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Introduction:Commerce has become one of the most sought after streams for the youngsters. There is huge potential in the Banking and finance sectors of our country. Commerce graduates and students who have a flair for commercial and banking technicalities jump for this bandwagon. The employments available in these sectors demand quality and aptness from the candidates, thus making the bunch of competent and eligible team of youngsters. But, it is very obvious that in order to gain certain degree of eligibility a solid base of communication is very much required. Looking at this growing need of Commerce Franklyn has developed a foundation course for you. The target is to make you aware of the technical and non-technical components of this happening industry. This course caters to all those aspirants who opt for commerce as their mainstream subject, businessmen want to have a better grip over the market and professionals in general who want to navigate in to the world of commerce for practical and personal need. With the wake of Globalization banking is no more confined to the area of local market and a handful of target clients only. The increase of corporatization requires an enlarged market and should include global customers too. This extended version of Finance sector should match with profiles that can make a thorough communication and network a
chain of large and prolific populace. Keeping an eye with this Franklyn Banking and Finance English offers a customized course that incorporates almost all of the subjects which can make one suitable for the industry. Financial English courses are developed to provide you with the key skills, tools and terminology you need to operate in an ever competitive international financial environment.
Objectives:Fun learning These unusual way of training is by no means dilute the seriousness of learning. There are few traditional institutions that offer classical modes of learning, and a few of these offbeat courses fill the gaps thus giving students something experimental they are looking for. Our unique course contents allow students to master the course better than any traditional method of learning. In specialized course contents Franklyn’s allow students to know the subject through and through. Feasibility This course, Banking and Finance English is probably creating a stir around the business and corporate world, and might be a subject of great many conversations in the cafeteria. Without investing for a full time course this crash course might well be taken as a learning platform to gather some hands on skill on the domain. The world of banking of finance is dominated by the English language. Whether between negotiating parties or in commercial business English is the prominent language of choice. It is estimated that over 1 billion people are learning English worldwide and as the world economy steadily grows the popularity of English as a major language in banking and finance is likely to increase. Benefits Franklyn’s Financial English course will provide you with: - Greater confidence when discussing financial documents and data. - Increased verbal fluency for face-to-face negotiations. - In depth knowledge about the familiar ingredients of Banking and Finance.
- Economy and finance, trade and cooperation, money, banking transactions and services, personal finance. Who should attend
A Financial English course is suitable for anyone who requires a solid command of financial English and is particularly ideal for: - In-company accountants - Bankers - Internal auditors - Finance managers - Directors and divisional managers - In-house counsel - Fund managers, financial lawyers, accountants, auditors and any other bank/financial staff who are increasingly required to use fluent English in their job. - Treasury, dealing room, corporate lending and marketing staff who need to be completely up-to-date with financial terminology and 100% accurate in stating/understanding facts and figures.
Choose the correct answer to go in the gap. Example: If you go abroad you don't have to take a lot of cash with you. Instead, you can take ...... cheques with you, which are accepted in most hotels, restaurants and shops all over the world. tourist traveller's travel 1. Here is a small ...... . You'll get the rest of the money after the job is finished. benefit advance preview 2. "Here's a ten-pound ...... ". "Your change, Sir".
invoice bill note 3. "What is the ......... in Poland". "It's the Polish Zloty". money currency greenback 4. He doesn't have any money problems. He is fully ...... . wealthy solvent thrifty 5. If you work longer than your usual working day you should be paid ...... outgoing overdue overtime 6. I don't get paid in cash. My salary is paid into my bank ....... . deposit debt account 7. The long-term loan you take from a bank to buy a house or flat is called a ......... . mortgage overdraft arrears 8. I don't have any money. I'm .................. . stony broke hand and fist comfortably off 9. I need to ......... my belt, and cut down on the money I spend on luxuries. loosen tighten do
10. I don't have any cash on me. Can I pay with my .......... card? deposit credit expenditure
Topic Details: The content of your Financial English course will be determined by your level and requirements. However, core subject areas for each Financial English course will include: Unit 1: General Introduction to Bank and Banking Sector. (Class 2-3) Unit 2: Financial Matters:a. Transaction. (Class 4- 5) b. Risk Management. (Class 6- 7) Unit 3: Glossary 1 (Class 8- 10) Glossary 2 (Class 11- 13) Conversation and Exercise. (Class 14- 15) Terminologies Important to remember. (Related to Banking and Stocks) (Class 16)
General Introduction to Bank and Banking sectors:-
A banker or bank is a financial institution that acts as a payment agent for customers, and borrows and lends money. Banks acts as payment agents by conducting current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to the customer's current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM. Banks borrow money by accepting funds deposited on current account, accepting term deposits and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current account, by making installment loans, and by investing in marketable debt securities and other forms of lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds borrowed from households and non-financial businesses, and lend most funds lent to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to. Economic functions in a Bank: The economic functions of banks include: 1. issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par and effectively transferrable by mere delivery in the case of banknotes, or by drawing a cheque, delivering it to the payee to bank or cash. 2. netting and settlement of payments -- banks act both as collection agent and paying agents for customers, and participate in inter-bank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables payment flows between geographical areas to offset, reducing the cost of settling payments between geographical areas.
3. credit intermediation -- banks borrow and lend back-to-back on their own account as middle men 4. credit quality improvement -- banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and the bank's own capital which provides a buffer to absorb losses without defaulting on its own obligations. 5. maturity transformation -- banks borrow more on demand debt and short term debt, but provide more long term loans. Bank can do this because they can aggregate issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintain reserves of cash, invest in marketable securities that can be readily sold if needed, and raise replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets) because they have a high and more well known credit quality than most other borrowers. Law of Banking: Banking law is based on a contractual analysis of the relationship between the bank and the customer. The definition of bank is given above, and the definition of customer is any person for whom the bank agrees to conduct an account. The law implies rights and obligations into this relationship as follows: 1. The bank account balance is the financial position between the bank and the customer, when the account is in credit, the bank owes the balance to the customer, when the account is overdrawn, the customer owes the balance to the bank. 2. The bank engages to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit. 3. The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer. 4. The bank engages to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account. 5. The bank has a right to combine the customer's accounts 6. The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank. 7. The bank must not disclose the details of the transactions going through the customer's account unless the customer consents, there is a public duty to disclose, the bank's interests require it, or under compulsion of law. 8. The bank must not close a customer's account without reasonable notice to the customer, because cheques are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force in the jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship. Banking channels: Banks offer many different channels to access their banking and other services:
A branch, banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of face to face service to its customers ATM is a computerised telecommunications device that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a wider range of services to a wider range of users. For example in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering the account number to be credited. Also, most ATMs enable card holders from other banks to get their account balance and withdraw cash, even if the card is issued by a foreign bank. Mail is part of the postal system which itself is a system wherein written documents typically enclosed in envelopes, and also small packages containing other matter, are delivered to destinations around the world. This can be used to deposit cheques and to send orders to the bank to pay money to third parties. Banks also normally use mail to deliver periodic account statements to customers. Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone. This normally includes bill payments for bills from major billers (e.g. for electricity). Online banking is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website
Types of banks Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to High Net Worth Individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasiregulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis. Class: 3
Banking in India: Structure of the organised banking sector in India. Number of banks are in brackets. Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. Early history At the end of late-18th century, there were hardly any banks in India in the modern sense of the term. At the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped from the Americas. Some banks were opened at that time which functioned as entities to finance industry, including speculative trades in cotton. With large exposure to speculative ventures, most of the banks opened in India during that period could not survive and failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century.
The Bank of Bengal, which later became the State Bank of India. At the beginning of the 20th century, Indian economy was passing through a relative period of stability. Around five decades have elapsed since the India's First war of Independence, and the social, industrial and other infrastructure have developed. At that
time there were very small banks operated by Indians, and most of them were owned and operated by particular communities. The banking in India was controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank of India, upon India's independence, was renamed the State Bank of India. There were also some exchange banks, as also a number of Indian joint stock banks. All these banks operated in different segments of the economy. The presidency banks were like the central banks and discharged most of the functions of central banks. They were established under charters from the British East India Company. The exchange banks, mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency banks, and the exchange banks. There was potential for many new banks as the economy was growing. Lord Curzon had observed then in the context of Indian banking: "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." Under these circumstances, many Indians came forward to set up banks, and many banks were set up at that time, a number of which have survived to the present such as Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank. Post-independence The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and banking activities had remained paralyzed for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included:
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In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a licence from the RBI, and no two banks could have common directors.
However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalization of major banks in India on 19th July, 1969.
By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it received the presidential approval on 9th August, 1969. A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the GOI controlled around 91% of the banking business of India. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation and gave licences to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as UTI Bank (now re-named as Axis Bank) (the first of such new generation banks to be set up), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kickstarted the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
Public sector banks
SBI group: State Bank of India, with its seven associate banks commands the largest banking resources in India. SBI and its associate banks are:
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State Bank of India State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Saurashtra State Bank of Travancore
After the amalgamation of New Bank of India with Punjab National Bank, currently there are 19 nationalised banks in India:
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Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank Union Bank of India United Bank of India UCO Bank Vijaya Bank
Private sector banks
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Axis Bank (formerly UTI Bank) Bank of Rajasthan Bharat Overseas Bank Catholic Syrian Bank Centurion Bank of Punjab City Union Bank Development Credit Bank Dhanalakshmi Bank Federal Bank Ganesh Bank of Kurundwad HDFC Bank ICICI Bank IDBI Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Limited. Karur Vysya Bank Kotak Mahindra Bank Lakshmi Vilas Bank Lord Krishna Bank ( now Centurian Bank of Punjab) Nainital Bank Ratnakar Bank
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Rupee Bank Saraswat Bank SBI Commercial and International Bank South Indian Bank Tamilnad Mercantile Bank Ltd. Thane Janata Sahakari Bank Bassein Catholic Bank United Western Bank YES Bank
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ABN AMRO Bank N.V. Abu Dhabi Commercial Bank Ltd American Express Bank Antwerp Diamond Bank Arab Bangladesh Bank Bank International Indonesia Bank of America Bank of Bahrain & Kuwait Bank of Ceylon Bank of Nova Scotia Bank of Tokyo Mitsubishi UFJ Barclays Bank BNP Paribas Calyon Bank ChinaTrust Commercial Bank Cho Hung Bank Citibank DBS Bank Deutsche Bank HSBC (Hongkong & Shanghai Banking Corporation) JPMorgan Chase Bank Krung Thai Bank Mashreq Bank Mizuho Corporate Bank Oman International Bank Société Générale Standard Chartered Bank State Bank of Mauritius Taib Bank
A financial transaction involves a change in the status of the finances of two or more businesses or individuals.
The most common type of financial transaction. An item or good is exchanged for money. This transaction results in a decrease in the finances of the purchaser and an increase in the finances of the seller.
A slightly more complicated transaction in which the lender gives a single large amount of money to the borrower now in return for many smaller repayments of the borrower to the lender over time, usually on a fixed schedule. The smaller delayed repayments usually add up to more than the first large amount. The difference in payments is called interest.
A combination loan and purchase. A lender gives a large amount of money to a borrower for the specific purpose of purchasing a very expensive item (most often a house). As part of the transaction, the borrower usually agrees to give the item (or some other high value item) to the lender if the loan is not paid back on time. This guarantee of repayment is known as collateral. .
A bank is a business that is based almost entirely on financial transactions. In addition to acting as a lender for loans and mortgages, banks act as a borrower in a special type of loan called an account. The lender is known as a customer and gives unspecified amounts of money to the bank for unspecified amounts of time. The bank agrees to repay any amount in the account at any time and will pay small amounts of interest on the amount of money that the customer leaves in the account for a certain period of time. In addition, the bank guarantees that the money will not be stolen while it is in the account, and will reimburse the customer if it is. In return, the bank gets to use the money for other financial transactions as long as they hold it.
A special combination of purchase and loan. The seller gives the buyer the good or item as normal, but the buyer pays the seller using a credit card. In this way, the buyer is paying with a loan from the credit card company, usually a bank. The bank or other financial institution issues credit cards to buyers that allow any number of loans up to a certain cumulative amount. Repayment terms for credit card loans, or debts vary, but the interest is often extremely high. An example of common repayment terms would be a minimum payment of the greater of $10 or 3% every month, and a 15-20% interest charge for any unpaid loan amount. In addition to interest, buyers are sometimes charged a yearly fee to use the credit card. In order to collect the money for their item, the seller must apply to the credit card company with a signed receipt. Sellers usually apply for many payments at regular intervals. The seller is also charged a fee by the credit card company for the privilege of accepting that brand of credit card for purchases. The fee is normally 1-3% of the purchase price. Thus, in a credit card purchase, the transfer of the item is immediate, but all payments are delayed.
This is a special type of purchase. The item or good is transferred as normal, but the purchaser uses a debit card instead of money to pay. A debit card contains an electronic record of the purchaser's account with a bank. Using this card, the seller is able to send an electronic signal to the buyer's bank for the amount of the purchase,and that amount of money is simultaneously debited from the customer's account and credited to the account of the seller. This is possible even if the buyer or seller use different financial institutions. Currently, fees to both the buyer and seller for the use of debit cards are fairly low because the banks want to encourage the use of debit cards. The seller must have a card reader set up in order for such purchases to be made. Debit cards allow a buyer to have access to all the funds in his account without having to carry the money around. It is more difficult to steal such funds than cash, but is still done. See skimming and shoulder surfing.
Maturity refers to the final payment date of a loan or other financial instrument, at which point all remaining interest and principal is due to be paid. 1, 3, 6 months maturity band can be calculated by using 30-day per month periods. For maturity bands over a year it is acceptable to use 365 day per year. For example with a Treasury Bond, its maturity is the date on which the principal is paid.
Inflation is defined as a sustained increase in general price levels for some set of goods and services in a given economy over a period of time. It is measured as the percentage rate of change of a price index. A variety of inflation measures are in use, because there are many different price indices, designed to measure different sets of prices that affect different people. Two widely known indices for which inflation rates are commonly reported are the Consumer Price Index (CPI), which measures nominal consumer prices, and the GDP deflator, which measures the nominal prices of goods and services produced by a given country or region. Mainstream economists overwhelmingly agree that high rates of inflation are caused by high rates of growth of the money supply. Views on the factors that determine moderate rates of inflation, especially in the short run, are more varied: changes in inflation are sometimes attributed mostly to changes in the real demand or supply of goods and services, and sometimes to changes in the supply or demand for money. In the midtwentieth century, two camps disagreed strongly on the main causes of inflation (at moderate rates): the "monetarists" argued that money supply dominated all other factors in determining inflation, while "Keynesians" argued that real demand was often more important than changes in the money supply.
Related economic and inflation concepts include: deflation, a general falling level of prices; disinflation, the reduction of the rate of inflation; hyperinflation, an out-ofcontrol inflationary spiral; stagflation, a combination of inflation and rising unemployment; and reflation, which is an attempt to raise prices to counteract deflationary pressures. In classical political economy, inflation meant increasing the money supply, while deflation meant decreasing it (see Monetary inflation). Economists from some schools of economic thought (including some Austrian economists) still retain this usage. In contemporary economic terminology, these would usually be referred to as expansionary and contractionary monetary policies.
A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, secessionist movements or revolutionary movements). Taxes could also be imposed by a sub national entity. Taxes consist of direct tax or indirect tax, and may be paid in money or as unpaid labour. A tax may be defined as a "pecuniary burden laid upon individuals or property to support the government […] a payment exacted by legislative authority." A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name
of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name." In modern taxation systems, taxes are levied in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the UK. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) may be imposed on the non-paying entity or individual.
A cheque (or check - USA) is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specific demand account held in the maker/depositor's name with that institution. Both the maker and payee may be natural persons or legal entities.
Parts of a cheque
Cheques generally contain: 1. 2. 3. 4. 5. 6. 7. place of issue cheque number date of issue payee amount of currency signature of the drawer routing / account number in MICR format - in the U.S., the routing number is a nine-digit number in which the first 4 digits identifies the U.S. Federal Reserve Bank's cheque-processing center. This is followed by digits 5 through 8, identifying the specific bank served by that cheque-processing center. Digit 9 is a verification digit, computed using a complex algorithm of the previous 8 digits. The account number is assigned independently by the various banks. 8. fractional routing number (U.S. only) - also known as the transit number, consists of a denominator mirroring the first 4 digits of the routing number. And a hyphenated numerator, also known as the ABA number, in which the first part is a city code (1-49), if the account is in one of 49 specific cities, or a state code (5099) if it is not in one of those specific cities; the second part of the hyphenated numerator mirrors the 5th through 8th digits of the routing number with leading zeros removed.
A cheque is generally valid indefinitely or for six months after the date of issue unless otherwise indicated; this varies depending on where the cheque is drawn. In Australia, for example, it is fifteen months. Legal amount (amount in words) is also highly recommended but not strictly required. In the USA and some other countries, cheques contain a memo line where the purpose of the cheque can be indicated as a convenience without affecting the official parts of the cheque. This is not used in Britain where such notes are often written on the reverse side. LOAN: A loan is a type of debt. All material things can be lent but this article focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan. Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply. Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it. In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter - often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
A type of loan especially used in limited partnership agreements is the recourse note.
Unsecured loans are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages:
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credit card debt, personal loans, bank overdrafts credit facilities or lines of credit corporate bonds
The interest rates applicable to these different forms may vary depending on the lender, the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974. Class: 5
Share Market: In financial markets, a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, use of the word shares in the plural to refer to stock is so common that it almost replaces the word stock itself. And especially in American English, the plural stocks is widely used instead of shares, in other words to refer to the stock (or perhaps originally stock certificates) of even a single company. Traditionalist demands that the plural stocks be used to refer only to stock of more than one company are rarely heard nowadays. The income received from shares is called a dividend, and a person who owns shares is called a shareholder. A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends and to a portion of the value of the company in case of liquidation. Shares can be voting or nonvoting, meaning they either do or do not carry the right to vote on the board of directors and corporate policy. Whether this right exists often affects the value of the share. Voting and Non-Voting shares are also known as Class A and B shares.
Common, Preferred and Convertible
A share (aka equity shares) of stock represents a share of ownership in a corporation and typically take the form of shares of common stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK). Although there is a great deal of commonality between the stocks of different companies, each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. Some shares of common stock may be issued without the typical voting rights be included, for instance. Or some shares may have special rights unique to them and issued only to certain parties. These case by case variations in the specific form of stock issuance is beyond the scope of this article, except to note that not all equity shares are the same.
A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. Companies listed at the stock market are expected to strive to enhance shareholder value. Shareholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company. However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors. This means that shareholders typically receive nothing if a company is liquidated after bankruptcy (if the company had had enough to pay its creditors, it would not have entered bankruptcy), although a stock may have value after a bankruptcy if there is the possibility that the debts of the company will be restructured. Shareholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders. Although directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders, the shareholders themselves normally do not have such duties towards each other.
However, in a few unusual cases, some courts have been willing to imply such a duty between shareholders. For example, in California, majority shareholders of closely held corporations have a duty to not destroy the value of the shares held by minority shareholders. The largest shareholders (in terms of percentages of companies owned) are often mutual funds, and especially passively managed exchange-traded funds.
The owners of a company may want additional capital to invest in new projects within the company. They may also simply wish to reduce their holding, freeing up capital for their own private use. By selling shares they can sell part or all of the company to many part-owners. The purchase of one share entitles the owner of that share to literally share in the ownership of the company, a fraction of the decision-making power, and potentially a fraction of the profits, which the company may issue as dividends. In the common case of a publicly traded corporation, where there may be thousands of shareholders, it is impractical to have all of them making the daily decisions required to run a company. Thus, the shareholders will use their shares as votes in the election of members of the board of directors of the company. In a typical case, each share constitutes one vote. Corporations may, however, issue different classes of shares, which may have different voting rights. Owning the majority of the shares allows other shareholders to be out-voted - effective control rests with the majority shareholder (or shareholders acting in concert). In this way the original owners of the company often still have control of the company.
Although ownership of 51% of shares does result in 51% ownership of a company, it does not give the shareholder the right to use a company's building, equipment, materials, or other property. This is because the company is considered a legal person, thus it owns all its assets itself. This is important in areas such as insurance, which must be in the name of the company and not the main shareholder. In most countries, including the United States, boards of directors and company managers have a fiduciary responsibility to run the company in the interests of its stockholders. Nonetheless, as Martin Whitman writes: "...it can safely be stated that there does not exist any publicly traded company where management works exclusively in the best interests of OPMI [Outside Passive Minority Investor] stockholders. Instead, there are both "communities of interest" and "conflicts of interest" between stockholders (principal) and
management (agent). This conflict is referred to as the principal/agent problem. It would be naive to think that any management would forgo management compensation, and management entrenchment, just because some of these management privileges might be perceived as giving rise to a conflict of interest with OPMIs." Even though the board of directors runs the company, the shareholder has some impact on the company's policy, as the shareholders elect the board of directors. Each shareholder typically has a percentage of votes equal to the percentage of shares he or she owns. So as long as the shareholders agree that the management (agent) are performing poorly they can elect a new board of directors which can then hire a new management team. In practice, however, genuinely contested board elections are rare. Board candidates are usually nominated by insiders or by the board of the directors themselves, and a considerable amount of stock is held and voted by insiders. Owning shares does not mean responsibility for liabilities. If a company goes broke and has to default on loans, the shareholders are not liable in any way. However, all money obtained by converting assets into cash will be used to repay loans and other debts first, so that shareholders cannot receive any money unless and until creditors have been paid (most often the shareholders end up with nothing). Risk Management: Class: 6 Risk management is the human activity which integrates recognition of risk, risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources. The strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. Some traditional risk managements are focused on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death and lawsuits). Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments. Objective of risk management is to reduce different risks related to a preselected domain to the level accepted by society. It may refer to numerous types of threats caused by environment, technology, humans, organizations and politics. On the other hand it involves all means available for humans, or in particular, for a risk management entity (person, staff, organization).
In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. In practice the process can be very difficult, and balancing between risks with a high probability of occurrence but lower loss versus a risk with high loss but lower probability of occurrence can often be mishandled. Intangible risk management identifies a new type of risk - a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. For example, when deficient knowledge is applied to a situation, a knowledge risk materialises. Relationship risk appears when ineffective collaboration occurs. Processengagement risk may be an issue when ineffective operational procedures are applied. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identification and reduction of risks that reduce productivity. Risk management also faces difficulties allocating resources. This is the idea of opportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management minimizes spending while maximizing the reduction of the negative effects of risks.
Steps in the risk management process
Establish the context
Establishing the context involves 0. Identification of risk in a selected domain of interest 1. Planning the remainder of the process. 2. Mapping out the following: the social scope of risk management, the identity and objectives of stakeholders, and the basis upon which risks will be evaluated, constraints. 3. Defining a framework for the activity and an agenda for identification. 4. Developing an analysis of risks involved in the process. 5. Mitigation of risks using available technological, human and organizational resources.
Once risks have been identified, they must then be assessed as to their potential severity of loss and to the probability of occurrence. These quantities can be either simple to measure, in the case of the value of a lost building, or impossible to know for sure in the
case of the probability of an unlikely event occurring. Therefore, in the assessment process it is critical to make the best educated guesses possible in order to properly prioritize the implementation of the risk management plan. The fundamental difficulty in risk assessment is determining the rate of occurrence since statistical information is not available on all kinds of past incidents. Furthermore, evaluating the severity of the consequences (impact) is often quite difficult for immaterial assets. Asset valuation is another question that needs to be addressed. Thus, best educated opinions and available statistics are the primary sources of information. Nevertheless, risk assessment should produce such information for the management of the organization that the primary risks are easy to understand and that the risk management decisions may be prioritized. Class: 7
Potential risk treatments
Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories:
• • • •
Avoidance (aka elimination) Reduction (aka mitigation) Retention Transfer (aka buying insurance)
Ideal use of these strategies may not be possible. Some of them may involve trade-offs that are not acceptable to the organization or person making the risk management decisions. Another source, from the US Department of Defense, Defense Acquisition University, calls these ACAT, for Avoid, Control, Accept, or Transfer. The ACAT acronym is reminiscent of the term ACAT (for Acquisition Category) used in US Defense industry procurements.
Includes not performing an activity that could carry risk. An example would be not buying a property or business in order to not take on the liability that comes with it. Another would be not flying in order to not take the risk that the airplane were to be hijacked. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed. Not entering a business to avoid the risk of loss also avoids the possibility of earning profits.
Involves methods that reduce the severity of the loss. Examples include sprinklers designed to put out a fire to reduce the risk of loss by fire. This method may cause a
greater loss by water damage and therefore may not be suitable. Halon fire suppression systems may mitigate that risk, but the cost may be prohibitive as a strategy. Modern software development methodologies reduce risk by developing and delivering software incrementally. Early methodologies suffered from the fact that they only delivered software in the final phase of development; any problems encountered in earlier phases meant costly rework and often jeopardized the whole project. By developing in iterations, software projects can limit effort wasted to a single iteration.
Involves accepting the loss when it occurs. True self insurance falls in this category. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible. War is an example since most property and risks are not insured against war, so the loss attributed by war is retained by the insured. Also any amounts of potential loss (risk) over the amount insured is retained risk. This may also be acceptable if the chance of a very large loss is small or if the cost to insure for greater coverage amounts is so great it would hinder the goals of the organization too much.
Means causing another party to accept the risk, typically by contract or by hedging. Insurance is one type of risk transfer that uses contracts. Other times it may involve contract language that transfers a risk to another party without the payment of an insurance premium. Liability among construction or other contractors is very often transferred this way. On the other hand, taking offsetting positions in derivatives is typically how firms use hedging to financially manage risk. Some ways of managing risk fall into multiple categories. Risk retention pools are technically retaining the risk for the group, but spreading it over the whole group involves transfer among individual members of the group. This is different from traditional insurance, in that no premium is exchanged between members of the group up front, but instead losses are assessed to all members of the group. Outsourcing is another example of risk transfer.In this case companies outsource only some of their departmental needs. For example, a company may outsource only its software development, the manufacturing of hard goods, or customer support needs to another company, while handling the business management itself. This way, the company can concentrate more on business development without having to worry as much about the manufacturing process, managing the development team, or finding a physical location for a call center.
Unit 3: Glossary (i): Financial & Banking Terms: Class: 8
-AAllowance – an amount of money parents give kids to help them learn to manage money. The amount is usually given weekly. Sometimes an allowance is tied to completing responsibilities – household chores or jobs for the family. Annual Percentage Rate (APR) – the rate of interest (in terms of a percent, such as 8.75%) being charged for a loan over a year's time. The APR rate includes interest, transaction fees, and service fees. Appreciate – to grow in value. Usually a term used in relation to investments: stocks, collectibles, etc., which are now worth more than you paid for them. Asset – any item of value that you own: house, land, gems, stocks, bonds, money in savings, etc. ATM – these letters stand for Automated Teller Machine. This is an electronic banking station that enables people to take care of banking business 24 hours a day, 7 days a week. You can deposit and withdraw money, pay loans, etc., at most ATMs. Auto Insurance – this insurance helps you pay for damage you cause as a result of an accident to people or property, medical expenses you may have and the cost of fixing your car. It will also pay all these expenses if someone hurts you or your car and they do not carry insurance themselves. -BBalance – 1) In talking about loans, the balance is the difference between the amount owed and the amount paid. If you pay $45 on a $100 debt, your balance is $55.
2) In talking about checkbooks, balancing means to account for all money that came into and went out of your account, so that at the end of the month you and your bank statement agree. 3) In talking about savings, your balance is what is left in your savings account after you deposit or withdraw money. Bank Card – this plastic card looks like a credit card, but it is used to withdraw money from a savings or checking account. When you use a debit card at Automatic Teller Machines or in stores to make purchases, money is immediately withdrawn from your account. You cannot withdraw more money than you have in the account. Bankruptcy – a state of being in so much debt that you are legally declared unable to pay in full the people and companies you owe. When you legally declare yourself bankrupt in some states, you must sell off all your possessions and pay off your debts as best you can. Blue Chip Stock – a name given to the stocks of major corporations, like IBM and General Motors. The name is derived from the most highly valued poker chip, the blue chip. Bond – an IOU issued by a corporation or government that confirms you are lending the corporation or government money. Bonds pay interest regularly to lenders. At the end of the term of the bond, the borrower returns to the lender the face value of the bond (the amount the lender invested in the bond). Broker – a licensed professional who advises people about investments; also helps people buy and sell stocks, bonds, mutual funds, etc. The broker earns a fee for this help, called a commission, usually a percentage of the transaction. Brokerage Company – a company that charges a fee to buy or sell investments for you. Budget – a plan you create for controlling spending and encouraging saving. -C-
Certificate of Deposit – a type of investment that requires you to invest money for a certain length of time and guarantees the same rate of return (interest) for that entire time. CDs usually require a minimum deposit. Charge – to borrow money (from a store, service provider, or credit card company) to make a purchase. If you do not pay the debt off in full within the card issuer's grace period (usually 25-28 days), you will pay interest on the amount you owe. Check Register – a small booklet comes with your checkbook and gives you record sheets that so you can keep track of all the deposits, ATM withdrawals, and checks you write. If you keep your check register up-to-date, you always know how much money you have in your checking account. Collateral – property used to assure the payment of a loan. In other words, if the borrower does not pay back the loan, the borrower must give up this property or money. Collectibles – objects such as art, jewelry, baseball cards, and antiques that people buy in the hope that the objects' value will increase. Commodities – raw materials – such as oil, wheat, soybeans, pork, or gold – you buy. In buying commodities you are hoping that the price will rise, so that you can sell the commodity for a profit. Compound Interest – interest on an investment, like a savings account, that is calculated not only on the money you originally invested, but also on any interest the investment has already earned. Corporation – the most common form of organizing a business — the organization's total worth is divided into shares of stock, and each share represents a unit of ownership and is sold to stock holders. A corporation is considered a separate entity from the stockholders for legal and tax purposes. Examples of corporations: Pepsi Cola, Intel, The Gap. Coverage – this is a very detailed list of what an insurance policy will pay for and how much.
Credit – a loan that enables people to buy something now and to pay for it in the future. Credit Limit – the highest amount you may charge on a credit card. Your limit is set by your card company's opinion of your ability to handle debt. Credit History – a record of your borrowing and paying habits. Credit reporting companies track your history and supply this information to credit card companies, banks, and other lenders. Credit Rating or Score – this is a score or grade that credit companies assign to you based on how you handle your money and pay your bills. Class: 9 -DDebit Card – this plastic card looks like a credit card, but it is used to withdraw money from a savings or checking account. When you use a debit card at Automatic Teller Machines or in stores to make purchases, money is immediately withdrawn from your account. You cannot withdraw more money than you have in the account. Debt – money or goods you owe. Deposit – to put money into a bank or investment account. Direct Deposit – some employers electronically deposit paychecks directly into an employee’s bank account. The employee then gets a paper copy of the deposit, called an Earnings Statement as proof of the deposit. Disability Insurance – if you become too sick from an illness or too injured in an accident to go to work and earn money, disability insurance will help provide an income for you. Diversify – to spread out the money you invest into different types of investments: bonds, stocks, CDs, mutual funds, etc. The idea is to avoid putting all your eggs in one basket. Different kinds of investments do well in different kinds of economic climates. Therefore, if one of your investments drops in value, the other kinds of investments should hold or increase their value.
Dividend – a payment made by a company to a stockholder to share in the company's profits. Discount – to reduce from an original price or an item's full worth. -EEarned Income – wages paid in exchange for work. Earnings Statement – a paper copy, proof that a paycheck has been electronically deposited in a bank account; an employer sends employees earnings statements to confirm that a paycheck has been electronically deposited in the employee’s bank account. Entrepreneur – a person who assumes the risk to start a business with the idea of making a profit. Expenses – things you pay money for - both needs and wants. -FFace Value – the value printed on the bond. FICA – a payroll tax. FICA stands for Federal Insurance Contributions Act (FICA) tax. This tax is used to fund Medicare and Social Security. FDIC-Insured – established as part of the Banking Act of 1933, the Federal Deposit Insurance Corporation (FDIC) protects bank customers from possible losses by insuring various kinds of savings accounts up to $100,000 per account. Finance Charge – the fee you pay when you do not pay off the entire credit card debt within a single payment period, usually about 25-28 days. Fixed – not changing. Fixed interest rates never change during the time of the investment or loan. Fixed Expenses – expenses which stay basically the same from month to month, such as housing and transportation. -G-
Grace Period – the time, usually about 25-28 days, which you have to pay a bill or a loan in full. If you pay within the grace period, you do not have to pay a finance charge. Gross Pay – the entire amount of your income or paycheck before any deductions – like taxes or insurance payments – are subtracted. -HHealth Insurance – people buy health insurance to help them pay for medical expenses like going to the doctor, prescription drugs or surgery. Homeowner’s Insurance – people have homeowner’s insurance so they will have the money to fix or replace their home and its contents. Damage can be done by fire or storms, or even by a burglar. -IIndex Fund – an index fund is designed to track the performance of a specific group of stocks or bonds. An example is an index fund that tracks the performance of the S&P 500 by holding all the stocks in this index. Income Tax – money that wage earners pay the government to run the country. The amount of the tax depends upon how much you earn. Insufficient Funds – a phrase that means you did not have enough money to cover an expense. Usually checks that bounce are returned stamped with the phrase, "insufficient funds." The amount of the check was larger than the balance in the checking account. Insurance – insurance is a type of plan that can help protect you from an event in life that costs a large amount of money. A policy will pay you money to cover the cost of these events. See auto insurance, disability income insurance, renter’s insurance, homeowner’s insurance and health insurance. Insure – to protect yourself from loss. You pay premiums (payments) to an insurance company who, in turn, agrees to pay for losses to your property (house, car, jewelry, etc.) or your person (in case of injury). You can buy insurance that
protects you even when you cause a loss to other people. For example, you cause a car accident. Insured Savings – accounts that are insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). Banks are insured by the FDIC, so your money in bank accounts is insured. Interest – the amount paid by a borrower to a lender for the privilege of borrowing the money. Investment – using your money to try to make more money – for example, by depositing money in a bank or by buying a bond or stock in a company. Interest Rate – the price paid for the use of someone else's money expressed as an annual percentage rate, such as 6.5%. Invest – to put your money into CDs, money market accounts, mutual funds, savings accounts, bonds, stocks or objects that you hope will grow in value and earn you more money. -LLate fee – A fee charged to you for missing a payment date. If your payment arrives “late” or not at all, the charge is added to your debt. Late fees are strong penalties. Credit companies routinely charge $30 or more if you miss your payment date. Get organized! Lien – a right given to a lender over a borrower's property or money when the borrower cannot pay a debt. Life Insurance – people buy life insurance so if they die, their family will receive money that can help them go on living the way they are living today. Liquid – an investment that can be easily turned into cash. Liquidity – how quickly an asset (any item of value that you own) can be turned into cash. In other words, you don't have to wait until a certain date or pay a penalty to withdraw your money.
Loan – money or an object that is lent, usually with the understanding that the loan will be paid back, usually with interest. Long-Term – an example of Long- term savings might be saving to buy a car or pay for college. You need months or years to save this amount of money. People invest long-term for many, many years, for retirement, for example. -MMinimum Payment – the smallest amount you are required to pay a lender each month on a debt. Money Market Account – a savings account offered by a bank (or a mutual fund). The account typically requires 1) a minimum deposit and 2) that you maintain a minimum balance. The account invests in certificates of deposit and treasury bills and pays a rate of interest that rises and falls with the economy. Mortgage – usually refers to the money borrowed from a lender to buy a house; the borrower makes payments on the loan each month until the entire loan, along with interest, is paid in full. Mutual Fund – a savings fund that uses cash from a pool of savers to buy a wide range of securities, like stocks, bonds, and real estate. This is a way to diversify your investments because you own small units of each of the fund's investments. The fund is managed by professionals and permits small amounts of money to be invested. Class: 10 -NNet pay – the amount of your income or paycheck after any deductions – like taxes or insurance payments – are subtracted. This is your take-home pay. -OOpportunity Cost – the next best alternative that is given up when a choice is made. For example, when you spend your money, you lose your “opportunity” to use it in other ways.
Overdraw: to take more money out of an account than is available in the account. You write a check for $25.00, but your account contains only $20. You will have to pay the bank a penalty charge for going over the limit. -PPenny Stock – a nickname for extremely low priced stock, usually only a few dollars a share. These stocks are considered highly speculative, which is another way of saying highly risky. They are priced low because they have not yet proven themselves in the market. Percentage – a way of measuring. The number 100 (which stands for the whole amount) is usually divided into 100 smaller, but equal, parts, each called a percent. So a percentage usually refers to a certain number of parts within the whole. Therefore, 6% is 6 units out of 100% (the whole). If you have invested $100, and you earn 8% interest on the money, you will earn 8 parts of the whole, or $8. A percentage explains a number in relation to the whole. Published Index – is a listing of stocks that is used to track the value of the stocks that make up the list. For example, the S&P 500 is an index containing the stocks of 500 corporations, most of which are American. This is the most watched index, because many investors think that the performance of this index indicates how well the economy is doing overall. Premiums – premium is another word for payments on an insurance policy. Principle – this is the amount of money you borrow in a loan. You pay this back plus interest. Profit – the money you've earned after you subtract a) any money you had to spend to make the product or perform the service. B) any taxes that had to be paid on your earnings. -RRate of Compounding – when an account compounds interest (figuring interest on interest already earned) it does so regularly. Compounding can take place annually, semi-
annually, quarterly, monthly, or daily. The more often interest is compounded the faster your money will grow. Renter’s Insurance – a type of home insurance that protects against damage and losses that occur in an apartment or a rented residence. This insurance also protects belongings and helps you pay for an accidents that may occur to other people while they are in your apartment or rented home. Real Estate – property in the form of land or buildings. Return – the amount of money a saver receives from a savings account or fund. The return is usually talked about as a percentage, such as "This account returns 7.37%." Risk – the likelihood that you will lose money on an investment. Rule of 72 – math formula that determines the number of years needed to double your money at a given interest rate. Here's how it works: you divide 72 by the interest rate. Therefore, money invested at 10% interest rate will double in 7.2 years. -SSave – hanging onto your money for a future use instead of spending it. Saving is the opposite of spending. Savings Account – a bank account that pays you interest for keeping your savings in it. Banks use your money to make loans, so they pay you interest for the use of your money. Your savings is insured up to $100,000 by the FDIC, so you don't have to worry about borrowers taking your money and not paying it back. Secured Credit Card – this credit card is “secured” with a cash balance, a savings account, for example. You cannot touch this balance, or the card will be deactivated (turned off). If you charge over your limit, the bank will take the balance from your account. Scarcity – a lack of something, like money, natural resources, etc. Scarcity forces you to make choices about how you use or treat whatever is scarce. Share – a unit of ownership in an investment or a company.
Shareholder – someone who owns stock in a company. Short-Term – short-term savings is for something you know you will need to pay for soon, like a new MP3 player. Short term investing usually means choosing an investment that is liquid, meaning you can pull your money out easily. Social Security Tax – a tax used to fund a program of the US government that gives money to elderly people. The elderly receive funds because the federal government has deducted money from each of their paychecks during the course of their working lives. The money taken out of their paychecks has been deposited into the Social Security fund. Employers, too, deposited money to this fund on behalf of each employee. When people reach a certain age, they become eligible to receive Social Security payments. The government mails checks each month. These payments help the elderly live, now that they are no longer working full-time. The money they receive is drawn out of the Social Security fund, where it has been earning interest for many years. Sole Proprietor – a business owned by a single person. Splitting – to divide stock in order to lower its price so that more people will invest in it. In a two-to-one split, 100 shares of $70 per-share stock become 200 shares of $35 per-share stock. In a three-to-one split, 90 shares at $60 a share become 270 shares at $20 a share. Standard & Poor’s 500 – the S&P 500 is an index containing the stocks of 500 corporations, most of which are American. This is the most watched index, because many investors think that the performance of this index indicates how well the economy is doing overall. Standard of Living – the level of material well-being of an individual or group. Stock – a certificate representing a share of ownership in a company. Stock Market – an organized way for 1) people to buy and sell stocks and 2) corporations to raise money. There are three widely known stock exchanges: The New York Stock Exchange, the American Stock Exchange, and the National Association of
Securities Dealers Automated Quotation System (you hear it called NASDAQ on the news). -UUnearned Income – money you make that is not the result of your labor, such as interest from a savings account or other kind of investment. U.S. Bond – a kind of investment in which you lend money to the government for a certain amount of time and at a certain interest rate. You are paid interest according to the terms of your bond. At the end of the agreed-on time, the borrower (the government) returns to you the amount you originally lent. -VVariable Expenses – kinds of spending that can be controlled and typically change from month to month. For example, groceries can be a variable expense. You can choose to buy expensive food, (steak, lobster, lamb chops, or shrimp) or inexpensive food (chicken legs, turkey, hamburger). With variable expenses, you have choices. -WWithdraw – take money out of an account. Withdrawal – the act of taking money out of an account. Glossary: (ii) Class: 11
Ideal for any business traveller, this glossary covers topics relating to banking and finance - from office practice to stock market and accounting terminology.
The new Glossary covers the expanding and influential field of foreign exchange, treasury, money and capital markets, sovereign and corporate debt, financial futures and options, public sector borrowing, mortgage-backed assets, equities, commodities, business loans and debt collecting, money supply, macroeconomic terms, technical analysis and derivatives, government & local finance, central banking, and European finance. It is intended for students and professionals in the field of finance as well as private investors and the readers of the financial pages of newspapers.
An agreement which you sign and which lists your rights and responsibilities and the bank's rights and responsibilities for the bank account. .
Money owed by a business for goods and services received.
Money owed to a business by purchasers of goods and/or services.
A credit card (usually Visa or MasterCard) that has a promotion arrangement with an affiliated organization (often a charity or non-profit group). The logo of the group appears on the card and the group usually gets a percentage of the sales made on the card.
Private individuals with capital to invest in business enterprises.
Things that you own which have value in financial terms.
Automated Banking Machines (ABMs)
Terminals that allow customers to perform many everyday banking tasks, e.g., deposits, withdrawals, bill payments and transfers between accounts.
The amount of money in your account.
Shows the assets and liabilities (legal responsibility of your company) at any particular time. The assets on a balance sheet will always equal the liabilities plus the owner’s equity.
Federal legislation governing how banks operate in Canada. The Bank Act was first passed in 1871 and is updated periodically -- usually every five years. The last major revision was completed in 2001.
A card issued by a financial institution that identifies the holder as a customer of the institution and allows access to accounts through an ABM; also, a credit or debit card issued by a financial institution.
Bank for International Settlements (BIS)
The BIS is an international body that promotes the co-operation of central banks, fulfils the function of a central banks' bank and acts as a clearing and settlement agent. It acts as a forum for discussion of international monetary policy and conducts research into international banking developments.
Bank of Canada
The country's central bank, which formulates and implements monetary policy. As the federal government's fiscal agent, it also helps carry out the government's borrowing program, provides banking services for the government and other clients and ensures that the need for bank notes across the country is met.
The interest rate paid by major financial institutions if they borrow from the Bank of Canada. The Bank Rate influences the rates of interest major financial institutions charge and pay their customers.
A cheque that does not have a dollar amount written on it.
Offered by governments and corporations, bonds are investments in which you lend a sum of money to the issuer for a set amount of time at a fixed rate of interest.
Bull and Bear Markets
When stock prices are increasing and it’s a healthy market, this is known as a bull market. When stock prices are decreasing, it’s a bear market.
The ups and downs of the economy that follow a cyclical pattern over the course of time.
Capital Adequacy Ratio
A ratio of total capital divided by risk-weighted assets and risk-weighted off-balance sheet items. A bank is expected to meet a minimum capital ratio of 8.0% unless a higher ratio has been specifically prescribed by the Superintendent of Financial Institutions.
Capital Gain or Loss
The difference between the price you paid for an investment and the price at which you sell (in other words, the profit or loss you make). Investments that earn capital gains or losses include equity and growth funds.
Money used to purchase permanent fixed assets for a business, such as machinery, land or buildings as opposed to day-to-day operating expenses.
Cash flow forecast
An estimate of when and how much money will be received and paid out of a business. It usually records cash flow on a month-by-month basis for a period of two years.
Financial institutions regulated under the Bank Act. Chartered banks are designated as Schedule I, Schedule II or III depending on their ownership.
A written order from a financial institution for payment of a certain amount of money.
A book with blank cheques. The cheques may be personalized or non-personalized.
A book with space for you to note the details of every transaction in your chequing or combination account.
Clearing and Settlement
The process whereby banks collect or pay out for items drawn on or paid into accounts in their institution. This process enables banks to accept each other's cheques and bank drafts for deposit. The Canadian Payments Association operates Canada's clearing system.
An alliance between a card issuer and a large non-deposit taking corporation which offers discounts/rewards to cardholders for using the card which bears the corporation's name.
Property (real, personal or otherwise) pledged as security for a loan. Also, any supplementary promise of payment, such as a guarantee.
An account that is part savings and part chequing. You may write cheques and you will be paid interest if you have enough money in the account.
Commercial banking centres serve small- and medium-sized businesses such as franchising, leasing and cash management services.
Refers to earning income on your income. For example, on fixed income investments that pay interest over time at periodic intervals, compounding means making interest on your initial investment and also on the interest as it builds up (i.e., earning interest on your interest).
Consumer Price Index
An index that measures movements in the average price of products and services typically consumed by Canadian families.
An amount of money you put into a savings/investment plan.
Banking services for large firms.
In a country where a bank does not have offices, it will often make arrangements with another bank to act as its agent in that country. The correspondent bank carries out financial transactions, such as making payments on behalf of the first bank in the foreign country.
Credit cards such as Visa and MasterCard allow the holder to charge purchases rather than pay cash. Generally, no interest is charged as long as the monthly statement is paid in full by the due date.
The risk of loss one assumes under a financial contract that a borrower or a counterparty to a loan or other credit-related contract may default or fail to perform its obligations.
Another name for withdrawal of funds from your account.
Another name for a bank card that allows you to access your deposit accounts electronically. You can use it at banking machines or to pay for purchases at retailers using the direct payment service.
The issuance of bonds or other forms of debt on the public markets.
A comparison of debt and equity used to measure the health of a business.
An actual decline in the general level of prices in the economy.
A loan that must be repaid in full, on demand.
Characteristics of the population that influence consumption of products and services. They include age, sex, race, family size, level of education, occupation, income and location of residence.
Money put into an account. The deposit may be in the form of cash, cheque or electronic transaction.
The Canada Deposit Insurance Corporation insures depositors' funds to a maximum of $60,000 per depositor, per institution, with some exceptions, in the event of the failure of a federal financial institution. Deposits in some provincial financial institutions are also covered.
You can deduct a specified amount of the purchase price of business equipment, for tax purposes, to calculate your company’s taxable income. Your accountant can provide details.
A prolonged downturn in the economy and level of business activity.
Financial contracts whose value is derived from the value of some underlying asset, rate or index. Derivatives are used as risk-management tools by governments and corporations to reduce exposure to risk, mainly related to fluctuations in foreignexchange and interest rates. Derivative instruments include swaps, options, futures and forward contracts and are used by banks in two principal activities: sales/trading and asset/liability management.
A means of authorizing recurring payments (e.g., mortgage payments, insurance premiums) to be drawn on an account.
If you receive money on a regular basis (i.e. from a job, pension, allowance), your employer, the government or person paying the allowance can deposit the money directly into your account.
Direct Deposit/Direct Fund Transfers (DFT)
A means of authorizing payment made by governments or companies to be deposited directly into a recipient's bank account. It is used mainly for deposits of a recurring nature such as salary, pensions and interest payments.
A reduction in the rate of inflation either as a result of government policy or of declining economic activity.
Company earnings that may be paid out to shareholders according to the number of shares or stocks they hold. Dividends can be earned on stocks and certain mutual funds.
Written undertaking by a bank on behalf of an importer authorizing an exporter to draw funds from a bank up to a specified amount under specific terms and conditions. They are used to facilitate international trade. In the United States these instruments are called commercial letters of credit.
Banks owned by Canadians. Class: 12
The rate of change in output from one year to the next.
Statistics that help determine how the economy is faring. They include the Consumer Price Index, housing starts, and unemployment rates, among others.
Electronic funds transfer (EFT) at the point of sale (POS). A payment option which allows consumers to pay for purchases by transferring funds directly from their accounts to a merchant's accounts.
Electronic Data Interchange (EDI)
EDI is a system that companies use to exchange business information electronically, virtually eliminating paperwork.
Electronic Funds Transfer (EFT)
A system that transfers funds through electronic messages instead of by traditional means, such as cash or cheques.
Employment Equity Act
A federal statute that requires employers with 100 or more employees to eliminate any practices in the workplace discriminating against four designated groups of people who have historically been disadvantaged in the labour market: women; people who, by reason of race or colour, are members of visible minority groups; aboriginal peoples; and persons with disabilities.
To sign the back of a cheque in order to cash it.
A person who starts and manages a business.
The value of a business after all debts and other claims are settled. Also the amount of cash a business owner invests in a business and/or the difference between the price for which a property could be sold and the total debts registered against it.
Products and services produced in Canada and sold in other countries.
When the government spends more money than it receives in revenue over the course of one year.
The use of government spending and taxation policies to influence the economy.
When the government receives more in revenue than it spends over the course of the year.
Assets like machinery, land, buildings, or property used in operating a business that will not be consumed or converted into cash during the current accounting period.
Fixed business costs that do not change with the volume of business, such as rent for business premises, insurance payments, utilities, etc.
Fixed-Return Instruments or Vehicles
Instruments that pay a fixed rate of interest for an agreed-upon length of time such as term deposits, Treasury bills and Guaranteed Investment Certificates.
Paper money and coins from other countries.
Various instruments used to settle payments for transactions between individuals or organizations using different currencies (e.g., notes, cheques, etc.).
Foreign Exchange Rate
The value of a nation’s currency in terms of another nation’s currency.
A term used to describe the main types of financial institutions: banking, trust, insurance and securities.
The right to sell products or services under a corporate name or trade mark (established by someone else). This right is usually purchased for cash in addition to a royalty fee on, or a percentage of, all sales.
Contracts to buy something in the future at a price agreed upon in advance. They first developed in the agriculture commodity markets but often involve foreign exchange, Eurodollar deposits and government bonds.
Gross Domestic Product
The total value of all the goods and services produced by the Canadian economy in a single year.
Gross National Product
The value of all goods and services accruing to Canadians in a given year. It equals Gross Domestic Product, plus income of Canadians from foreign production, less income from Canadian production earned by non-residents (such as interest and dividends paid to foreign lenders).
Gross profit margin
The difference between the sales your business generates and the costs you pay out for goods.
Guaranteed Investment Certificate
An investment in which you deposit money, over a fixed period of time, and are paid a set rate of interest.
A way to access bank accounts by phone and/or Internet. Typically customers can transfer funds, pay bills and make account inquiries.
Goods and services produced in other countries and sold in Canada.
Also known as the profit & loss statement or P&L, enables you to calculate your company’s pretax profits by subtracting total expenses from total revenues.
A financial strategy for tax purposes. Splitting income refers to the process of shifting income from the hands of one family member to another, who is in a lower tax bracket and will therefore pay tax at a lower rate. This helps reduce your family’s overall tax burden.
A rise in the average level of prices in the economy.
Institute of Canadian Bankers (ICB)
Educational institute that provides career-oriented education and training programs to financial-services professionals.
Canada's largest shared network of ABMs. It allows cardholders to access their accounts from any ABM on the network regardless of which financial institution owns the machine.
Interac Direct Payment
A method of paying for goods and services electronically with the funds taken immediately and directly from your bank account and transferred directly into the merchant's account. You use your debit card to do this.
The amount paid or earned for the use of money.
The percentage used to calculate the interest to be paid.
The area of banking business that includes the operation of bank branches and subsidiaries located outside Canada, the supervision of correspondent banking relationships, foreign exchange trading and trade finance.
International Chamber of Commerce (ICC)
A world business organization that brings business people and experts together to formulate policies in such areas as banking, taxation and the environment.
International Organization for Standardization (ISO)
An international organization created to promote standardization around the world.
Stock on hand in the form of goods ready for sale. Also includes raw material in the process of being manufactured or completed for sale.
Something you put your money into in order to make money.
Bank operations that manage a bank's funding position, as well as its holdings of Treasury bills, bonds and preferred and common stock.
This is income earned on investments you make. Investment income includes interest, dividends and capital gains.
An agreement to rent for a period of time at an agreed price.
Line of Credit
An agreement negotiated between a borrower and a lender establishing the maximum amount of money a borrower may draw. The agreement also sets out other conditions, e.g., how and when money is to be repaid.
Money that you owe over a period longer than 12 months, such as mortgages, bank loans and other obligations.
Looking at the economy as a whole, particularly the interaction of its various components with one another.
Looking at the individual parts of the economy, with emphasis given to the market process and how it works.
Minimum monthly balance
The least amount of money that has been in a bank account during the whole month.
The ability of the Bank of Canada to influence the economy through changes in shortterm interest rates and the money supply.
Popular term used to describe the process whereby criminals conceal illicitly acquired funds by converting them into seemingly legitimate income. While the term refers to the proceeds of organized crime generally, it is now most often associated with financial activities of drug dealers who seek to launder the large amounts of cash generated from the sale of narcotics.
The part of the capital market where government Treasury bills, commercial paper, bankers' acceptances and other short-term obligations are bought and sold.
An investment product in which your money is pooled with the money of many other investors. A professional manager(s) uses the pooled money to buy a portfolio of investments or securities, and monitors each of the investments on an ongoing basis. There are many varieties of mutual funds, each with specific objectives. By investing in a mutual fund, you purchase units of that fund. The value of your units can go up or down depending on the type and performance of the mutual fund.
N.S.F. means Not Sufficient Funds. If a cheque is returned for this reason, it means that there was not enough money in your bank account to cover the amount of the cheque. There is a fee to you if this situation occurs.
Net Interest Margin
Net interest income (the difference between interest income and interest expense) as a percentage of average total assets.
The offsetting with a counterparty or counterparties of financial obligations or payments one is owed with those one is entitled to receive. Netting is also used as a risk management tool to help counterparties, thus reducing the costs arising out of payment settlements.
A loan intended for short-term financing, supplying cash flow support or to cover day-today operating expenses.
A formal contract which grants the holder of the option the right to buy or sell a certian quantity of an underlying interest or asset at a stipulated price within a specific period of time. Class: 13
A book in which all the transactions in a bank account are noted. This book may list the transaction codes and the customer's responsibilities.
The name of the person to whom the money in a cheque is to go.
Personal Consumption Spending
What households collectively spend on goods and services.
Personal Disposable Income
Personal income minus personal income tax payments. Also called “take-home pay.”
Personal Identification Number (PIN)
A unique number or pass code entered by a customer when using an Automated Banking Machine (ABM) or Interac Direct Payment, that gives the customer access to his or her account.
The difference between personal disposable income and personal consumption spending.
A cheque which has your name and account number printed on it.
A collection of investments.
Prime Rate/Prime Lending Rate
The rate of interest charged on loans by chartered banks to their most creditworthy customers.
Provision for Credit Losses
The amount deducted from income equal to the amount by which a bank adjusts its loan balances to reflect anticipated losses on them.
Comparison of two figures used to evaluate business performance, such as debt/equity ratio and return on investment.
Real estate, including land and buildings.
When the Gross Domestic Product declines for at least two consecutive three-month periods.
Checking all bank account papers to make sure that the bank's records and your records agree.
Registered Education Savings Plan
Education savings plans that grow tax free until a child is ready to pursue a postsecondary education, at which time the money is withdrawn to help finance the costs.
Registered Retirement Savings Plan (RRSP)
A savings plan introduced by the federal government to encourage Canadians to save money for retirement. The investment and the interest earned on it is sheltered: it will not be taxed as long as it is left in the plan.
Those activities and services that a bank provides for individual customers such as savings accounts, personal loans, cheque cashing and RRSPs.
All the profits or losses that you’ve accumulated from prior years and from this year’s income statement, less dividends paid to you.
Any increase in value or in income you earn on an investment.
Schedule I Banks
Schedule I banks are domestic banks and are authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation.
Schedule II Banks
Schedule II banks are foreign bank subsidiaries authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canada Deposit and Insurance Corporation. Foreign bank subsidiaries are controlled by eligible foreign institutions.
Schedule III banks are foreign bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada. These branches have certain restrictions.
The loss of jobs due to changes in the climate and other conditions. Forestry, fishing and construction are affected by climate, while retailing is affected by seasons and holidays. For instance, at Christmas, retail employment is higher than in January.
Investments such as stocks and bonds.
One who acts as the agent for another party to buy and sell securities and other investments; also an underwriter.
A fee paid for using a service.
Regional collection points in the clearing and settlement system operated by the Canadian Payments Association. Settlement points forward each bank's regional balance to the Bank of Canada in Ottawa at the end of each day to allow the central bank to adjust the banks' balances with the central bank.
Money that you have to pay in less than 12 months, including wages, short-term loans, taxes, credit card balances and long-term loans.
Small and Medium-sized enterprises (SMEs)
There are many definitions for this term. Banks define small businesses as those having authorized credit limits of $500,000 or less, while medium-sized businesses have authorization levels of up to $1 million.
A card with an imbedded computer chip which stores more information, performs more functions and is more secure than a credit card or debit card.
Social Insurance Number (SIN)
Every person who has an income or pays taxes must apply for this number, which is assigned by the Government of Canada. You must, by law, provide this number to financial institutions with which you have an interest-bearing deposit account.
Society for (SWIFT)
A co-operative owned by the international banking community that operates a global data processing system for the transmission of financial messages.
Specialized Financing Entity
A term in the Bank Act referring to an investment vehicle via which banks are permitted to make venture capital investments.
The difference between the interest rate charged to borrowers and the interest rate paid to depositors.
A period of time in which both the unemployment rate and the rate of inflation are relatively high.
A computer printout which lists all the transactions in a bank account for a period of time. Statements are usually given once a month.
Traded on a stock exchange, these are shares in a company. Essentially, you purchase shares in exchange for owning a part of that company.
An agreement between two businesses to exchange commodities, payments or other financial products to reduce the risk of volatile market conditions or to obtain a better price or rate. For example, interest rate swaps, where floating rate interest is exchanged for fixed rate interest, protects a corporation against rises in rates or allows it to take advantage of a better rate. A cross-currency swap enables two parties to enter into an agreement in which one exchanges its currency for the other's to meet their separate requirements.
Loans to a company backed by a group of banks in order to share the risk in a large transaction among several financial institutions. There is usually a lead bank and several participating banks.
A tax shelter is a savings/investment plan which offers significant tax savings.
The maximum time allotted for a loan to be repaid.
An investment product in which you deposit a fixed sum of money for a set period of time and are paid interest.
A loan intended for medium-term or long-term financing to supply cash to purchase fixed assets such as machinery, land or buildings or to renovate business premises.
Action in a bank account. It may be a deposit, withdrawal, debit card payment, service charge or interest payment.
These are a safe way to carry large amounts of money if you are going on a trip. They are considered to be the same as cash, but can be replaced if they are lost or stolen. You can buy them at your bank for a small fee. If you have a special service package, you may not have to pay this fee.
Treasury Bills (T-Bills)
Short-term government obligations that are payable to the bearer and sold on a discount basis; the difference between a T-bill's market or discounted price and its face or redemption value is effectively interest if the T-bill is held to maturity.
The percentage of the labour force that is not employed but currently seeking work.
Costs of doing business that vary with the volume of business, such as advertising costs, manufacturing costs and bad debts.
Commonly refers to funds that are invested by a third party in a start-up business either as equity or as a form of secondary debt.
Money taken out of an account. The withdrawal may be in cash, by cheque or debit card, or by automatic withdrawal. N.B: The Glossary may contain some of the terms discussed above. The complete list consists of the probable terminologies most frequently used. Conversations Class: 14 Read the following conversations and you will get a practical touch of common interaction in the Bank and Financial places. See the useful vocabulary listed below.
Talking About Your Job
Jack: Hi Peter. Can you tell me a little bit about your current job? Peter: Certainly What would you like to know? Jack: First of all, what do you work as? Peter: I work as a computer technician at Schuller's and Co. Jack: What do your responsibilities include? Peter: I'm responsible for systems administration and in-house programming. Jack: What sort of problems do you deal with on a day-to-do basis?
Peter: Oh, there are always lots of small system glitches. I also provide information on a need-to-know basis for employees. Jack: What else does your job involve? Peter: Well, as I said, for part of my job I have to develop in-house programs for special company tasks. Jack: Do you have to produce any reports? Peter: No, I just have to make sure that everything is in good working order. Jack: Do you ever attend meetings? Peter: Yes, I attend organizational meetings at the end of the month. Jack: Thanks for all the information, Peter. It sounds like you have an interesting job. Peter: Yes, it's very interesting, but stressful, too! Useful Vocabulary computer technician day-to-day basis glitch good working order in-house need-to-know basis organizational meeting stressful to be responsible for to develop to involve to pay bills to produce reports to work as
Representative: Hello. How can I help you today? Customer: Hello. I'd like some information on the telephone banking services offered at by your bank. Representative: Certainly. What is your account number? Customer: at the High Street Branch. Representative: What would you like to know? Customer: How do I sign up? Representative: Just let me know, I'll sign you up immediately. Customer: Can you tell me how the telephone banking services work? Representative: You can do all your day-to-day banking over the telephone, 24 hours a day. Customer: That's great. How do I access my account? Representative: Just call the bank, key in your PIN number and listen to the menu of options available. Customer: How do I choose which option I want? Representative: Just press the number for the service stated by the recording. Customer: What kind of things can I do? Representative: You can check your balance, pay bills, order a statement or even transfer money to another bank.
Customer: That's fantastic! Can I trade stocks and bonds. Representative: I'm afraid you will have to have a special account for that. Customer: What about getting help if I have any problems? Representative: There's an automated answering machine and staff are available 9 to 5 seven days a week. Customer: It all sounds very good to me. I'd like to sign up. Representative: Alright, can you answer a few questions please? Customer: Certainly... Useful Vocabulary 24 hours a day account number automated answering machine day-to-day banking menu of options telephone banking services to access an account to check your balance to key in a PIN number to order a statement to pay bills to sign up to trade stocks and bonds to transfer money
Banking Vocabulary Collocations Quiz
Match the verbs and nouns concerning banking. Click on the arrow to check your answer.
A. B. C. D. E. F. G. H.
transfer check order pay follow key in sign deposit I. make J. pay into
A Cheque. A pin number. Money An account. Bills. A statement. Instructions A balance
Exercise on Role Play:
International transfers How long does it take?
Bank clerk: — Hello. Can I help you, ma´am? You:
Bank clerk: — Well, you can pay by mail, telegraphic or SWIFT transfer. Or you can have a banker´s draft and mail
it yourself to the beneficiary. — ... Bank clerk: — It depends on the amount and how fast you want that person to receive the money. A SWIFT transfer is the fastest method but a banker´s draft is usually the cheapest. How much do you wanna send?
You: You: You: You: You:
— ... — ... — ... — ... within three or four working days, depending on whether the beneficiary´s bank is among our correspondent banks or we have to route the transfer through a third bank.
Bank clerk: — Why don´t you send it by mail payment order? Bank clerk: — About a week. Bank clerk: — Sure. You can have a Telegraphic or a SWIFT transfer. Bank clerk: — Both a Telegraphic Transfer and a SWIFT transfer will normally be credited to the payee´s account
— ... Bank clerk: — You have to fill out this form, ma´am.
Examples to be looked at: Foreign exchange I´d like to change some euro into US dollars.
Cashier: Paul Ryefield: Cashier: Paul Ryefield: Cashier: Paul Ryefield: Cashier: Paul Ryefield: Cashier: Paul Ryefield:
— — — — — — — — — —
Hi. May I help you? Yes. What´s the buying rate for euro? 1.15 U.S. dollars to the euro. Okay. I´d like to change some euro into US dollars, please. Sure. How much would you like to change? Six hundred euro. Very good. May I see your passport? Here you are. How would you like your bills? In fifties please.
Bank drafts I want to make a remittance to New Delhi.
Bank Clerk: Bill Nichols: Bank Clerk: Bill Nichols:
— — — —
Good morning. May I help you, sir? Yes. I want to make a remittance to New Delhi. Do you want an international money order or a banker´s draft? I´d like a banker´s draft please. It´s not really urgent.
International transfers How long does it take?
— Hello. Can I help you, ma´am? bank in Germany?
Mary Jones: — Yes. Could you tell me how to send some money to someone with an account with a
Bank clerk: Mary Jones: Bank clerk:
Mary Jones: Bank clerk: Mary Jones: Bank clerk: Mary Jones: Bank clerk: Mary Jones: Bank clerk:
Mary Jones: Bank clerk:
— Well, you can pay by mail, telegraphic or SWIFT transfer. Or you can have a banker´s draft and mail it yourself to the beneficiary. — Which is the best way? — It depends on the amount and how fast you want that person to receive the money. A SWIFT transfer is the fastest method but a banker´s draft is usually the cheapest. How much do you wanna send? — $800. — Why don´t you send it by mail payment order? — How long does it take? — About a week. — I don´t know. Can I send it more quickly? — Sure. You can have a Telegraphic or a SWIFT transfer. — And how long do those take? — Both a Telegraphic Transfer and a SWIFT transfer will normally be credited to the payee ´s account within three or four working days, depending on whether the beneficiary´s bank is among our correspondent banks or we have to route the transfer through a third bank. — I see. How can I pay by Telegraphic Transfer? — You have to fill out this form, ma´am.
More Conversations: 1. Jackie has a 20-dollar bill and wants to break it so that she may have some smaller bills and change for the laundry. Cashier: How can I help you, Miss? Jackie: Could you break a 20 for me? Cashier: Sure. How do you want it? Jackie: Could I have two 5's and the rest in ones? Cashier: Well, I have some 5's, but I don't have enough 1's. Are quarters fine with you? Jackie: Oh, that's even better! In that case, I won't have to worry about the small change for the laundry. Cashier: Here you go! Jackie: Thanks a million!
Terminologies Important to remember
Banking and Stocks Glossary - 1
English is increasingly the language of communication in today's financial world and the specific vocabulary needed to operate in this world is covered comprehensively in BANKING ENGLISH in an interesting and active way. Through a variety of stimulating activities and exercises students will learn over 750 financial terms and expressions which are used in the world of finance and international banking.
The use of this lexical approach is essential for successful language acquisition for Banking and Financial Sectors. However, we are often not equipped with the exact English terminology required in very specific trade sectors. These core vocabulary reference sheets provide between 150 and 240 key words and phrases for industry.
to accept a bill account account overdraft actual yield after-hours trading at 30 days after sight at 60 days after date at a discount at a premium - above par at best at closing at par at sight - on demand to backdate - to antedate bank to bank - to deposit bank account bank balance bank branch bank clearance bank counter bank credit bank deposit bank guarantee bank lending rates bank loan
exchange controls exchange rate exchange-rate fluctuations to exercise an option to expire expiry date - due date financial market fixed exchange rate fixed term sale float due to collection floating-rate loan foreign bank foreign currency foreign exchange market forward market - futures market future transaction - forward transaction futures - forward contracts to grant a loan gross yield to honour a bill hostile takeover in the red interest interest accrual interest rate investor
bank merger bank rate rise bank sector bank suretyship - bank guarantee bank transfer bank transfer order banker's draft - bank draft banking banking secrecy
irrevocable irrevocable letter of credit issue price issuing bank issuing house junk bond legal interest letter of credit loan
Banking and Stocks Glossary - 2
banking system banknote (GB) - bill (US) bear bear market bearer bill bearer bond bearer cheque bearer share bill for collection blank cheque blank endorsement bond - debenture bond certificate bond holder - debenture holder bond issue bonus share - free share borrowing rate bounced cheque - uncovered cheque bull market to buy back call option - call to cash a cheque cash against documents merchant bank money laundering money market negotiable negotiable bill net yield official discount rate official Stock Exchange list on deposit - on consignment to open an account ordinary share (GB) - common stock (US) out-of-town cheque to overdraw parity - at par payable at sight payable to bearer payment order to postdate preference share (GB) - preferred stock (US) premium deal private bank promissory note - note of hand to protest a bill
cash market - spot market cash overdraft cashier - teller to charge an account cheque (GB) - check (US) cheque book collection collection charges commodity exchange confirmed irrevocable credit confirmed letter of credit contract note
protest charges rate recipient - beneficiary registered share to renew the bill repayment date - refund date revocable revocable credit revocable letter of credit right of veto safety deposit box savings bank
Banking and Stocks Glossary - 3
convertibility convertible convertible bond correspondent bank crash on the Stock Exchange credit credit card credit opening crossed cheque currency exposure current account (GB) - checking account (US) current account deposit date of issue debit balance default interests - interests on arrears to deposit deposit book deposit certificate - deposit warrant depositor discount rate dividend savings deposit to sell forward to settle a debt - to pay off a debt settlement of a bill share - stock share certificate share index share issue short-term bill short-term debt sight bill - bill on demand speculative bubble spot exchange stock dividend Stock Exchange Stock Exchange capitalisation Stock Exchange index stock market stock option stockbroker - stockjobber to stop a cheque
dividend warrant domiciled bill Dow Jones index to draw a cheque drawer drawer's signature end of month (EOM) to endorse - to back to endorse a cheque endorsement endorsement for collection endorser exchange exchange broker - stockbroker
to stop an account subject to collection surcharge suretyship - guarantee to take out a loan take-over bid (TOB) town cheque transferable unacceptance unpaid - unsettled to value at market price voting share to write out a cheque yield
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