or organization that provides advice or assistance about how to improve a consumer's credit record. or long as participation in the fund is restricted to only those customers covered by the exemption." Co-Signer: An individual who signs the note of another person as support for the credit of the primary signer and who becomes responsible for the obligation. Credit Life Insurance: A type of life insurance that helps repay a loan if you should die before the loan is fully repaid. Credit Disability Insurance: A type of insurance. Page credit card companies. Credit Card Issuer: Any financial institution that issues bank cards to those who apply for them. the "principal". including many non-profit organizations and the creditor that is owed the debt. Credit Card Account Agreement: A written agreement that explains the y terms and conditions of the account. A portion of each monthly payment goes towards paying back the money borrowed. The most well-known type of credit score is the FICO® score. also known as accident and health insurance that makes payments on the loan if you become ill or injured and cannot work. 20. employment. including low. Credit Bureau: An agency that collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Credit Report: A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness. A conventional fixed-rate loan is fully paid off over a given number of years-usually 15. and existing debt) to allow the seller to establish the applicant's creditworthiness. that measures an individual's credit worthiness. It was enacted by the Congress in 1977." of the loan. provides. Credit Limit: The maximum amount of credit that is available on a credit card or other line of credit account. and y Duties and responsibilities of the card issuer. After the cut-off time. Credit Repair Organization: A person or organization that sells. or "term. This score represents the answer from a mathematical formula that assigns numerical values to various pieces of information in your credit report. Typical clients include banks. credit history or credit rating (or says that that they will do so) in exchange for a fee or other payment. mortgage lenders. Cut-Off Time: A time of day established by a bank for receipt of deposits. Also commonly referred to as a consumer reporting agency or a credit reporting agency. the rest is "interest. Consumer Reporting Agency: An agency that regularly collects or evaluates individual consumer credit information or other information about consumers and sells consumer reports for a fee to creditors or others. an application fee is charged to cover the cost of loan processing. Conventional Fixed Rate Mortgage: A fixed-rate mortgage offers you a set interest rate and payments that do not change throughout the life. There are some important exceptions to this definition. or assists in improving a consumer's credit record. y credit usage and payment by the cardholder. mortgage lenders. Credit Score: A number. roughly between 300 and 800. Typical clients include banks. If these limitations are met. loan. giving sufficient details (residence. and other financing companies. Banks use a credit score to help determine whether you qualify for a particular credit card. 4 .) Credit Application: A form to be completed by an applicant for a credit account. Sometimes. Co-Maker: A person who signs a note to guarantee a loan made to another person and is jointly liable with the maker for repayment of the loan.and moderate-income neighborhoods. and other financing companies. (Also known as a Co-maker. performs. or 30. CIFs are exempt from SEC registration and reporting requirements.

Electronic Banking: A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's Web site on the Internet. Deferred Payment: A payment postponed until a future date. the higher the ratio. a creditor may take legal action against an individual to resolve a fraudulent attempt to eliminate debt. Debit Card: A debit card allows the account owner to access their funds electronically. written order by which one party (the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee). drafts. Draft: A signed. embezzlement is defined as theft/larceny of assets (money or property) by a person in a position of trust or responsibility over those assets. Debt Elimination Scheme: A debt elimination scheme is a plan that is advertised as a way for an individual to eliminate various types of debt simply by paying someone a small fee compared to the amount of debt to be eliminated. In addition. Demand Deposit: A deposit of funds that can be withdrawn without any advance notice. Debtor: Someone who owes monies to another party. Decedent: A deceased person.) Embezzlement: In most States. The information is then used to make a one-time electronic payment from your account-an electronic fund transfer. (Wire transfers. Debit cards may be used to obtain cash from automated teller machines or purchase goods or services using pointof-sale systems. Drawee bank: The bank upon which a check is drawn. Direct Dispute: A dispute submitted directly to the furnisher about the accuracy of information in your consumer report that relates to an account or other relationship you have with the furnisher. Embezzlement typically occurs in the employment and corporate settings. and possibly incur additional debt. As a result of using a fraudulent scheme. and the number that identifies your financial institution. your account number. Delinquency: A debt that was not paid when due. (This is also known as Internet or online banking. Debt-to-Income Ratio (DTI): The percentage of a consumer's monthly gross income that goes toward paying debts.) Electronic Check Conversion: Electronic check conversion is a process in which your check is used as a source of information-for the check number. ordinarily used with respect to one who has died recently. and paper instruments do not fall into this category. Drawer: The person who writes a check or draft instructing the drawee to pay someone else. Debit: A debit may be an account entry representing money you owe a lender or money that has been taken from your deposit account. Electronic Funds Transfer (EFT):The transfer of money between accounts by consumer electronic systems-such as automated teller machines (ATMs) and electronic payment of bills-rather than by check or cash. could lose property. These schemes are fraudulent. will damage their credit rating. The use of a debit card involves immediate debiting and crediting of consumers' accounts. Deposit Slip: An itemized memorandum of the cash and other funds that a customer presents to the bank for credit to his or her account. Typical bank drafts are negotiable instruments and are similar in many ways to checks. The check itself is not the method of payment. Loans with higher risk are generally priced at a higher interest rate.Page deposits are considered received on the next banking day. Drawee: The person (or bank) who is expected to pay a check or draft when it is presented for payment. individuals will lose money. the higher the perceived risk. 5 . at sight or at a specific date. Disclosures: Certain information that Federal and State laws require creditors to give to borrowers relative to the terms of the credit extended. Direct Deposit: A payment that is electronically deposited into an individual's account at a depository institution. checks. Generally. Derogatory Information: Data received by a creditor indicating that a credit applicant has not paid his or her accounts with other creditors according to the required terms. It is also possible for the victim to have identify theft occur by participating in such a fraudulent scheme. Debt Collector: Any person who regularly collects debts owed to others.

monetary and financial system. Fair Credit Reporting Act (FCRA): A Federal provides consumers with the secure means to request their free credit report. and other mortgage-related items when due. Escrow Analysis: The periodic examination of escrow accounts by a mortgage company to verify that monthly deposits are sufficient to pay taxes. The FCRA regulates consumer credit reporting and related industries to ensure that consumer information is reported in an accurate. Federal Deposit Insurance Corporation (FDIC): A government corporation that insures the deposits of all national and State banks that are members of the Federal Reserve System. FEMA oversees the administration of flood insurance programs and the designation of certain areas as flood prone.] Enforcement Action: A regulatory tool that the OCC may use to correct problems or effect change in a national bank. and Trans Union). AnnualCreditReport. marital status. and other assets can be held in escrow. and other financial instruments.C.Encoding: The process used to imprint or inscribe MICR characters on checks.S. [Magnetic Ink Character Recognition (MICR) is a character-recognition technology adopted mainly by the banking industry to facilitate the processing of checks. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States. Federal Reserve System: The central bank of the United States. The Federal Reserve System is composed of a central governmental agency in Washington. Escheat: Reversion of real or personal property to the State when 1) a person dies without leaving a will and has no heirs. there is an encoding error. Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA):The purpose of this Act is to help consumers protect their credit identities and recover from identity theft. and complete manner. Exception Hold: A period of time that allows the banks to exceed the maximum hold periods defined in the Expedited Funds Availability Act. One of the key provisions of this Act is that consumers can request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Equifax. established in 1971 and revised in 1997. Error Resolution: The required process for resolving errors involving electronic transfers to and from deposit accounts. deposits. If that information is entered incorrectly. Securities. It is often used in conjunction with the Fair Credit Reporting Act. The Act was amended to address the sharing of consumer information with affiliates. You can divide the Federal Reserve's duties into four general areas: y Conducting monetary policy y Regulating banking institutions and protecting the credit rights of consumers Page 6 . natural and man-made. sex. and other escrow-related items on when due. Federal Emergency Management Agency (FEMA): Federal agency responsible for the emergency evaluation and response to all disasters. or because an applicant receives income from a public assistance program. Equal Credit Opportunity Act (ECOA):Prohibits creditors from discriminating against credit applicants on the basis of race. timely. The funds are held by the escrow service until it receives the appropriate written or oral instructionsor until obligations have been fulfilled. Estate Account: An account held in the name of a decedent that is administered by an executor or administrator of the estate. Experian. funds. Each check in encoded at the bottom with the dollar amount of the check. insurance. that gives consumers the right to see their credit records and correct any mistakes. insurance. age. D. or 2) when the property (such as a bank account) has been inactive for a certain period of time. as it is commonly called. religion. color. Escrow: A financial instrument held by a third party on behalf of the other two parties in a transaction. The Fed. Escrow Funds: Funds held in reserve by a mortgage company to pay taxes. Fair Debt Collection Practices Act (FDCPA): The Fair Debt Collection Practices Act is a set of United States statutes added as Title VIII of the Consumer Credit Protection Act. Its purpose is to ensure ethical practices in the collection of consumer debts and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. national origin. regulates the U.

Fixed Rate Mortgage: A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change. Finance Charge: The total cost of credit a customer must pay on a consumer loan. Fixed Rate Loan: The interest rate and the payment remain the same over the life of the loan. The intent of the forgery is to deceive or defraud. Furnisher: An entity that provides information about a consumer to a consumer reporting agency for inclusion in a consumer report.g. administrator. mortgage.. or trustee for a family trust. Garnishment/Garnish: A legal process that allows a creditor to remove funds from your bank account to satisfy a debt that you have not paid. the account of a deceased person is frozen pending a court order distributing the funds to the new lawful owners). conservator. If you owe money to a person or company. Freedom of Information Act (FOIA): A Federal law that mandates that all the records created and kept by Federal agencies in the executive branch of government must be open for public inspection and copying. taking priority over all other liens. or testamentary trust. A consumer would use this option if they believe they were a victim of identity theft.S.Maintaining the stability of the financial system Providing financial services to the U. authorized trust. The bank will freeze the account to preserve the existing funds until legal action can determine the lawful owner. Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Flood Insurance: Flood insurance protects against water from an overflowing river or a hurricane's tidal surge and also covers damage from water that builds up during storms. including interest. or check. river. Frozen Account: An account on which funds may not be withdrawn until a lien is satisfied and a court order or other legal process makes the account available for withdrawal (e. The Page 7 . Forgery: The fraudulent signing or alteration of another's name to an instrument such as a deed. y y Foreign Transaction Fees: A fee assessed by your bank for making a transaction at another bank's ATM. 2) The time that elapses between the day a check is deposited and the day it is presented for payment to the financial institution on which it is drawn. An account may also be frozen when there is a dispute regarding the true ownership of an account. Fraud Alert: A key provision of the Fair and Accurate Credit Transactions Act of 2003 is the consumer's ability to place a fraud alert on their credit record. Flood Plain: A strip of relatively flat and normally dry land alongside a stream. or lake that is covered by water during a flood. Forged Check: A check on which the drawer's signature has been forged. In case of a foreclosure. The only exceptions are those records that fall into one of nine exempted categories listed in the statute. the first mortgage will be repaid before any other mortgages. government Fiduciary: Undertaking to act as executor. they can obtain a court order directing your bank to take money out of your account to pay off your debt. guardian. The consumer makes equal monthly payments of principal and interest until the debt is paid in full. The primary regulators are the following: y OCC (Office of the Comptroller of the Currency) y FDIC (Federal Deposit Insurance Corporation) y FRB (Federal Reserve Board) y NCUA (National Credit Union Administration) y State regulatory agencies First Mortgage: A real estate loan which is in a first lien position. or receiver or trustee in bankruptcy. Guaranteed Student Loan: An extension of credit from a financial institution that is guaranteed by a Federal or State government entity to assist with tuition and other educational expenses. The alert requires any creditor that is asked to extend credit to contact the consumer by phone and verify that the credit application was not made by an identity thief. The Truth in Lending Act requires disclosure of the finance charge. Financial Regulatory Agency: An organization authorized by statute for ensuring the safe and sound operation of financial institutions chartered to conduct business under that agency's jurisdiction. Float:1) The amount of uncollected funds represented by checks in the possession of one bank but drawn on other banks.

The amount contributed is not taxed until withdrawn. during the term of the CD. The interest paid is usually tax-deductible. Inactive Account: An account that has little or no activity. Interest is paid on loans or on debt instruments. This type of loan is sometimes referred to as a second mortgage or borrowing against your home. Individual Account: An account in the name of one individual. if you default. of a particular index. a right. Investors should carefully review the investment risk considerations detailed in the relevant offering documents and disclosure statements. neither deposits nor withdrawals having been posted to the account for a significant period of time. Index-linked CDs are not securities and are not registered under securities laws. For example. Withdrawal is not permitted without penalty until the individual reaches age 59 1/2. Interest paid on the loan is generally tax deductible (consult a tax advisor to be sure).Page government entity is responsible for paying the interest on the loan and paying the lender to manage it. Interest Rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. the bank may foreclose on your house and take ownership of it. and other major purchases. Interest Rate Index: A table of yields or interest rates being paid on debt that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans. share. Insurance (Hazard): Insurance to protect the homeowner and the lender against physical damage to a property from sources such as but not limited to fire. debt consolidation. usually expressed as 8 . Interest: The term interest is used to describe the cost of using money. The government entity also is responsible for the loan if the student defaults. Kiting: Writing a check in an amount that will overdraw the account but making up the deficiency by depositing another check on another bank. It can be used for home improvements. Insured Deposits: Deposits held in financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) against loss due to bank failure. or to finance their child's college education. Index-linked CDs provide the investor the ability to participate in the appreciation. Either party can conduct transactions separately or together as set forth in the deposit account contract. such as notes or bonds. Because the loan is secured by your home's equity. which is the difference between the amount that your home could be sold for and the amount that you still owe. Individual Retirement Account (IRA):A retirement savings program for individuals to which yearly tax-deductible contributions up to a specified limit can be made. The funds may be accessed by writing checks against the line of credit or by getting a cash advance. Index-linked CDs may have complicated payout structures and may not be suitable or appropriate for all investors. or until a specific check or debit is posted. Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. or title in property. Insufficient Funds: When a depositor's checking account balance is inadequate to pay a check presented for payment. Hold: Used to indicate that a certain amount of a customer's balance may not be withdrawn until an item has been collected. Late Charge: The fee charged for delinquent payment on an installment loan. either at regular intervals or as part of a lump sum payment when the issue matures. or vandalism. Joint Account: An account owned by two or more persons. Homeowners often use a home-equity loan for home improvements. but counting on receiving and depositing your paycheck before the mortgage company presents the check for payment. wind. if any. Home Equity Line of Credit (HELOC):A line of credit secured by the equity in a consumer's home. mailing a check for the mortgage when your checking account has insufficient funds to cover the check. Index-linked Certificate of Deposit: An indexlinked CD is a deposit obligation of the issuing bank and is often sold through bank branches and affiliated and unaffiliated brokers. Home Equity Loan: A home equity loan allows you to tap into your home's built-up equity. to pay for a new car.

or other debt. space. at. Media: Any organization in the business of informing the public with news or commentary. A mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan.a percentage of the loan balance or payment. Mortgagor: The borrower in a mortgage loan relationship. Loan Modification Provision: A contractual agreement in a loan that allows the borrower or lender to permanently change one or more of the terms of the original contract. Manufactured (mobile) home: A structure. Minimum Balance: The amount of money required to be on deposit in an account to qualify the depositor for special services or to waive a service charge. The various forms of media include print. Therefore. Lien: Legal claim against a property. the more favorable the program terms offered by lenders. structures. Loan Proceeds: The net amount of funds that a lending institution disburses under the terms of a loan. the Federal Reserve consolidated its checking processing centers into one processing center.000. Mortgagee: The lender in a mortgage loan relationship. Loan Fee: A fee charged by a lender to make a loan (in addition to the interest charged to the borrower). They are not insured by the FDIC. The LTV will affect programs available to the borrower. internet. Missing Payment: A payment that has been made but not credited to the appropriate account.g. or through a bank in the same check processing region as the location of the branch of the depository bank. Mortgage Loan: A loan made by a lender to a borrower for the financing of real property. a mobile home must be on a permanent foundation and meet specific anchoring requirements for it location. all checks are now considered local. (Property is used as collateral to make payment.) 9 . Mobile home: To be eligible for coverage under the National Flood Insurance Program. Insured by the FDIC. these accounts have limits on the number of transactions allowed and may require higher balances to receive the higher rate of interest. and which the borrower then owes. or equipment in consideration of a payment (e. rent). Loan Contract: The written agreement between a borrower and a lender in which the terms and conditions of the loan are set. or other financial instrument becomes due and payable. The term does not include recreational vehicles. the lower the LTV. Minimum Payment: The minimum dollar amount that must be paid each month on a loan. The depository bank is the bank into which the check was deposited..000 home. and affixed to a permanent foundation. Money market funds usually offer check writing privileges. As of February 27. Money Market Deposit Account: A savings account that offers a higher rate of interest in exchange for larger than normal deposits. See manufactured (mobile) home. on a $100. Also. line of credit. Money Market Fund: An open-ended mutual fund that invests in short-term debts and monetary instruments such as Treasury bills and pays money market rates of interest. built on a permanent chassis. Maturity: The date on which the principal balance of a loan. television. Once the property is sold. Local Check: A check payable by. a penalty imposed by a card issuer against a cardholder's account for failing to make minimum payments. Mortgage: A debt instrument used in a real estate transaction where the property is the collateral for the loan. the loanto-value ratio is 80 percent. Loan-to-Value Ratio (LTV): The ratio of the loan principal (amount borrowed) to the appraised value (selling price). with a mortgage loan principal of $80. Lease: A contract transferring the use of property or occupancy of land. 2010. Lender: An individual or financial institution that lends money with the expectation that the money will be returned with interest. transported to a site in one or Page more sections. and radio. For example. Line of Credit: A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. the lien holder is then paid the amount that is owed. bond. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit. generally.

(Mutual funds are not covered by FDIC insurance. Page 10 . and leases. Overdraw: To write a check for an amount that exceeds the amount on deposit in the account. These funds offer investors the advantages of diversification and professional management. the investor may pay fees and expenses.) Offset. National Bank Examiner: An employee of the Comptroller of the Currency whose function is to examine national banks periodically to determine the financial position of a bank and the security of its deposits. Treasury Department.) Open-End Credit: A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services.Mutual Fund: A fund operated by an investment company that raises money from shareholders and invests it in stocks.) Operating Subsidiary: National banks conduct some of their banking activities through companies called operating subsidiaries. The benefits may be exempt from garnishment but you will have to alert the court or creditor. the excess is known as an overdraft. (Also called a charge account or revolving credit. To participate. Official Check: A check drawn on a bank and signed by an authorized bank official. which insures the deposits of Federal credit unions. Overlimit: An open-end credit account in which the assigned dollar limit has been exceeded. Not Automatically Protected: There are several types of Federal benefits that are not automatically protected under 31CFR 212: Federal benefits received by check rather than direct deposit. and the account is said to be overdrawn. offer banking products and services such as loans. The borrower is only billed for the amount that is actually borrowed plus any interest due. The Office of the Comptroller of the Currency is a bureau of the U. It is also known as right of setoff Online Banking: A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's web site on the Internet. A national bank can be recognized because it must have "national" or "national association" in its name. This is an interestbearing account for which the bank must reserve the right to require the depositor to provide at least seven days notice of his/her intent to withdraw funds. (NCUA also administers the National Credit Union Share Insurance Fund. bonds.S. (Also known as a cashier's check. Subchapter B. mortgages. The examiner also verifies that the bank maintains procedures consistent with Federal banking laws and regulations. options.) National Bank: A bank that is subject to the supervision of the Comptroller of the Currency. among other things. Negotiable Order of Withdrawal Account (NOW): A savings account from which withdrawals can be made by negotiable orders of withdrawal (functional equivalent of checks).) National Flood Insurance Program (NFIP):The program of flood insurance coverage and floodplain management administered under the Flood Disaster Protection Act (FDPA or Act) and applicable Federal regulations found in Title 44 of the Code of Federal Regulations. Right of: Banks' legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default. Federal benefits received more than two months before the bank received the garnishment order or Federal benefits that were transferred to another bank account. commodities. Outstanding Check: A check written by a depositor that has not yet been presented for payment to or paid by the depositor's bank. These subsidiaries are companies that are owned or controlled by a national bank and that. (This is also known as Internet or electronic banking. Participating Community: A community for which the Federal Emergency Management Agency (FEMA) has authorized the sale of flood insurance under the National Flood Insurance Program (NFIP). National Credit Union Administration (NCUA): The Federal regulatory agency that charters and supervises Federal credit unions. The Office of the Comptroller of the Currency supervises and regulates the activities of many of these operating subsidiaries. Overdraft: When the amount of money withdrawn from a bank account is greater than the amount actually available in the account. or money market securities.

(The bank may refer to this as a Durable Power of Attorney: The principal grants specific rights to the agent. taxes. The PRP generally is available for property located in B. among other things.) Previous Balance: The cardholder's account balance as of the previous billing statement. or it may be general in nature. the daily periodic rate is the cost of credit per day. interest. short-term loan that a borrower promises to repay out of their next paycheck or deposit of funds. Preferred Risk Policy (PRP): A policy that offers fixed combinations of building/contents coverage or contents-only coverage at modest. fees and penalties can be assessed. C. Periodic Statement: The billing summary produced and mailed at specified intervals. fixed premiums. this applies when there is not a prepayment clause in the mortgage note to offset the penalty. all sums due. the power of attorney usually expires when the person granting it dies. Payee: The person or organization to whom a check. usually monthly. Any payment received after this date is considered late. 2) Systems that allow bank customers to effect transfers of funds from their deposit accounts and other financial transactions at retail establishments. PITI: Common acronym for principal. The power of attorney may be for a definite. The code is either randomly assigned by the bank or selected by the customer. and X Zones in Regular Program Communities that meets eligibility requirements based on the property¶s flood loss history. If not. It is intended to prevent unauthorized use of the card while accessing a financial service terminal. Prepayment Clause: A clause in a mortgage allowing the mortgagor to pay off part or all of the unpaid debt before it becomes due. interest. Preauthorized Payment: A system established by a written agreement under which a financial institution is authorized by the customer to debit the customer's account in order to pay bills or make loan payments. Real Estate Settlement Procedures Act (RESPA): Federal law that. the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. for example. including principal. Some institutions require that you use the bank's power of attorney forms. Periodic Rate: The interest rate described in relation to a specific amount of time. excluding interest and fees. and insurance²used when describing the monthly charges on a mortgage. and any other amounts due. PMI is usually limited to loans with a high loan-to-value (LTV) ratio. draft. The terms of the written power of attorney may specify when it will expire. Prepayment Penalty: A penalty imposed on a borrower for repaying the loan before its due date.) Preauthorized Electronic Fund Transfers: An EFT authorized in advance to recur at substantially regular intervals. Point of Sale (POS):1) The location at which a transaction takes place. Principal Balance: The outstanding balance on a loan. It is set by a financial institution. is the cost of credit per month. Private Mortgage Insurance (PMI): Insurance offered by a private insurance company that protects the bank against loss on a defaulted mortgage up to the limit of the policy (usually 20 to 25 percent of the loan amount). withdrawals. or note is made payable. Payoff occurs either over the full term of the loan or through prepayments. requires lenders to provide "good faith" estimates of Page 11 . Paying (Payor) Bank: A bank upon which a check is drawn and that pays a check or other draft. The monthly periodic rate. (In the case of a mortgage. and earnings of a customer's savings account. Payoff: The complete repayment of a loan. Payment Due Date: The date on which a loan or installment payment is due. Power of Attorney: A written instrument which authorizes one person to act as another's agent or attorney. specific act. Payday Loans: A small-dollar. Past Due Item: Any note or other time instrument of indebtedness that has not been paid on the due date. Payor: The person or organization who pays. The borrower pays the premium. It shows the current status of the loan account.Passbook: A book in ledger form in which are recorded all deposits. Payoff Statement: A formal statement prepared when a loan payoff is contemplated. Prepayment: The payment of a debt before it actually becomes due. Personal Identification Number (PIN): Generally a four-character number or word. and the daily rate of interest.

except in the case of a first mortgage loan. a contract that uses the home of a person as collateral. Stale-Dated Check: Presented to the paying bank 180 days (6 months) or more after the original issue date. Reverse Mortgage: A reverse mortgage is a special home loan product that allows a homeowner aged 62 or older the ability to access the equity that has accumulated in their home. Revolving Credit: A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. Reconciliation: The process of analyzing two related records and. there were ten days for which interest accrued. who receives a full refund of all fees paid.) Right of Offset: Banks' legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default. Refund: An amount paid back because of an overpayment or because of the return of an item previously sold. RESPA also limits the amount of funds held in escrow for real estate taxes and insurance. Service Charge: A charge assessed by a depository institution for processing transactions and maintaining accounts. Return Item: A negotiable instrument²principally a check²that has been sent to one bank for collection and payment and is returned unpaid by the sending bank. or no longer live there as your principal residence. The maker of a check can discourage late presentment by Page 12 . The right of rescission is guaranteed by the Truth in Lending Act (TILA). Satisfaction of Mortgage: A document issued by a mortgagee (the lender) when a mortgage is paid in full. For example. Right of Rescission: Right to cancel. Safekeeping: A service provided by banks where securities and valuables are protected in the vaults of the bank for customers. The loan must be repaid when you die. Refinancing: A way of obtaining a better interest rate. if your statement cycle date was January 10 and the bank received your payment on January 20. Example: Comparing an up-to-date check book with a monthly statement from the financial institution holding the account. The loan is underwritten based on the value of the collateral (home) and the life expectancy of the borrower.settlement costs and make other disclosures regarding the mortgage loan. sell your home. Residual Interest: Interest that continues to accrue on your credit card balance from the statement cycle date until the bank receives your payment. Redlining: The alleged practice of certain lending institutions of not making mortgage. Regular Program Community: A community wherein a Flood Insurance Rate Map is in effect and full limits of coverage are available under the Flood Disaster Protection Act (FDPA or Act). Signature Card: A card signed by each depositor and customer of a bank which may be used as a means of identification. home improvement. The home itself will be the source of repayment. There is no fee to the borrower. This amount will be posted on your next statement. A second loan is taken out to pay off the first. Special Flood Hazard Area (SFHA):An area defined on a Flood Insurance Rate Map with an associated risk of flooding. and small business loans in certain neighborhoods-usually areas that are deteriorating or considered by the lender to be poor investments. lower monthly payments. higherrate loan. if differences exist between them. Release of Lien: To free a piece of real estate from a mortgage. (Also called a charge account or open-end credit. It is also known as the right of set-off. Renewal: A form of extending an unpaid loan in which the borrower's remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period. finding the cause and bringing the two records into agreement. Banks are not required by the Uniform Commercial Code to honor stale-dated checks and can return them to the issuing bank unpaid. within three business days. or borrow cash on the equity in a property that has built up on a loan. The signature card represents a contract between the bank and the depositor. The borrower is only billed for the amount that is actually borrowed plus any interest due. Safe (or Safety) Deposit Box: A type of safe usually located in groups inside a bank vault and rented to customers for their use in storing valuable items.

there are significant penalties for early withdrawal. lenders must provide information on y what credit will cost the borrowers. Substitute checks were created under Check 21. guardianships. Loan funds are used by the borrower for education purposes. but the custodian (usually the parent) has the responsibility to handle the money in a prudent manner for the minor's benefit. The parent cannot withdraw the money to use for his or her own needs. Accretion of a Discount: A type of portfolio accounting in which there is a straight-line accumulation of capital gains on discount notes and bonds. or it can be held for another term. and agencies. 13 . trust and warehouse receipts. Statement: A summary of all transactions that occurred over the preceding month and could be associated with a deposit account or a credit card account. Substitute Check: A substitute check is a paper copy of the front and back of the original check. Student Loan: Loans made. Generally. Time Deposit: A time deposit (also known as a term deposit) is a money deposit at a bank that cannot be withdrawn for a certain "term" or period of time. or guaranteed under any program authorized by the Higher Education Act. Wire Transfer: A transfer of funds from one point to another by wire or network such the Federal Reserve Wire Network (also known as Fed Wire). which became effective on October 28. It includes negotiable instruments. the check will not be debited from the payer's account. and y What the borrower's rights are as a consumer? Uncollected Funds: A portion of a deposit balance that has not yet been collected by the depository bank. Uniform Gift to Minors Account: A UGMA provides a child under the age of 18 (a minor) with a way to own investments. The money is in the minor's name. stock transfers. Stop Payment: An order not to pay a check that has been issued but not yet cashed. You can use it the same way you would use the original check. The longer the term. Trust Administrator: A person or institution that manages trust accounts. In general. Uniform Commercial Code (UCC): A set of statutes enacted by the various States to provide consistency among the States' commercial laws. Truth in Lending Act (TILA): The Truth in Lending Act is a Federal law that requires lenders to provide standardized information so that borrowers can compare loan terms.Page writing the words "not good after X days" on the back of the check. insured. Variable Rate: Any interest rate or dividend that changes on a periodic basis. The usury rate is generally set by State law. Usury: Charging an illegally high interest rate on a loan. The buyer of the security pays the market price plus accrued interest. State Banking Department: The organization in each State that supervises the operations and affairs of State banks. If requested soon enough." The substitute check must also have been handled by a bank. State Bank: A bank that is organized under the laws of a State and chartered by that State to conduct the business of banking. 2004 Terms: The period of time and the interest rate arranged between creditor and debtor to repay a loan. Trust Account: A general term that covers all types of accounts in a trust department. the better the yield on the money. y when charges will be imposed. sales. Time Certificate of Deposit: A time deposit evidenced by a negotiable or nonnegotiable instrument specifying an amount and maturity. A substitute check is slightly larger than a standard personal check so that it can contain a picture of your original check. When the term is over it can be withdrawn. such as estates. and bills of lading. the Check Clearing for the 21st Century Act. Accrued Interest: The interest accumulated on a security since the issue date or since the last coupon payment. A substitute check is legally the same as the original check if it accurately represents the information on the original check and includes the following statement: "This is a legal copy of your check. Usury Rates: The maximum rate of interest lenders may charge borrowers. Most banks charge a fee for this service.

a provision is made for the redemption of part or all of these bonds by purchase or call prior to maturity. At the Market: A trading term for the buying or selling of securities at the current market price rather than at a predetermined price. The agent. See Assessment Ratio. This allows the proceeds (principal as well as interest) to be paid to the current holder of the security. Arbitrage: Effecting sales and purchases simultaneously in the same or related securities to take advantage of a market Inefficiency. Basis Price: Price expressed in yield to maturity or the annual rate of return on the investment. Agent: Executes an order for or acts on behalf of someone else. Average Life: The average holding period of a mortgage-backed security. Amortization of Premium: The periodic charges made against the interest received on bonds in order to offset any premium price paid for the bonds. Baby Bonds: Bonds whose face value is usually $100 or less. One hundred basis points equal 1 percent. Auction Coverage: The ratio of the total bids offered in an auction to the number of accepted bids. The instrument is therefore payable to the person who has physical possession of the security. Full value is the fair market value at the bid side of the market. All or None (AON): An all or none order requires that none of the order be executed unless all of it can be executed at the specified price. Bearer Form: A negotiable instrument format that has no registered owner. See Discount Book. Amortization: The gradual reduction of a debt by means of equal periodic payments sufficient to meet current interest charges and to pay off the debt at maturity. Assessment Ratio: The ratio of the assessed value of property to the full or actual property value. Bearer Security: A security that does not have the name of the owner or owner's agent registered on the books of the issuer. Bear Market: A period of generally pessimistic attitudes and declining market prices. Very often. Also called pre refunding. Advance refunding on a municipal bond refers to the sale of a refunding issue several years prior to the issue's first call date. that is overdue. Basis Point: One-hundredth of 1 percent. An AON order usually involves an offering of new securities. the property is assessed below 100 percent of the market value.Page Active Market: A securities market in which a high volume of trading activity takes place. Advancing Market: A market in which prices are generally rising. Basis Book: A book of mathematical tables used to convert yield-to-maturity to the equivalent dollar prices at different rates of interest. with the proceeds being held in trust. Balloon Maturity: Describes a bond issue in which bonds that come due close to the maturity date of the issue have a substantially larger value than those bonds that came due earlier in the issue. is subject to the control of the principal and does not have title to the principal's property. In some areas. Asked Price: See Bid and Asked. It is calculated mathematically by weighting the time the investment is outstanding by the amount of principal returned each month. such as interest or preferred stock dividends. The normal standard in California is of full value. Arrears: Amounts. Also called AMEX or ASE. the principal. At-the-Opening Order: A trading term for an order that is to be executed at the opening of the market or not at all. This ratio is used to evaluate general interest in any given auction. Advance Refunding: A treasury operation that offers owners of outstanding federal obligations the opportunity to exchange securities for longer-term issues that may bear a higher yield to maturity. Compare Bull Market. Assessed Valuation: The valuation placed on property for the purpose of taxation. less an allowance for sales and other expenses. 14 . American Stock Exchange: A leading securities exchange located in New York City. Authorized Capital Stock: The total amount of stock that a company is permitted to issue under its charter. whether a firm or an individual. Averaging Up or Down: The practice of purchasing the same security at various prices to arrive at a higher or lower average cost. The agent may charge a fee or Commission for this service.

See Debenture. Bond Anticipation Notes (BANS): Short-term notes sold by states and municipalities to obtain interim financing for projects that will eventually be financed by the sale of bonds. dividend payments. 15 . The difference between the two is called the spread. as opposed to an unsecured bond or one secured by specific assets. Bond Resolution: A legal order or contract by a governmental unit to authorize a bond issue. this usually refers to a firm order to buy or sell a given amount of securities or currency at the best price that can be found over a given period of time. These are usually overnight call loans to finance stock inventories. underwriting activities. Broker or Dealer Loans: Loans made to securities brokers and dealers. See Rating. Bull Market: A period of generally optimistic attitudes and increasing market prices. it may differ significantly from the market value. In contrast to a principal or a dealer. the broker does not own or take a position in securities. Compare Bear Market. It is often referred to as a quotation or a quote. generally charging a commission for this service. Bond Averages: The average prices of certain bonds over a specific period. Book Value: The amount at which a security is carried on the books of the holder or issuer. mainly by money center banks and secured by securities. Best-Efforts Basis: Where a securities dealer does not underwrite a new issue but sells it on the basis of what can be sold. posts the results of those sales. Book-Entry Securities: Securities that are not represented by engraved certificates but are maintained in computerized records of the issuer. Buyer's Market: A market in which supply is greater than demand. published each business day that shows current municipal bond offerings by banks and municipal bond dealers throughout the country. Bond Buyer Index: An index published weekly by the Bond Buyer to indicate the level of long-term municipal bond yields. The book value is often the original cost of the security plus or minus amortization and accretion. and general price stability. Bond Discount: The difference between a bond's face value and a selling price. and carries news items of special interest to the municipal bond industry.Page Below the Market: A price below the current market price for a particular security. See Call Loans. Broker: An intermediary who brings buyers and sellers together and handles their orders. Bid and Asked/Bid and Offer: The price at which an owner offers to sell (asked or offer) and the price at which a prospective buyer offers to buy (bid). and face value. Most bonds have a maturity of greater than one year and generally pay interest semiannually. See Bond. Blue-Chip Stocks: The securities of major companies known nationally for their record of earnings. Blue List: A trade publication. giving buyers an advantage Call: An option to buy a specific asset at a certain price within a certain period of time. Callable: A bond or preferred stock that may be redeemed by the issuer before maturity for a call price specified at the time of issuance. Blanket Bond: A bond secured by the general assets of a company. Bond: An interest-bearing security issued by a corporation. See Power of Attorney. Big Board: The New York Stock Exchange (NYSE). They usually reflect trends in the bond market. when the selling price is lower than the face value. It is necessary to obtain bond powers whenever registered bonds are pledged as collateral. and it is usually secured by specific assets. This term denotes high esteem on the part of investors. or brokers' credit. maturity. Bond Power: A "power of attorney" used in connection with the sale and transfer of registered bonds. Bond Buyer: A trade publication that describes upcoming municipal bond sales. government. It is a form of debt with an interest rate. In the money market. A bond resolution carefully details the rights of the bondholders and the obligations of the issuer. Bond Rating: The classification of a bond's investment quality. or other body. Blue-Sky Laws: Laws enacted by states to regulate the issuance and sale of securities. governmental agency. Block: A large number of securities dealt with as a unit. It can also refer to a flexible amount up to a certain limit at a given rate.

The correspondent bank accepts all deposits in the form of cash letters. Funds are transferred from bank to bank to allow settlement in the various areas served by a particular clearing house. Clearing house funds are available the next day. Correspondent: A bank. Cornering the Market: Buying securities on a scale large enough to give a buyer control over the market price. Capital Market: The market in which buyers and sellers. Clearing House Funds: Monies within the New York Clearing House Interbank Payments System. The coupons are detached as they come due (usually semiannually) and are presented for payment of interest. may become a final sale that is binding to both parties. Collateral Note: A promissory note that specifically mentions the collateral pledged by the borrower as security for the repayment of a loan or other obligation. or preferred stocks that allows them to be exchanged for another class of securities. debentures. Commercial Paper: Short-term. The depository bank will render all banking services to its correspondent in the region in which the depository bank is located. and the buyer delivers funds. if any. Call Price: The price paid for a security when it is called. Negative Carry. Collateral Trust Bonds: Bonds secured by a lien on specified securities pledged as collateral and held by a trustee as collateral. A convertible bond contains a provision that permits conversion to the issuer's common stock at some fixed exchange ratio.. Call Money: Money loaned to brokers by banks and subject to call at the discretion of the lender. This practice is illegal. and collects items for its bank depositor. Capital Gain/Loss: The amount that is made or lost. banks. Called Bonds: Bonds redeemed before maturity. unsecured. Page 16 . Clear: To carry out a trade: the seller delivers securities. Call Premium: The excess paid for a bond or security over its face value. depending upon the difference between the sale price and the purchase price of any capital asset or security. Commission: Broker's or agent's fee for purchasing or selling securities for a client. The term Coupon also refers to the rate of interest the issuer promises to pay the issue holder. Coupon Yield: The annual interest rate of a bond divided by the bond's face value and stated as a percentage. Coupons: Certificates attached to a bond that indicates the interest due on a payment date. Call Loans: Loans that may be terminated at the discretion of the borrower or the lender. in whole or in part. See Positive Carry. Carry: The cost incurred in interest charges for financing and holding a securities inventory. Consolidated Debt: A debt in which all of the separate entities of an organization are equally responsible for repayment of the debt. A trade that does not clear is said to fail. The call price is equal to the face value of the security plus the call premium. Convertible: A feature of certain bonds. CMO Class: A group of bonds within a collateralized mortgage obligation (CMO) issue. including institutions. Coupon Rate: The annual rate of interest that the issuer of a bond promises to pay to the holder of the bond. Also referred to as a tranche. A security with such a provision will usually have a higher interest rate than comparable non callable securities. securities firm. or other financial organization that regularly performs services for another in a market to which the other does not have direct access. corporations. Cash Sale: A transaction calling for the delivery and payment of the securities on the same day that the transaction takes place. prior to maturity. governments.Call Date: The date before maturity on which a bond may be redeemed at the option of the issuer. Correspondent Bank: A bank that is the depository for another bank. Call Provision: The details by which a bond may be redeemed by the issuer. Each class has a specific rate and principalredemption schedule. See Call Loans. and individuals. Circle: Indicating an interest in a specified amount of bonds by making a nonbinding commitment to buy the issue. Collateral: Securities or other property that a borrower pledges as security for the repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. This usually is not equal to the bond's current yield or its yield to maturity. negotiable promissory notes issued by businesses. trade debt and equity securities.

Debt Service: Interest and principal obligation on an outstanding debt. Debenture: A bond secured only by the general credit of the issuer rather than by a specific lien on property. Dated Date. or a bond. Also refers to the rate of return on a bondholder's investment. reflecting how much the earnings for a certain period of time exceed the debt payable during that same period. for example. such as a bill. the difference between its selling price and its face value at maturity. Debt Instrument: A written pledge to repay debt. A security may sell below face value in return for such things as prompt payment 17 . and corporate securities. a one year bill issued nine months ago has a current maturity of three months. Day Order: An order placed to buy or sell securities on a specific day. Evaluates the issuing entity's ability to meet its debt obligations. This is usually for a one-year period. Occasionally one government assumes the debt of another. or Issue Date: The date of a municipal bond issue from which the bond holder is entitled to receive interest. receipt (also called "free"). Cover: The spread between the winning bid/ offer and the next highest bid/next lowest offer.S. When the securities are delivered. payment is delivery of securities with an exchange of money for the securities. Default: Failure to pay principal or interest promptly when it is due. Demand Loan: A loan that has no fixed maturity date but that is payable upon demand. which was established under the auspices of the American Bankers Association to develop a uniform method of identifying municipal. Debt Limit or Debt Ceiling: the maximum amount of debt that can legally be acquired under the debtincurring power of a state or municipality. and the suitability of such obligations underwriting or investment. If the order is not executed. particularly on instruments where no coupon is left to be paid until maturity. The dealer's profit is determined by the difference between the price paid and the price received. Delivery vs. Credit Analysis: A critical review and appraisal of the economic and financial condition of a government agency or corporation. Current Yield: The coupon payments on a security as a percentage of the security's market price. Normally used in connection with revenue bonds and corporate bonds. Delivery: Either of two methods of delivering securities: delivery vs. Coverage Ratio: The ratio of income available to pay a specific obligation versus the total amount obligated. Day Loan: A one-day loan granted for the purchase of securities. it expires at the end of that trading session. a note. Covering: Buying back a security previously sold short. as is a mortgage bond. CUSIP: The Committee on Uniform Security Identification Procedures. Agency bonds are frequently called debentures. Direct Placement: Selling a new issue not by offering it for sale publicly but by placing it with one or several institutional investors. This is a measure of a firm's financial stability. receipt is delivery of securities with an exchange of a signed receipt for the securities. U. Current Maturity: The amount of time left until an obligation matures. In many instances the price should be gross of accrued interest. government. Typically. even though the bonds may actually be delivered at some other date. dealers buy for their own account and sell to a customer from their inventory. Discount: The reduction in the price of a security. Direct Debt: Debt incurred or assumed by an entity in its own name. payment and delivery vs. Dealer Market: The market for trading government securities. there may be some assumed debt. Dealer Loans: See Broker or Dealer Loans. When adjoining lands are annexed to a school district.Page Covenant: A pledge on the part of an issuer of a security to perform in a way that may benefit the security holders or to refrain from doing something that might be disadvantageous to them. For example. Delivery vs. in order to eliminate one's short position (see Short Sale). Dealer: An individual or firm that ordinarily acts as a principal in security transactions. they are pledged as collateral to secure a regular call loan for a few hours of the business day in order to finance the securities. Debt Coverage: The margin of safety for payment of debt. It is useful as a basis for evaluation of the bids.

Freddie Mac: Trade name for the Federal Home Loan Mortgage Corporation (FHLMC). "At a discount" refers to a security selling at less than the face value. are usually traded flat. Compare Optional Redemption. Fiduciary: An individual or group. Payment is received by debiting or crediting accounts or by check. Double Exemption: Being exempt from both state and federal income taxes.e. the buyer of that security is not entitled to the rights to purchase a new issue of the security at a discount. that acts for the benefit of another party or to which property is given to hold in trust. which is commonly used in the Eurobond market. See Rights. Free: Delivery of securities upon presentation of a signed receipt. Income bonds. Fill or Kill: The instructions to fill an entire order immediately or kill (cancel) the entire order. including consideration for all unpaid interest accrued.. Bonds that are in default of interest or principal are traded flat. See Basis Book. Floating Supply: The total amount of securities available for immediate purchase from dealers and other investors who wish to sell. Free and Open Market: A market in which supply and demand indicate prices for securities. The rate is adjusted periodically according to a predetermined formula. principal or maturity value) of a security appearing on the face of the instrument. Fail: The failure of a seller to deliver securities to the purchaser or of the buyer to deliver the proper funds as contracted. Ex-Rights: Without rights. which pay interest only to the extent earned." An expression used to denote a lack of knowledge of a particular trade or transaction. Firm: A term designating a buy or sell order made for a security that will not change in price for a specified period of time. the buyer pays the market price plus interest accrued since the last coupon or payment date. based upon specific market indicators. Not to be confused with the term US.Page 18 and quantity purchase. Fannie Mae: Trade name for the Federal National Mortgage Association (FNMA). or other means. it provides the investor with a rate of return comparable to the rate prevailing in the current market environment. Different from optional redemption or mandatory redemption on municipal issues. Term used in relation to municipal bonds Downside Risk: The maximum amount that can be lost in an investment. Firming of the Market: A period of improvement when security prices tend to rise or to stabilize at current levels. Dollar bonds. as opposed to "at a premium. Don't Know: Also DK or DKed. the fiscal year of national chartered banks begins on1January." when it sells for more than the face value. With most other bonds. which is referred to as "and interest. Dollar Bond: A bond that is quoted and traded in dollars rather than on a yield basis. . When a security is sold ex-rights. Flat: The price at which a bond is traded. It is sometimes accompanied by a recall within a specified time. Thus. Full Faith and Credit: Indicator that the unconditional guarantee of the United States government backs the repayment of a debt. Trades are often DKed due to conflicting instructions from one party or the other. Discretionary Order: A securities transaction offer placed by a broker who is empowered to act on behalf of a customer with regard to price and timing. The federal government's fiscal year starts October 1. Face Amount: The par value (i. Discount Book: A book of mathematical tables used to determine the rate of return on a dollar bond for a specified discounted rate at a certain maturity. Discount Window: A facility provided by the Federal Reserve Bank. Dumping: Selling large amounts of securities without regard to the effect on the marketplace. such as five or ten minutes. as in "don't know the trade. such as a bank or trust company. Fiscal Year: An accounting or tax period comprising any 12-month period." Floating-Rate Note/Bond: A note or bond with a fluctuating interest rate. wire transfer. Extraordinary Redemption: Redemption occurring under an unusual circumstance such as destruction of the facility financed. Exempt Securities: Securities that are exempt from the registration requirements of the Securities and Exchange Commission.

Investment Securities: Securities purchased for an investment portfolio. Immediate or Cancel Order: An order at market price (or some other limited price) that is to be executed in whole. The document sets the maturity date. institution. or endorser to repay funds that have been or will be paid out on the borrower's behalf. such as stocks. security. unpaid interest may accumulate as a claim against the issuer when the principal comes due. Guaranteed Bond: A bond in which repayment is guaranteed by someone other than the debtor. Ginnie Mae: Trade name for the Government National Mortgage Association (GNMA). Underwriter. Indebtedness: The obligation assumed by a borrower. they are obligations of the US. Government Bonds: Securities issued by the federal government. Investment bankers buy and sell securities. usually for delivery at some future date. Holder: The person or entity that has possession of a negotiable instrument. negotiation. which usually includes unlimited taxing power. Good `till Canceled (GTC) Order: An order for securities that may be limited in terms of price but not in terms of time. and (when appropriate) the trustee. Good Delivery: A security that meets all the requirements of the stock exchange for delivery to a banker when the security is sold. and distribution services. Investment Portfolio: A collection of securities held by a bank. Income Bonds: Bonds on which the payment of interest is due only when the issuer has attained sufficient income. Hypothecation: An agreement that pledges securities to guarantee a loan without transferring title to the securities. expressed as a percentage of the principal. determined by dividing the dollar price into the annual interest payment and calculating the return to maturity. Also known as "governments. The desired result is that the profit or loss on a current sale or purchase will be offset by the loss or profit on the future purchase or sale. if the bonds are awarded to a syndicate that does not pick them up as agreed. The good-faith checks of unsuccessful bidders are returned. There is no guaranteed return. General Property Taxes: Taxes that are placed on real estate and personal property. individual. such as advisory. Hedging: A method used by traders to minimize losses resulting from price fluctuations in the money market. or the marketing and selling of such securities. In and Out: Describes the purchase and sale of the same security within a short period of time to take advantage of price fluctuations. Issue: A group of identical securities. Usually. the issuer. interest rate. Indenture: A written agreement used in connection with a security issue. and mortgages. 19 . See Open Order. as soon as it is received. as opposed to the working capital of a business. In some cases. or government agency for investment purposes. the good-faith check is kept. guarantor. Issue Price: The price at which a new group of identical securities (new issue) is put on the market." Gross Debt: The sum total of a debtor's obligations. Gross Yield: The percentage of return on a security. They act as the intermediaries between the investor and the corporation or government that needs to finance its operations. Investment Banking: A term used to describe the financing of the capital requirements of an enterprise. Good-Faith Check: The check that must be included with a bid on a bond sale. Interest: Compensation paid or to be paid for the use of money. Also. Investor: A person who purchases securities with the intention of holding them to make a profit. The portion that is not transacted is considered canceled. bonds. and other terms for the issue holder.Page General Obligation Bonds (GOs): Bonds secured by the pledge of the municipal issuer's full faith and credit. as opposed to those purchased for resale to customers. Interest Rate: The interest payable each year on borrowed funds. or in part. The method involves counterbalancing a present sale or purchase with the purchase or sale of a similar or different security. See Syndicate. the return on an investment before deduction of costs. The rate of interest is generally expressed as an annual percentage. Treasury. An investment bank charges a fee for services relating to securities.

Marketability: The ease with which a security can be sold in the secondary market. One party. The state has no legal obligation to make such a payment. may invest. possesses a structure whereby a state pledges to make up shortfalls in a debt service reserve fund. or by a specified portion of the real estate tax. any dealer acting in the capacity of a block positioned. issued by a state or its agencies. Maturity: The date that the principal or stated value of a debt instrument becomes due and payable. For the protection of depositors or liability holders. subject to legislative appropriation. Legal List or Legal Investment: a list of securities in which certain institutions and fiduciaries. 20 . The rate depends on the maturity of the deposit as well as on which bank quotes the rate. Market Order: An order to buy or sell securities at the market's prevailing bid or asked price. The value of the property used as collateral usually exceeds that of the mortgage bond issued against it. See Prudent Man Rule. but market participants recognize that failure to honor the "moral" pledge would have negative consequences for the state's own creditworthiness. with respect to a security. Also known as legal. Margin: The difference between the collateral pledged to secure a loan and the amount of the loan itself. Long: Owning more securities than one has contracted to deliver. legal lists are restricted by regulatory agencies to highquality securities that meet certain specifications. London Interbank Offered Rate (LIBOR): The interest rate on Eurodollar deposits traded between banks. Also used to denote the length of time between the issue date and the due date. procedural conformity. Liquidity: The ease at which a security can be bought or sold (converted to cash) in the market. and usually the exemption of interest from federal income taxes. and any dealer who. holds himself/herself out (by entering quotations in an interdealer communications system) or otherwise as being willing to buy and sell a security for his/her own account on a regular or continuous basis. Joint and Several Obligations: A guarantee to the holder of a security in which the liability for a bond or note issue may be enforced against all parties jointly or any one of them individually. as opposed to the price at which the last security order was sold." Limited Order: An order to buy or sell a certain amount of a security at a minimum price within a specific period of time. Legal Opinion: An opinion concerning the validity of a municipal issue with respect to statutory authority. Money Market Instruments: Private and government obligations with maturities of one year or less. Municipal securities may or may not be backed by the issuing agency's taxation powers. A large number of buyers and sellers and a high volume of trading activity are important components of liquidity. Municipals: Securities. Making a Market: Any specialist permitted to act as a dealer. The rate and amount of such a bond is limited. The interest on "munis" is usually exempt from federal income taxes and state and local income taxes in the state of issuance. such as insurance companies and banks. several. Unlisted securities are usually sold over the counter. Quote: Quote designates the current bid and asked price on a security. Listed Securities: Securities that have been admitted for trading on a recognized securities exchange. or all may be held responsible for payment. Money Market Securities: Short-term securities with market prices more closely tied to the current interest rate than to a company's standing or to general business conditions. Federal Reserve Board requirements for margin on stocks have ranged from 40 to 100 percent of the purchase price. Moral Obligation Bond: A revenue bond that. Market Value: The price at which a security is currently being sold in the market. Limited-Tax Bond: A bond guaranteed by a special tax or taxes. Market vs. constitutionality. usually bonds. often referred to as "bond counsel.Page Issuer: Any corporation or governmental unit that borrows money through the sale of securities. The legal opinion is usually rendered by a law firm recognized as specializing in public borrowings. Locked Market: A securities market in which the bid price is the same as the asked price. Mortgage Bond: A bond secured by a mortgage on property. in addition to its primary source of security.

not including sinking-fund accumulations and all self-supporting debt. Option: The right to trade a security during a certain period of time. the title to which is transferable by delivery. dealers. Under that law. The right can be exercised at the option of the issuer. Non legal¶s: Securities that do not conform to the requirements of a state's legal list of lawful investments for savings banks and trust funds. without competitive public bidding. Note: A written document that contains a promise to pay a specified amount to a certain entity on a particular date. Nonnegotiable: Describes a security whose title or ownership is not transferable through simple delivery or endorsement. in which securities that have already been issued are sold. usually within a certain time limit. National Association of Securities Dealers (NASD): A self-regulatory organization that regulates the over-the-counter market. Compare also Positive Carry. and banks. New Issue Market: The market for new issues of securities. MSRB is designed to create rules and regulations for municipal bond trading among brokers. The term also indicates that the securities can be exchanged for cash or near-cash instruments. Original Issue Discount: A municipal bond issued at a dollar price less than par that qualifies for special treatment under federal tax law. See Legal List. Usually states the price and terms. Offering Price: The price at which members of an underwriting syndicate for a new issue will offer securities to investors. the difference between the issue price and par is treated as tax-exempt income rather than capital gain. Negotiable: A term used to designate a security. Odd Lot: A securities holding that contains less than the normal trading unit. nor is there any knowledge of threatened litigation that might affect the validity of the bonds. supervising exchange and member activities. See Good 'till Canceled Order. often at a premium. and judging whether an applicant is qualified to be a specialist. the initiator's position remains unchanged. New Issue: The first offering of a security. Net Interest Cost (NIC): The average interest rate an issuer must pay in order to borrow funds over the life of a bond. Offering: The means by which securities are sold to buyers.Page Municipal Securities Rulemaking Board (MSRB): Registered under the Maloney Act in 1975. Negotiated Sale: An arrangement in which the terms of a securities issue are made privately between the parties involved. Offer: The price at which an owner is willing to sell a security. No-Litigation Certificate: A statement issued by the bond attorney and the issuer¶s not counsel that no legal suits are pending against the bond issue. Offset: The buying or selling of a security in an exact amount to counterbalance the sale or purchase of a similar type of security. Net Debt: The gross debt of a state or governmental agency. Optional Redemption: A right to retire all or part of an issue prior to the stated maturity during a specified period of years. Upon completion of an offset transaction. as opposed to the secondary market. Open Order: An order to buy or sell a security at a designated price. New York Stock Exchange: A corporation operated by a board of directors responsible for setting policy. Obligation: A responsibility for repaying a debt. overseeing the transfer of members' seats on the exchange. No Par Value: Describes a security issued with no stated face or par value. Non callable: Describes a security that does not contain a call provision. Net Change: The difference in the closing price of a security from one day to the next. See Call Provision. See Negotiable. Odd-Lot Dealer: A broker or dealer who buys or sells securities in quantities smaller than the normal trading unit. if the bonds are held to maturity. Compare Round Lot. Negative Carry: Negative carry occurs when the cost of borrowing to finance the holding of securities is in excess of the income on those securities. Official Statement: Document prepared by or for the issuer that gives detailed security and financial information about the issue. listing securities. Overbought/Oversold: Describes a security or a market that has undergone a sharp rise or fall due to 21 .

Pay down: The net reduction in debt that occurs when the amount of a new issue is less than the maturing issue. Pools are identified by a number.S. This usually occurs when homeowners sell their homes or otherwise prepay their mortgage loans prior to maturity. for example. The market for U. Compare Negative Carry. Paying Agent: Usually a commercial bank that dispenses the principal and interest payable on a maturing issue. Compare Realized Gain/Loss. Prepayments may significantly affect the weighted average life and yield of mortgage-backed bonds. Portfolio: A collection of securities held by an individual or institution. Municipal bonds are usually also payable at the office of a public treasurer. the prospects. Overlay or Over levy: An amount included in the general property tax to cover abatements and taxes that will probably not be collected. The prospectus gives detailed information about the company. Public Debt: The total outstanding debt of the federal government. Principal: The face or par value of a security. Prospectus: A document issued by a company prior to the sale of a new issue of securities. Being overbought or oversold indicates that such buying or selling may have left prices temporarily too high or too low. as opposed to an organized securities exchange auction system. as required by the Securities and Exchange Commission. or simply PSA. Positive Carry: A condition in which the yield on a security is greater than the cost of borrowing funds to hold it. Pool: A collection of mortgages assembled by an originator or master servicer as the basis for a security. Pledged Assets: Bank-owned securities that are pledged as collateral for funds deposited by the federal government or by a state or municipal government. See Secondary Distribution. where it remains for the life of the mortgage.2 percentage point each month thereafter until the 30th month. Par value should not be confused with market value. Primary Distribution or Offering: the initial sale and distribution of an issuer's securities.S. The 100% PSA model assumes that a brand-new mortgage will prepay at an annualized rate of 0. Over the Counter: A securities market in which dealers negotiate directly. Power of Attorney: The legal authorization for one party to sign for and act on behalf of another party. Prepayment: An unscheduled principal payment on a mortgage or mortgage-backed security that forms part of the collateral for a mortgage-backed security. PSA Prepayment Model: The Public Securities Association prepayment model is used in the mortgage-backed securities market as a measurement of prepayment speed. Also. government or municipal obligations or other types of obligations as specified by law.vigorous buying or selling. Premium: The amount by which the price paid for a security exceeds the par value of the security. May also refer to the total outstanding debt of the federal government along Page 22 . Sometimes referred to as standard prepayment assumption model. Actual appreciation or depreciation is realized when the security is sold. and likely financial developments. to determine the amount and timing of a company's future cash requirements.2 percentage point in its first month and increase by 0. how these relationships might change in the future. Primary Market: The demand for first issues of securities. the offering. Pro Forma Statement: A financial statement based on assumptions usually made on the basis of past account relationships. It does not include accrued interest. These pledged assets are generally U. Paper Gain/Loss: Unrealized capital gain or loss on securities held in portfolio. A pro forma would be used. at which time it reaches 6%. Par Value: The value of a security expressed as a specific dollar amount marked on the face of the security or the amount of money due at maturity. government and municipal bonds is primarily an over-the-counter market. and the risks. based on a comparison of current market price and the original cost of the securities. the amount that must be paid over the par value to call or refund an issue before maturity. Prudent Man Rule: A long-standing common-law rule that requires a trustee who is investing for another to behave in the same way as a prudent individual of reasonable discretion and intelligence who is seeking a reasonable income and preservation of capital.

based on its purchase price or its current market price. The object may be to save interest costs or to extend the maturity of the loan. Compare Odd Lot. Quotation. This is a service banks offer to customers for a fee. On a bond. Registered Bond: A bond whose principal and/or interest is payable only to the person or organization registered with the issuer. and other political subdivision. Rating: The designation used by investors' services to rate a security. usually by redeeming it. BBB. Also refers to income earned on an investment. This bond can be transferred only when endorsed by the registered owner. change the interest rate. Seasoned Securities: Recognized securities that are generally accepted by the investing public. Such bonds are not generally backed by the taxation power of the issuer unless otherwise specified in the bond indenture. Rally: A brisk rise in the price of a security or a recovery in the market. This may occur at maturity but usually occurs at the issuer's option. Standard and Poor's ratings range from AAA (the highest) through AA. B. toll roads. See Refunding. BB. A. Moody's ratings range from Aaa (the highest) through Aa. the scale shows the prices or yields offered for each maturity in the issue. or Quote: The highest bid to buy or the lowest offer to sell a security in any market at a particular time. Rich: Description of the price of a security when the current market quotation appears to be high (or the income return low) in comparison with either the past price record of the security or the current prices of comparable securities. most government securities sold are to be delivered and paid for on the business day following the transaction. Compare Paper Gain/Loss. The notes are to be paid from the proceeds of those revenues. See Bid and Asked. is three business days. at the issuer's option. Public Offering: The offering of securities for sale to the public. expressed as a percentage of the cost of the investment. however. such as bridges. Redemption Price: The price at which a bond may be redeemed. Round Lot: The normal minimum unit of trading for a particular issue or type of security. or postpone payment until a more opportune time. Redemption Fund: A fund created for the purpose of retiring a callable obligation that matures in stages or for purchasing such an obligation as funds become available. Redemption: Liquidating debt by retiring an outstanding obligation. Rights: The privilege extended by an issuer to the holder of a security to subscribe to new or additional securities. Refinancing: Rolling over the principal on securities that have reached maturity or replacing them with the sale of new issues. B. Revenue Bond: A state or local bond secured by revenues derived from the operations of specific public enterprises. A. such as when a bond issue is retired before its maturity date. Refunding: Replacing an outstanding obligation on or before its maturity with a new issue in order to extend the length of the borrowing. Ba. Roll Over: To reinvest in a new issue of the same or a similar security after receiving funds from a matured security. Safekeeping: Holding securities in a bank's vaults for protection. Secondary Distribution or Offering: the redistribution of a large block of securities . and so on. municipalities. Scale: The terms on a serial bond issue that is reoffered to the public. the rate of return may be the amortized yield to maturity or the current income return. Revenue Anticipation Notes (RANs): Short-term notes sold in anticipation of receiving future revenues. before maturity. and so on. Regular-Way Delivery: Unless otherwise specified. Sallie Mae: Trade name for the Student Loan Marketing Association (SLMA). Realized Gain/Loss: Actual profit or loss experienced upon the sale of a security. sometimes at a price lower than the subscription price. or utilities. consolidate issues. Retire: To withdraw a security from circulation. Regular delivery for municipal and corporate securities.Page 23 with that of states. This allows current stockholders the opportunity to avoid diluting their percentage of ownership. Baa. Rate of Return: The yield that can be attained on a security.

The offer is not binding unless it is accepted by the properly authorized representatives of the issuer. Secured Loan: A loan that is secured by marketable securities or other marketable valuables. See Primary Distribution. acting as principal and taking title of the securities until they are sold to someone else. at maturity. The issuing governmental entity agrees to make the assessments and to earmark the tax proceeds to repay the debt on these bonds. or extending or shortening maturity. Self-Supporting Debt: Debt that requires only the support of taxes that have been designated specifically for its repayment and for no other purpose. under the laws of certain jurisdictions. Selling below the Market: A security that is currently quoted at a price less than that quoted for similar securities. Taking a Position: The activities of a dealer who purchases a block of a certain security as inventory for the purpose of resale at a profit. Special Tax Bond: A bond secured by a special tax. May be made to achieve many goals. For example. the syndicate is broken. including establishing a tax loss. The syndicate members agree to distribute a specified amount of the securities. notes. Stop Out: The lowest price that the US. Self-Liquidating Bonds: Bonds that are paid for from the earnings of a municipally owned enterprise. An investment banking syndicate is headed by a manager who has made a successful bid for the wholesale purchase of a securities lot. Also refers to the order made for the purchase of new securities. Spread: The difference between two figures or percentages. The manager may allot the securities to them on a prorata or other agreed-upon basis. Secured loans may be either time or demand loans. usually a utility. See Dealer. The earnings of the enterprise must be sufficient to cover the debt with a reasonable margin of protection in order for the bonds to be regarded as entirely self-liquidating. The SEC enforces various securities acts that are intended to protect investors. upgrading credit quality. Short Covering: Buying back securities that were previously sold. Sinking Fund: A reserve fund set aside over a period of time for the purpose of liquidating or retiring an obligation. Syndicate: A partnership of banks or brokers that join together in enterprises that are too large for any member to handle individually. such as a bond issue. Senior Securities: Securities that have priority over other obligations for claims on the issuer's assets and earnings. Security Dealer: An individual or firm who buys and sells securities for his or her own account. Securities: Investment instruments such as stocks and bonds. as compared to the new issue market. 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 from a broker in time to be delivered to the buyer. See Underwriter. the purchase or sale of securities in a special offering or through a means other than the regular channel of trading. The short seller's intent is to profit by buying the security at a lower price than it sold for. Also. or bonds in a particular auction. Serial Bonds: Bonds of the same issue that have different maturities over a number of years. Treasury will accept for a new issue of bills. Secured Deposit: Bank deposits of state or local government funds that. Swap: The sale of a block of securities and the purchase of another block with similar market value. Page 24 . Subscription: An agreement to purchase a certain offering for a specific price. and the obligation of all members to the terms of the agreement is terminated. Special Assessment Bonds: Bonds that are paid back from taxes on a property that is being improved with funds financed by the bonds. such as a gasoline tax. Secondary Market: The market in which previously issued securities are traded. to make delivery on a short sale. On final distribution of all securities.previously sold by the issuer or underwriting group in an initial or primary offering. must be secured by the pledge of acceptable securities. the difference between the bid and asked prices of a quote or between the amount paid when a security is bought and the amount received when it is sold. This allows the issuer to retire the issue in small amounts over a long period of time. Securities and Exchange Commission (SEC): An agency created by Congress to regulate securities issuance and trading.

Unlimited Tax Bond: A municipal bond secured by the pledge of taxes that are not limited by rate or amount. Generally. government with a maturity of one year or less. purchases . in money market terms. Thin Market: A market in which trading volume is low. 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. bonds have longer maturities. Interest income. with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. Zero Coupon Bonds: Zeros do not pay periodic coupon payments. Also called net yield. Winning Bid: The successful bid for a particular issue. is the current income yield minus any premium above par or plus any discount from par in the purchase price. Yield to Maturity: The average annual yield on a security. In this capacity. responsibility for paying the net purchase price. Treasury Bonds and Notes: Obligations of the U." following a market quotation for such securities. expressed as a percentage of the investment. Yield: The annual rate of return on an investment. Treasury bill (T Bill): An obligation of the U. Usually abbreviated to "w.Page 25 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. Repo transaction The term Repo has been derived from the word repurchase which literally means selling today and buying back at a later date. with very few bids to buy or offers to sell.S. Unlisted Securities: Securities that are traded in the over-the-counter markets rather than through a recognized exchange. and after this time period. it means a repo trader sells securities. They are sold at a discount from face value.S. The interest rate paid on these bonds is generally lower than rates on securities that are not tax-exempt. Tax-Exempt Bonds: Bonds for which the interest paid is usually exempt from federal taxes and. See also Syndicate. from state and local taxes in state of issuance. Income yield is obtained by dividing the current dollar income by the current market price for the security. Terms: The conditions of the sale or purchase of a security. To be specific. Trustee: A bank designated as the custodian of funds and the official representative of bondholders. government that bear interest. assuming it is held to maturity. the underwriter deals in new issues and with the issuing entity.i. Net yield. Trader: Someone who buys and sells securities for a personal account or a firm's account for the purpose of short -term profit. Visible Supply: The total dollar volume of new municipal bond issues coming up for sale within the next 30 days. In most instances. T bills bear no interest but are sold at a discount. Validation Proceedings: The legal proceedings required in some states whereby the courts decide the validity of proposed bond issues. Term Issue: A bond issue that matures all at once on a specific date. the trustee is responsible for enforcing the bondholders' contract with the issuer. Trading Market: The secondary market for bonds that have already been issued. 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. Underwriting is one function of an investment banker. which is received at maturity. Notes have maturities of one to ten years. is the difference between the purchase price and the amount at maturity. Trade Date: The date when a security transaction is executed. or yield to maturity. When-Issued Basis (WIB): Describes securities that are traded before they are actually issued. it produces the lowest net interest cost (NIC) to a municipal borrower or offers the highest premium in a single coupon bid. See Secondary Market. gets funds for a certain specified time. with the stipulation that the transactions are null and void if the securities are not issued. in some cases. 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.

A forex money market also repo works on similar terms. The securities in question basically act as an insurance against borrower¶s default. y This process continues in the banking system resulting to expand its initial deposit of Rs. borrower¶s bank will now lend him Rs.90 as loan will deposit the same in his bank. If RBI decides to increase the percent of this. y Higher the CRR.75 in deposit account. the available amount with the banks comes down.2000. y Banks are always happy to lend money to RBI since their money is in safe hands with a good interest.90 as loan and will have to keep Rs.10 as balance in Deposit account.81 and keep Rs.5 as balance in Deposit account. y Repo rate is the medium through which RBI infuses funds in the system.1000. y Repo rate is the rate at which banks borrow rupees from Reserve Bank of India (RBI).90. y .100 as deposit then it can lend Rs. consider following exampley Suppose RBI says the CRR as 5%. borrower¶s bank will now lend him Rs. RBI is using this method (increase of CRR rate). the lower the money available for lending. resulting into reduction in credit expansion by controlling the money that goes out of loans. These types of operations are generally for overnight operations.9 in deposit account. y Now the Borrower who has received Rs.25%.100 to maximum of Rs. y The rate charged by RBI for its Reverse Repo operations is 3. y When the Repo rate increases borrowing from RBI becomes more expensive. It is calculated on the total deposits that the bank has as on the date. y Similarly if suppose RBI says the CRR as 10%. it is termed as reverse repo transaction. Now if a bank A receives Rs.95 as loan will deposit the same in his bank. y The rate charged by RBI for its Repo operations is 5.100 to maximum of Rs. in view of the decreased (read tightening) liquidity conditions. y This process continues in the banking system resulting to expand its initial deposit of Rs. Cash Reserve Ratio (CRR) CRR is the amount of funds that the banks have to keep with RBI.Page 26 back the securities by paying the previously taken (read borrowed) funds along with some interest for the said period. y Reverse Repo rate is the rate at which RBI absorbs money from the system. y When RBI lends money to bankers against approved securities for meeting their day to day requirements or to fill short term gap. In order to understand this. it takes approved securities as security and lends money. it I termed as a repo transaction with RBI. Now if a bank A receives Rs. y A reduction in the Repo rate will help banks to get money at a cheaper rate. An increase in Reverse Repo rate can cause the banks to transfer more funds to RBI due to attractive interest rates. if the lender of the funds is RBI.95 as loan and will have to keep Rs. Recently.25%.100 as deposit then it can lend Rs.25 and keep Rs. RBI has allowed a second Repo facility which means that RBI is giving banks to borrow money from RBI and thus RBI is looking to infuse more money into the system y A bank¶s money market trader typically can use RBI¶s LAF and money market for arbitrage opportunities sometimes Reverse repo rate If the borrower of the funds is RBI. y It can cause the money to be drawn out of the banking system. y Now the Borrower who has received Rs.4. to drain out the excessive money from the banks. Repo rate In the above transaction. Following may be notedy Whenever the banks have any shortage of funds they can borrow it from RBI.

offsite surveillance and monitoring. SLR of banking system in India has a SLR of about 27% ie above the statutory SLR because due to the economic crisis. such borrowing will become costly and banks would thus either borrow less or pass on this increased cost to their borrowers. The BHCPRs are designed to assist analysts and examiners in determining a bank holding company¶s financial condition and performance based on financial statements. For example. if the rate is increased. Time Liabilities are the liabilities a commercial bank liable to pay to the customers on their anytime demand. Branch Locator A search option that provides a comprehensive list of all branches belonging to an 27 . Hope this article would be useful and help you in understanding the economic scenario better. Also through SLR. Activity This consists of the primary banking activity of an institution. including on-site examinations and inspections. inflation would be contained. in the incremental lending. trend analyses. It is administered by the Federal Deposit Insurance Corporation (FDIC). SLR is determined as the percentage of total y demand and percentage of time liabilities. and other matters. banks would divert more funds towards RBI and excess liquidity will be absorbed by RBI rather than going at cheaper cost in the economy. is increased. RBI can increase or decrease bank credit expansion. By changing the SLR rates. As of DateThis represents a report date or transaction date. it affects in two ways. non-member banks. Second. This adjustment of the 3 rates (commonly known as policy rates) is known as monetary policy. It is helpful to control the expansion of Bank Credits. actual lending will be less and demand for goods and services will be less In the case of CRR. Again if reverse repo is increased. Acquisition The process of buying or acquiring some asset or an entire company. banks have to maintain a SLR of 25% which means that 25% of the value of demand and time liabilities has to be invested in approved securities. comparative ratios. it can also be described as a situation in which excess money chases fewer goods. ie rates at which banks borrow from RBI. First. SLR rate is determined and maintained by the RBI in order to control the expansion of bank credit. Another ratio which does not directly affect inflation but is important for banking is statutory liquidity ratio. potential capacity of banks to lend is curtailed. This is the genesis behind controlling inflation through monetary policy. causing increase in demand of goods and thus leading to an increase in price. immediate liquidity in the system is absorbed to the extent CRR is increased as more money needs to be placed with the regulator. Currently. banks were conservative in lending and invested in same heaven Government securities. Statutory Liquidity Ratio (SLR) SLR is the amount a commercial bank needs to maintain in the form of cash or gold or approved securities (Bonds) before providing credit to its customers. and national banks (which are all commercial banks) is Commercial Banking. If repo. RBI ensures the solvency of a commercial bank from SLR. Relation between Inflation and Bank interest Rates: How does inflation affect rates? Inflation. In other words. This again leads to less lending by banks. Bank Holding Companies Performance Report (BHCPR)An analytical tool produced by the Federal Reserve System for supervisory purposes. and percentile ranks relative to its peers. in India. Thus if this demand created by excess money can be curtailed.Page Thus RBI increases the requirement of CRR whenever they feel the need to control money supply. In either of the cases. in simple terms is a sustained increase in general price level. interest rates are increased. RBI compels the commercial banks to invest in government securities like government bonds. Bank Insurance Fund (BIF) see InsuranceThe fund that provides deposit insurance for commercial banks. the primary activity of state member banks. Central bank of any country uses a combination of these 3 rates to influence the lending rate in the economy and thus contain inflation and stimulate growth. and analyses performed in connection with applications filed with the Federal Reserve regarding mergers. acquisitions. If inflation is high.

or unable to meet deposit outflows. National Information CenterThe National Information Center (NIC) is a central data repository containing information about all U. Institution TypeA classification describing the activities of the institution. it is the OCC. NIC also provides a glossary of Institution Types. Generally the survivor is the institution that remains in business following the merger. critically undercapitalized. The five federal regulators are as follows: Federal Deposit Insurance Corporation (FDIC) Federal Reserve System (FRS) National Credit Union Administration (NCUA) Office of the Comptroller of the Currency (OCC) Page 28 . whereas the institution that ceases to exist is the non-survivor. it is the Office of Thrift Supervision. This transaction results in a major change to the seller's primary business. InsuranceBank Insurance Fund (BIF) is the insurance fund for insured banks. Branch Office An office of an institution that is physically separated from its home office.. Mortgage Banking CompanyCompany that makes. or services loans or other extensions of credit for the account of others. and Primary Federal Regulator and Structure information such as Organization Hierarchy.Savings Association Insurance Fund (SAIF) is the insurance fund for insured savings associations. the head office of a branch. There may be more than one non-survivor for any given merger. Head Office The headquarters of the entity. including banks.BIF and SAIF are managed by the FDIC MergerThe consolidation of two or more institutions into a single entity. depository institutions. the chartering authority is usually the state banking department.S. Federal Financial Institutions Examination Council (FFIEC) Interagency body composed of representatives from the five regulatory agencies responsible for U. The institution may be the top tier or anywhere within the organization hierarchy. but that offers the same kinds of deposit taking. Home Mortgage Disclosure Act (HMDA) Respondents Certain financial institutions.e. Closed Bank When an institution's charter is closed and there is no successor institution. and short-term money market instruments. credit unions. i. FDIC Certificate Number A unique number assigned by the FDIC used to identify institutions and for the issuance of insurance certificates. Location. bonds. agency. as well as information on foreign banking organizations located in the U. Charter (Chartering Authority)A state or federal agency that grants charters to new depository institutions. and for federal savings institutions. for national banks. and Branch Locator. Organization HierarchyThe ownership relationships of institutions. which rescinds the institution¶s charter and revokes its ability to conduct business because the institution is insolvent. or other nonindependent facility.S. For state chartered institutions. Institutions Acquired. Institution History A description of an institution's characteristic and structure information over time. the option will only be available to those that do. RegulatorFederal Banking Agencies that supervise banks and other financial institutions depending on each institution¶s specific charter or mission. Institution History. The seller's charter may or may not continue. government securities. Failed Bank (failure) The closing of a financial institution by its chartering authority. acquires. Purchase and AssumptionA Purchase and Assumption (P&A) is a transaction in which an institution purchases assets and liabilities of another institution. Parent InstitutionThe Parent Institution owns or controls another institution. which was enacted by Congress in 1975. and other mortgage lending institutions that provide public loan data in accordance with the Home Mortgage Discloser Act. banking organizations and their domestic and foreign affiliates. Mutual FundFund that pools money from its shareholders in stocks.S. Not all banks will have branches therefore.institution. Characteristic information includes attributes such as Institution type. Institutions Acquired These are institutions that were acquired by other institutions. Institution Profile Provides detailed characteristic information about an institution. loan and other services conducted at the home office. savings associations.

deposits.A check drawn by a bank on itself. and government assistance is not involved. While the length of the RSSD ID varies by institution. payroll checks and dividend checks. Some types of Direct Deposits are Social Security. Daily Compounding .An investment tool created for 29 . SSI. Direct Deposit . pre-authorized debits. Canceled checks are stored rather than being returned to the customer." ACH Processing (ACH . The most common ACH transactions are direct deposit. Automated Teller Machine (ATM) . RSSD IDThe RSSD ID is a unique identifier assigned to institutions by the Federal Reserve.Automated Clearing House) .The process of microfilming customer's paid checks. Check Safekeeping . Cashier's Checks are universally accepted. such as cash withdrawals. it cannot exceed 10 numerical digits. The microfilm is the official record of the transaction and is retained by the financial institution. Both entities continue to exist. VA benefits. The cards are accepted around the world wherever you see the Visa or MasterCard logo.A type of deposit account with a fixed term (months until maturity) and a minimum initial deposit. purchase goods and services. via telecommunications lines instead of paper (checks). Routing Transit Number (RTN)The RTN is a bank identifier found on the bottom of checks. It is commonly referred to as an ABA (American Bankers Association) number and is nine numerical digits in length.Page Office of Thrift Supervision (OTS) Report DateThis date generally corresponds to the last day of the report period. Savings Association Insurance Fund (SAIF) see InsuranceThe fund that provides deposit insurance for savings institutions. Check Card (Debit Card) . Interest is earned at the current rate in effect for the term.A plastic card that can be used by the holder to make purchases or obtain cash advances using a line of credit made available by the card-issuing financial institution. annuities. Certificate of Deposit (CD) .A machine that allows the customer to perform some of the more common teller transactions. Education IRA .A plastic card with the Visa or MasterCard logo. StatusCurrent: institution that is open as of a specified dateNon-Current: institution that is closed as of a specified dateCurrent and Non-Current: all institutions that are open or haven been closed as of a specified date Top 50 BHCsThese are bank holding companies with the largest consolidated total assets and are ranked each quarter on a scale of 1 to 50. and transfers. or transfer funds from one account to another. Compound Interest . and corporate to corporate payments. pension benefits. 7 days a week. to transfer money between two parties. SplitWhen one entity (E1) transfers between 40 and 94 percent of its assets to one or more newly formed entities (E2). Credit Cards . The list changes periodically and is often referred to as the "Official Top 50 List. E1 has not failed. Interest is then earned on the new balance. SAIF was authorized by Congress in 1989 to take over the thrift deposit insurance role held by the former Federal Savings and Loan Insurance Corporation (FSLIC). Most CD's are automatically renewable at the end of a term for the current rate in effect at the time of renewal. ATMs are generally accessible 24 hours a day.A pre-authorized system in which customer's government benefits or other payments are automatically deposited to their checking or savings accounts. thus interest for the following period is computed on the principal plus accumulated interest. Interest payments may be added back to the CD or payable by check or deposit to another M&S checking or savings account.A frequency of calculating interest whereby interest is added to the principal each day. SAIF is administered by the Federal Deposit Insurance Corporation (FDIC). cash concentration. signed by the Cashier or other authorized bank officer and payable to a third party named by the customer.Processing that occurs between a nationwide network of financial institutions that send electronic messages. Cashier's Check . designed to give a customer access to funds in his/her checking account to obtain cash.Interest that accrues when earnings for a specific period are added to principal.

available via these same devices or a touch-tone phone. utilizes the ATM network to electronically pay any bill (excluding the federal government and IRS). Contributions and their earnings are tax-free when withdrawn to pay for qualifying education expenses. Rollover IRA . This retirement plan is simple to administer and offers contribution options that are both flexible and substantial.Contributions are not deductible but distributions can generally be withdrawn tax-free. Grace Period . The employer makes contributions. from which the account holder can withdraw funds by writing a negotiable order of withdrawal (NOW) payable to a third party and which can earn interest. or times of additions or withdrawals. money market mutual funds. Often used in conjunction with a plastic card or with a telephone voice response system. the Internet or Screen Phone. The portion of eligible distribution that is put into such an account enjoys the same tax-deferral status as a regular IRA.A form of deposit account with no legal limits or requirements as to amount. NOW Account . Signature Card .A time period within which a depositor can withdraw funds from a certificate without penalty.Two types to choose from for eligible individuals. the Traditional IRA and the Roth IRA.An interest rate structure in which the entire account balance earns a higher rate once it reaches the designated level. similar to a checking account. or interest is earned at various rates within tiers. Money Market Deposit Account . establishing account ownership and setting forth some of the basic terms of the account and provisions of the deposit contract. Overdraft Protection . Online Banking & Bill Pay . Funds are transferred from their line of credit or other designated account to their checking account as needed. are FDIC insured. IOTA Accounts .Electronic Federal Tax Payment System is a new way for taxpayers to pay federal taxes electronically from the convenience of office or home.A deposit account offered by financial institutions that is designed to be directly equivalent to. Simple IRA . where the interest is forwarded to the Florida Bar Foundation. Tax Identification Number (TIN) . EFTPS . The Bill Pay service.A service that allows the customer to write checks for an amount over and above the amount in their checking account. Simplified Employee Pension Plan .A plan by an employer to make contributions toward an employee's retirement income. These accounts.Personal and business account information accessible through a personal computer. Personal Identification Number (PIN) or Personal Access Number (PAN) .The number used to identify an individual or entity for federal income tax purposes.A deposit account. duration. EFTPS interfaces with the TT&L program and is designed to replace the Federal Tax Deposit coupons with the electronic system. executed by an account holder. generally available to both for-profit and not-forprofit employers having no more than 100 employees. Roth IRA . and the taxpayer is in full control of initiating all tax payments.A secret number or code used by the account holder to authorize a transaction or obtain information regarding his or her account. or upon termination of an employer's qualified retirement plan. directly to an IRA set up by an employee with a qualified financial institution. Tiered Interest Rate .An employee benefit plan that qualifies for special tax treatment under Internal Revenue Code Section 401(a). EFTPS offers two primary payment methods through the ACH network. up to the annual contribution limits. Paper checks are issued when ACH payments are not available.A contractual form. unlike mutual funds.Page the purpose of paying for the future cost of a child's post-secondary education.Interest on Trust Accounts are NOW accounts established by attorneys or law firms for their clients.A type of IRA that allows employees who receive a lump-sum distribution upon leaving an employer. Regular Savings Account .Savings Incentive Match Plan for Employees of small employers. Qualified Retirement Plan . The method 30 . and competitive with. to deposit all or any portion of the funds in a self-directed IRA. Individual Retirement Accounts .

An act that sets forth provisions for giving a minor an intangible gift (i. 2. Uncollected Funds . making those funds unavailable for withdrawal until the time period of the hold expires. to drain out the excessive money from the banks. is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Inflation happens when there are fewer Goods and more buyers. A reduction in the repo rate will help banks to get money at a cheaper rate. What is Deflation? A: Deflation is the continuous decrease in prices of goods and services. SLR is determined as the percentage of total demand and percentage of time liabilities. also referred to as the discount rate. Wire Transfer . Traditional IRA .. 8.An electronic transfer of funds from one financial institution to another.SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit. Uniform Transfer to Minors Act . An increase in inflation figures occurs when there is an increase in the average level of prices in Goods and services. 6. but distributions are generally taxable.Contributions may be partially or fully deductible. 1.used must be disclosed. What is CRR Rate? A: Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. although. Trustee Transfer .3 4. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period. RBI uses this tool when it feels there is too much money floating in the banking system. Financial Institutions typically place a temporary hold on their customers' uncollected funds.e. What is PLR? A: The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers). since there is more demand and less supply of the goods.Funds that have been deposited in an account or cashed against an account by a check that has not yet been cleared through the check collection process and paid by the drawee bank.The moving of IRA funds from one IRA trustee directly to another IRA trustee. Time Liabilities are the liabilities a commercial bank liable to pay to the customers on their anytime demand. approved securities (Bonds) before providing credit to its customers. The custodian has direct control over the gift and can sell and reinvest proceeds from the gift for the minor recognizing any gain and/or annual income that results. Adjustments to the prime rate are made by banks at the same time. with no check being made payable to the IRA participant. this will result in increase in the price of Goods. 3. What is a Repo Rate? A: Repo rate is the rate at which our banks borrow rupees from RBI. the available amount with the banks comes down. Changes in the bank rate are often used by central banks to control the money supply. The rate is almost always the same amongst major banks. Whenever the banks have any shortage of funds they can borrow it from RBI. What is Inflation? A: Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. SLR is used to control inflation and propel growth. stocks or bonds) that results in income shifting with an adult serving as custodian. What is SLR Rate? A: SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash. If RBI decides to increase the percent of this. borrowing from RBI becomes more expensive. RBI is using this method (increase of CRR rate). Banks are always happy to lend money to RBI since their money is in safe hands with a good interest. When the repo rate increases. This type of transfer is not subject to any time or frequency restrictions. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. the prime rate does not adjust on any Page 31 . 7. or gold or govt. 5. What is Reverse Repo Rate? A: This is exact opposite of Repo rate. Through SLR rate tuning the money supply in the system can be controlled efficiently. What is Bank Rate? A: Bank accounts.

00%. 19. . 16. The rates reported below are based upon the prime rates on the first day of each respective month.where the government presents an estimate of a sum required to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place. in other words buying Indian stocks. SDRs are allocated to member countries and can be fully converted into international currencies so they serve as a supplement to the official foreign reserves of member countries. What is Per Capita Income? A: The national income of a country. 13. 22. What is IPO? A: IPO is Initial Public Offering. mostly in the form of an institution. Savings Bank rate: 3. which proposes to invest in Indian market.00%-12. What is GNP? A: Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market. What is Fiscal Deficit? A: It is the difference between the government¶s total receipts (excluding borrowings) and total expenditure. 11. 14. etc. What is National Income? A: National Income is the money value of all goods and services produced in a country during the year. 21. Institutional Investors includes pension funds. What is Disinvestment? A: The Selling of the government stake in public sector undertakings. 17. including both expenditure and receipts.25% · Reverse Repo Rate: 3. dollar. 9. What is FDI? A: FDI (Foreign Direct Investment) occurs with the purchase of the ³physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control´ (Or) A foreign company having a stake in a Indian Company. Difference between Vote on Account and Interim Budget? A: Vote-on-account deals only with the expenditure side of the government's budget.8% of GDP.8% of GDP. 20.Page regular basis. 494.00% · SLR: 25. An institution established outside India. This is the first offering of shares to the general public from a company wishes to list on the stock exchanges. FII's generally buy in large volumes which has an impact on the stock markets. an interim Budget is a complete set of accounts. 23.00% · Repo Rate: 5.0% Lending/Deposit Rates: · PLR: 11. 15.25. 18. where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received by the government. Note: Rates as on 14-05-10. What is Vote on Account? A: A vote-on account is basically a statement . classically a year. Revenue deficit in 2009-10 is proposed at 4. What is SEZ? 32 . 12.5%. GDP during 2008-09 is 6. · Deposit Rate: 6.S. Insurance Companies.00%-7. Its value is based on a basket of key international currencies (U. 10. to keep the machinery running. What is SDR? A: The SDR (Special Drawing Rights) is an artificial currency created by the IMF in 1969. mutual funds. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments of the Fed Funds Rate. Policy Rates: · Bank Rate: 6.7%. Per capita income during 2008-09 estimated by CSO: Rs. Some banks use the name "Reference Rate" or "Base Lending Rate" to refer to their Prime Lending Rate. Banks.50%. What is Deposit Rate? A: Interest Rates paid by a depository institution on the cash on deposit. or region. What is GDP? A: The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period. What is FII? A: FII (Foreign Institutional Investor) used to denote an investor. Per capita income is often used to measure a country's standard of living. Fiscal deficit in 2009-10 is proposed at 6.75% Reserve Ratios: · CRR: 6. euro. yen and pound sterling). divided by its population. What is Revenue deficit? A: It defines that.

To regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. working simultaneously on different issues and increasing efficiency. (ii) availability of money. Traditional banking is the normal bank accounts we have. What is bank and its features and types? A bank is a financial organization where people deposit their money to keep it safe. Merchant banks do not provide regular banking services to the general public iv. Page What is Core Banking Solutions? Core banking is a general term used to describe the services provided by a group of networked bank branches. It will cut down time. regulations. of a country controls (i) the supply of money." Banker to the Government: performs merchant banking function for the central and the state governments. 1935 in accordance with the provisions of the Reserve Bank of India Act. customs. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission.Banker to banks: maintains banking accounts of all scheduled banks. and institutions affecting the way a corporation (or company) is directed. ii. development of infrastructure. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions. in order to attain a set of objectives oriented towards the growth and stability of the economy. The basic motto behind this is to increase foreign investment. iii. Is defined as the general set of customs. via a mobile device such as a mobile phone. Functions of RBI? The Reserve Bank of India is the central bank of India. laws. Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank. The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State. Mobile Banking is a service that allows you to do banking transactions on your mobile phone without making a call . account transactions. interest rates and government spending. vi. in an effort to control the economy. v. job opportunities and increase the income level of the people. agricultural labourers and rural artisans. As a key component of the financial system. policies. Corporate governance is the set of processes. central bank. banks allocate funds from savers to borrowers in an efficient manner. and laws that determine to what end a firm should be run. was established on April 1. also acts as their banker. What is corporate governance? The way in which a company is governed and how it deals with the various interests of its customers. Regional Rural Banks were established with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. 33 . A special Economic zone is a geographical region that economic laws which are more liberal than the usual economic laws in the country. FED bank in US). Is a term used for performing balance checks. though the bank was not set up for nine years. shareholders. These policies affect tax rates.A: SEZ means Special Economic Zone is the one of the part of government¶s policies in India.Banks play an important role in the financial system and the economy. What is monetary policy? A Monetary policy is the process by which the government. payments etc. Banking services for individual customers is known as retail banking. administered or controlled. Like. The RRBs mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers. Fiscal policy is an additional method to determine public revenue and public expenditure. A bank that deals mostly in but international finance. long-term loans for companies and underwriting. What is Fiscal Policy? Fiscal policy is the use of government spending and revenue collection to influence the economy. employees and society at large. and (iii) cost of money or rate of interest. put your money in the bank and they act as a security and you will get only the normal interests (decided by RBI in our case. using the SMS facility. Bank customers may access their funds and other simple transactions from any of the member branch offices. The commission submitted its report in the year 1926. habits. 1934.

NBFCs are doing functions akin to that of banks. Their main function is to grade the different sector and companies in terms of performance and offer solutions for up gradation. transparent and effective. It is a Negotiable Instrument. People believe banks more than individuals. Here. sale/purchase/construction of immovable property. What is demand Draft? A demand draft is an instrument used for effecting transfer of money. 1956 and is engaged in the business of loans and advances. encouraging citizen participation in the decision-making process and making government more accountable.) (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers. industrial activity. Maintaining close interaction with the Government of India in formulating National IT policies with specific focus on IT software and services maintaining a state of the art information database of IT software and services related activities for use of both the software developers as Page 34 . however there are a few differences: (i)A NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand -immediately or within a very short period -. ICRA was formerly referred to the Investment Information and Credit Rating Agency of India Limited.The Act applies to all States and Union Territories of India. Whereas banking is everything that happens in a bank only. people who are having so much money (money in excess which will yield only less interest if in Banks) will invest their money and get higher returns. These two terms are often used to denote services that a bank and other financial institutions provide to its customers. What is E-Governance? E-Governance is the public sector¶s use of information and communication technologies with the aim of improving information and service delivery. this could be accounting.A bill of exchange drawn on a specified banker and payable on demand. I will give to investment banks and they will do the money management and give me higher returns when compared to traditional banks. Cheque and Demand-Draft both are used for Transfer of money. buying properties etc. insurances and policies. What is a NBFC? A non-banking financial company (NBFC) is a company registered under theCompanies Act. For example. Cheque is written by an individual and Demand draft is issued by a bank. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October 2005.vii. Credit Rating Agencies in India? The credit rating agencies in India mainly include ICRA and CRISIL. What is NASSCOM ? The National Association of Software and Services Companies (NASSCOM). except the State of Jammu and Kashmir . ³Written order directing a bank to pay money´.which is covered under a State-level law. The credit rating agencies in India mainly include ICRA and CRISIL(Credit Rating Information Services of India Limited) What is Cheque? Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the maker/depositor's name with that Bank. and (iii) Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks. Diff between banking & Finance? Finance is generally related to all types of financial. What is Right to information Act? The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State Governments. acquisition of shares/stock/bonds/debentures/securities issued by government. It is a banker's check. the Indian chamber of commerce is a consortium that serves as an interface to the Indian software industry and Indian BPO industry. You can 100% trust a DD. If i have more money instead of taking the pain of investing in share market. but does not include any institution whose principal business is that of agriculture your current or savings accounts. Investment banking is entirely different. A check may be dishonored for lack of funds a DD can not. The term Banking and Finance are two very different terms but are often associated together.

cottage and village industries. The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE. smallscale industries. hedge funds and pension plans are all run by asset management companies. ******************************************************** . it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India. It is one of the premiere agencies to provide credit in rural areas. Page 35 What is SEBI? SEBI is the regulator for the Securities Market in India. on which repayments or interest payments are not being made on time. Where as NSE has 50 most traded stocks of NSE. What is Mutual funds? Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. What are foreign exchange reserves? Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. the term in popular usage commonly includes foreign exchange and gold. These companies earn income by charging service fees to their clients. SDRs and IMF reserve positions. It was established in 1920 by promoter chambers. it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture.made by a bank or finance company. Mutual funds. interfaces with Government on policy issues and interacts with counterpart international organizations to promote bilateral economic issues.well as interested companies overseas. Set up in 1990 through an act of parliament. Chairman-Pramod Bhasin What is ASSOCHAM? The Associated Chambers of Commerce and Industry of India (ASSOCHAM). What are non-perfoming assets? Non-performing assets. Sensex and Nifty both are an "index´. are loans. handicrafts and other rural crafts. also called non-performing loans. Chaired by C B Bhave. What is SENSEX and NIFTY? SENSEX is the short term for the words "Sensitive Index" and is associated with the Bombay (Mumbai) Stock Exchange (BSE). ASSOCHAM represents the interests of industry and trade. representing all regions of India. As an apex industry body.SENSEX IS THE INDEX OF BSE. The net proceeds or losses are then typically distributed to the investors annually. The mutual fund will have a fund manager that trades the pooled money on a regular basis. India's premier apex chamber covers a membership of over 2 lakh companies and professionals across the country. An index is basically an indicator it indicates whether most of the stocks have gone up or most of the stocks have gone down. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mr. What is Recession? A true economic recession can only be confirmed if GDP (Gross Domestic Product)growth is negative for a period of two or more consecutive quarters. What is Asset Management Companies? A company that invests its clients' pooled fund into securities that match its declared financial objectives. However. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments. President-Swati Piramal What is NABARD? NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. What is SIDBI? The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro. and Agricultural Refinance and Development Corporation (ARDC). Som Mittal ± President. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India.BOTH WILL SHOW DAILY TRADING MARKS. Originally set up by the Government of India in 1988. AND NIFTY IS THE INDEX OF NSE. small and medium scale industries in India.