banking terms and phrases

8/3/2019 Banking Terms and Phrases

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Banking Terms and Phrases

Account Agreement: The contract governing your open-end credit account, it provides information onchanges that may occur to the account.Account History: The payment history of an

account over a specific period of time, including thenumber of times the account was past due or over limit.Account Holder: Any and all persons designatedand authorized to transact business on behalf of anaccount. Each account holder's signature needs to beon file with the bank. The signature authorizes that person to conduct business on behalf of the account.Accrued Interest: Interest that has been earned butnot yet paid.Acquiring Bank: In a merger, the bank that absorbsthe bank acquired.Adjustable-Rate Mortgages (ARMS):Also knownas variable-rate mortgages. The initial interest rate isusually below that of conventional fixed-rate loans.The interest rate may change over the life of the loanas market conditions change. There is typically amaximum (or ceiling) and a minimum (or floor)defined in the loan agreement. If interest rates rise,so does the loan payment. If interest rates fall, theloan payment may as well.

Adverse Action: Under the Equal CreditOpportunity Act, a creditor's refusal to grant crediton the terms requested, termination of an existingaccount, or an unfavorable change in an existingaccount.Adverse Action Notice: The notice required by theEqual Credit Opportunity Act advising a creditapplicant or existing debtor of the denial of their request for credit or advising of a change in termsconsidered unfavorable to the account holder.Affidavit: A sworn statement in writing before a

proper official, such as a notary public.Alteration: Any change involving an erasure or rewriting in the date, amount, or payee of a check or other negotiable instrument.Amortization: The process of reducing debtthrough regular installment payments of principaland interest that will result in the payoff of a loan atits maturity.Annual Percentage Rate (APR): The cost of crediton a yearly basis, expressed as a percentage.

Annual Percentage Yield (APY):A percentage ratereflecting the total amount of interest paid on adeposit account based on the interest rate and thefrequency of compounding for a 365-day year.Annuity: A life insurance contract sold by insurancecompanies, brokers, and other financial institutionsIt is usually sold as a retirement investment. Anannuity is a long-term investment and can have steepsurrender charges and penalties for withdrawa before the annuity's maturity date. (Annuities are notFDIC insured.)Application: Under the Equal Credit OpportunityAct (ECOA), an oral or written request for anextension of credit that is made in accordance withthe procedures established by a creditor for the typeof credit requested.Appraisal: The act of evaluating and setting the

value of a specific piece of personal or real property.Authorization: The issuance of approval, by acredit card issuer, merchant, or other affiliate, tocomplete a credit card transaction.Automated Clearing House (ACH):Acomputerized facility used by member depositoryinstitutions to electronically combine, sort, anddistribute inter-bank credits and debits. ACHs process electronic transfers of government securitiesand provided customer services, such as directdeposit of customers' salaries and government

benefit payments (i.e., social security, welfare, andveterans' entitlements), and preauthorized transfers.Automated Teller Machine (ATM): A machineactivated by a magnetically encoded card or othermedium that can process a variety of bankingtransactions. These include accepting deposits andloan payments, providing withdrawals, andtransferring funds between accounts.Automatically Protected: As of May 1, 2011, up totwo months of Federal benefits such as SocialSecurity benefits, Supplemental Security Income benefits, Veteran¶s benefits, Railroad Retiremen benefits, and benefits from the Office of PersonneManagement that are direct deposited to an accountmay be protected from garnishment. The amountautomatically protected will depend upon the balance of the account on the day of review.Automatic Bill Payment: A checkless system for paying recurring bills with one authorizatiostatement to a financial institution. For example, thecustomer would only have to provide one



authorization form/letter/document to pay the cable bill each month. The necessary debits and credits aremade through an Automated Clearing House (ACH).Availability Date: Bank¶s policy as to when fundsdeposited into an account will be available for withdrawal.Availability Policy: Bank¶s policy as to when funds

deposited into an account will be available for withdrawal.Available Balance: The balance of an account lessany hold, uncollected funds, and restrictions againstthe account.Available Credit: The difference between the creditlimit assigned to a cardholder account and the present balance of the account.Balance Transfer: The process of moving anoutstanding balance from one credit card to another.

This is usually done to obtain a lower interest rate onthe outstanding balance. Transfers are sometimessubjected to a Balance Transfer Fee.Bank Custodian: A bank custodian is responsiblefor maintaining the safety of clients' assets held atone of the custodian's premises, a sub-custodianfacility or an outside depository.Bank Examination: Examination of a bank's assets,income, and expenses-as well as operations byrepresentatives of Federal and State bank supervisory authority-to ensure that the bank is

solvent and is operating in conformity with bankinglaws and sound banking principles.Bank Statement: Periodically the bank provides astatement of a customer's deposit account. It showsall deposits made, all checks paid, and other debits posted during the period (usually one month), aswell as the current balance.Banking Day: A business day during which anoffice of a bank is open to the public for substantially all of its banking functions.Bankrupt: A bankrupt person, firm, or corporationhas insufficient assets to cover their debts. Thedebtor seeks relief through a court proceeding towork out a payment schedule or erase debts. In somecases, the debtor must surrender control of all assetsto a court-appointed trustee.Bankruptcy: The legal proceedings by which theaffairs of a bankrupt person are turned over to atrustee or receiver for administration under the bankruptcy laws. There are two types of bankruptcy:

y Involuntary bankruptcy-one or more creditors ofan insolvent debtor file a petition having the debtordeclared bankrupt.

y Voluntary bankruptcy-the debtor files a petitionclaiming inability to meet financial obligations andwillingness to be declared bankrupt.

Beneficiary: A person who is entitled to receive the

benefits or proceeds of a will, trust, insuranc policy, retirement plan, annuity, or other contract.Billing Cycle: The time interval between the dateson which regular periodic statements are issued.Billing Date: The month, date, and year when a periodic or monthly statement is generateCalculations have been performed for appropriatefinance charges, minimum payment due, and new balance.Billing Error: A charge that appears on a periodic

statement associated with an extension of credit(e.g., credit card) thaty was not authorized by the cardholder or the

cardholders' designee,y is not properly identified, andy was not accepted by the cardholder or the

cardholder's designee.A billing error can also be caused by a creditor'sfailure to credit a payment or other credit to anaccount as well as accounting and clerical errors.Bond, U.S. Savings: Savings bonds are issued in

face value denominations by the U.S. Governmentin denominations ranging from $50 to $10,000They are typically long-term, low-risk investmenttools.Business Day: Any day on which offices of a bankare open to the public for carrying on substantiallyall of the bank's business.Canceled Check: A check that a bank has paidcharged to the account holder's account, and thenendorsed. Once canceled, a check is no longernegotiable.Cashier's Check: A check drawn on the funds ofthe bank, not against the funds in a depositor'saccount. However, the depositor paid for thecashier's check with funds from their account. The primary benefit of a cashier's check is that threcipient of the check is assured that the funds areavailable.Cease and Desist Letter: A letter requesting that acompany stops the activity mentioned in the letter.



Certificate of Deposit: A negotiable instrumentissued by a bank in exchange for funds, usually bearing interest, deposited with the bank.Certificate of Release: A certificate signed by alender indicating that a mortgage has been fully paidand all debts satisfied.Certified Check: A personal check drawn by an

individual that is certified (guaranteed) to be good.The face of the check bears the words "certified" or "accepted," and is signed by an official of the bank or thrift institution issuing the check. The signaturesignifies thaty the signature of the drawer is genuine, andy Sufficient funds are on deposit and earmarked for payment of the check.

Charge-off: The balance on a credit obligation thata lender no longer expects to be repaid and writes

off as a bad debt.Check: A written order instructing a financialinstitution to pay immediately on demand aspecified amount of money from the check writer'saccount to the person named on the check or, if aspecific person is not named, to whoever bears thecheck to the institution for payment.Check 21 Act: Check 21 is a Federal law that isdesigned to enable banks to handle more checkselectronically, which is intended to make check processing faster and more efficient. Check 21 is the

short name for the Check Clearing for the 21stCentury Act, which went into effect on October 28,2004.Check Truncation: The conversion of data on acheck into an electronic image after a check entersthe processing system. Check truncation eliminatesthe need to return canceled checks to customers.Checking Account: A demand deposit accountsubject to withdrawal of funds by check.ChexSystems: The ChexSystems, Inc. network iscomprised of member financial institutions thatregularly contribute information on mishandledchecking and savings accounts to a central location.ChexSystems shares this information amongmember institutions to help them assess the risk of opening new accounts. ChexSystems only sharesinformation with the member institutions; it does notdecide on new account openings. Generally,information remains on ChexSystems for five years.Closed-End Credit: Generally, any credit saleagreement in which the amount advanced, plus any

finance charges, is expected to be repaid in full by aspecified date. Most real estate and automobile loansare closed-end agreements.Closed-End Loan: Generally, any loan in which theamount advanced, plus any finance charges, isexpected to be repaid in full by a specified dateMost real estate and automobile loans are closed-end

agreements.Closing a Mortgage Loan: The consummation of acontractual real estate transaction in which allappropriate documents are signed and the proceedsof the mortgage loan are then disbursed by thelender.Closing Costs: The expenses incurred by sellers and buyers in transferring ownership in real propertyThe costs of closing may include the origination fee,discount points, attorneys' fees, loan fees, title search

and insurance, survey charge, recordation fees, andthe credit report charge.Collateral: Assets that are offered to secure a loanor other credit. For example, if you get a real estatemortgage, the bank's collateral is typically yourhouse. Collateral becomes subject to seizure ondefault.Collected Funds: Cash deposits or checks that have been presented for payment and for which paymenhas been received.Collection Agency: A company hired by a creditor

to collect a debt that is owed. Creditors typically hirea collection agency only after they have made effortsto collect the debt themselves, usually throughletters and telephone calls.Collection Items: Items-such as drafts, notes, andacceptances-received for collection and credited to adepositor's account after payment has been receivedCollection items are usually subject to specialinstructions and may involve additional fees. Most banks impose a special fee, called a collectiocharge, for handling collection items.Collective Investment Funds (CIFs): A CollectiveInvestment Fund (CIF) is a trust created andadministered by a bank or trust company thatcommingles assets from multiple clients. TheFederal securities laws generally require entities that pool securities to register those pooled vehicle(such as mutual funds) with the SEC. However,Congress created exemptions from these registrationrequirements for CIFs so long as the entity offeringthese funds is a bank or other authorized entity and



so long as participation in the fund is restricted toonly those customers covered by the exemption. If these limitations are met, CIFs are exempt from SECregistration and reporting requirements.Co-Maker: A person who signs a note to guaranteea loan made to another person and is jointly liablewith the maker for repayment of the loan. (Also

known as a Co-signer.)Community Reinvestment Act: The Act isintended to encourage depository institutions to helpmeet the credit needs of the communities in whichthey operate, including low- and moderate-incomeneighborhoods. It was enacted by the Congress in1977.Consumer Credit Counseling Service: A servicewhich specializes in working with consumers whoare overextended with debts and need to make

arrangements with creditors.Consumer Reporting Agency: An agency thatregularly collects or evaluates individual consumer credit information or other information aboutconsumers and sells consumer reports for a fee tocreditors or others. Typical clients include banks,mortgage lenders, credit card companies, and other financing companies.Conventional Fixed Rate Mortgage: A fixed-ratemortgage offers you a set interest rate and paymentsthat do not change throughout the life, or "term," of

the loan.A conventional fixed-rate loan is fully paid off over a given number of years-usually 15, 20, or 30. A portion of each monthly payment goes towards paying back the money borrowed, the "principal";the rest is "interest."Co-Signer: An individual who signs the note of another person as support for the credit of the primary signer and who becomes responsible for theobligation. (Also known as a Co-maker.)Credit Application: A form to be completed by anapplicant for a credit account, giving sufficientdetails (residence, employment, income, andexisting debt) to allow the seller to establish theapplicant's creditworthiness. Sometimes, anapplication fee is charged to cover the cost of loan processing.Credit Bureau: An agency that collects individualcredit information and sells it for a fee to creditorsso they can make a decision on granting loans.Typical clients include banks, mortgage lenders,

credit card companies, and other financingcompanies. Also commonly referred to as aconsumer reporting agency or a credit reportingagency.Credit Card Account Agreement: A writtenagreement that explains they terms and conditions of the account,y credit usage and payment by the cardholder, andy Duties and responsibilities of the card issuer.Credit Card Issuer: Any financial institution thatissues bank cards to those who apply for them.Credit Disability Insurance: A type of insurancealso known as accident and health insurance thatmakes payments on the loan if you become ill orinjured and cannot work.Credit Life Insurance: A type of life insurance thathelps repay a loan if you should die before the loan

is fully repaid. This is optional coverage.Credit Limit: The maximum amount of credit thatis available on a credit card or other line of creditaccount.Credit Repair Organization: A person ororganization that sells, provides, performs, or assistsin improving a consumer's credit record, credithistory or credit rating (or says that that they will doso) in exchange for a fee or other payment. It alsoincludes a person or organization that providesadvice or assistance about how to improve a

consumer's credit record, credit history or creditrating. There are some important exceptions to thisdefinition, including many non-profit organizationsand the creditor that is owed the debt.Credit Report: A detailed report of an individual'scredit history prepared by a credit bureau and used by a lender in determining a loan applicantcreditworthiness.Credit Score: A number, roughly between 300 and800, that measures an individual's credit worthinessThe most well-known type of credit score is theFICO® score. This score represents the answer froma mathematical formula that assigns numericalvalues to various pieces of information in your credireport.Banks use a credit score to help determine whetheryou qualify for a particular credit card, loan, orservice.Cut-Off Time: A time of day established by a bankfor receipt of deposits. After the cut-off time



deposits are considered received on the next bankingday.Debit: A debit may be an account entry representingmoney you owe a lender or money that has beentaken from your deposit account.Debit Card: A debit card allows the account owner to access their funds electronically. Debit cards may

be used to obtain cash from automated teller machines or purchase goods or services using point-of-sale systems. The use of a debit card involvesimmediate debiting and crediting of consumers'accounts.Debt Collector: Any person who regularly collectsdebts owed to others.Debt Elimination Scheme: A debt eliminationscheme is a plan that is advertised as a way for anindividual to eliminate various types of debt simply

by paying someone a small fee compared to theamount of debt to be eliminated. These schemes arefraudulent. As a result of using a fraudulent scheme,individuals will lose money, could lose property,will damage their credit rating, and possibly incur additional debt. In addition, a creditor may take legalaction against an individual to resolve a fraudulentattempt to eliminate debt. It is also possible for thevictim to have identify theft occur by participating insuch a fraudulent scheme.Debtor: Someone who owes monies to another

party.Debt-to-Income Ratio (DTI): The percentage of aconsumer's monthly gross income that goes toward paying debts. Generally, the higher the ratio, thehigher the perceived risk. Loans with higher risk aregenerally priced at a higher interest rate.Decedent: A deceased person, ordinarily used withrespect to one who has died recently.Deferred Payment: A payment postponed until afuture date.Delinquency: A debt that was not paid when due.Demand Deposit: A deposit of funds that can bewithdrawn without any advance notice.Deposit Slip: An itemized memorandum of the cashand other funds that a customer presents to the bank for credit to his or her account.Derogatory Information: Data received by acreditor indicating that a credit applicant has not paid his or her accounts with other creditorsaccording to the required terms.

Direct Deposit: A payment that is electronicallydeposited into an individual's account at a depositoryinstitution.Direct Dispute: A dispute submitted directly to thefurnisher about the accuracy of information in yourconsumer report that relates to an account or otherrelationship you have with the furnisher.Disclosures: Certain information that Federal andState laws require creditors to give to borrowersrelative to the terms of the credit extended.Draft: A signed, written order by which one party(the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee), asight or at a specific date. Typical bank drafts arenegotiable instruments and are similar in many waysto checks.Drawee: The person (or bank) who is expected to

pay a check or draft when it is presented fo payment.Drawee bank: The bank upon which a check isdrawn.Drawer: The person who writes a check or draftinstructing the drawee to pay someone else.Electronic Banking: A service that allows anaccount holder to obtain account information andmanage certain banking transactions through a personal computer via the financial institution's Website on the Internet. (This is also known as Internet

or online banking.)Electronic Check Conversion: Electronic checkconversion is a process in which your check is usedas a source of information-for the check numberyour account number, and the number that identifiesyour financial institution. The information is thenused to make a one-time electronic payment fromyour account-an electronic fund transfer. The checkitself is not the method of payment.Electronic Funds Transfer (EFT):The transfer ofmoney between accounts by consumer electronicsystems-such as automated teller machines (ATMs)and electronic payment of bills-rather than by checkor cash. (Wire transfers, checks, drafts, and paperinstruments do not fall into this category.)Embezzlement: In most States, embezzlement isdefined as theft/larceny of assets (money or property) by a person in a position of trust oresponsibility over those assets. Embezzlementtypically occurs in the employment and corporatesettings.



Encoding: The process used to imprint or inscribeMICR characters on checks, deposits, and other financial instruments. [Magnetic Ink Character Recognition (MICR) is a character-recognitiontechnology adopted mainly by the banking industryto facilitate the processing of checks. Each check inencoded at the bottom with the dollar amount of the

check. If that information is entered incorrectly,there is an encoding error.]Enforcement Action: A regulatory tool that theOCC may use to correct problems or effect changein a national bank.Equal Credit Opportunity Act (ECOA):Prohibitscreditors from discriminating against creditapplicants on the basis of race, color, religion,national origin, sex, marital status, age, or becausean applicant receives income from a public

assistance program.Error Resolution: The required process for resolving errors involving electronic transfers to andfrom deposit accounts.Escheat: Reversion of real or personal property tothe State when 1) a person dies without leaving awill and has no heirs, or 2) when the property (suchas a bank account) has been inactive for a certain period of time.Escrow: A financial instrument held by a third partyon behalf of the other two parties in a transaction.

The funds are held by the escrow service until itreceives the appropriate written or oral instructions-or until obligations have been fulfilled. Securities,funds, and other assets can be held in escrow.Escrow Analysis: The periodic examination of escrow accounts by a mortgage company to verifythat monthly deposits are sufficient to pay taxes,insurance, and other escrow-related items on whendue.Escrow Funds: Funds held in reserve by a mortgagecompany to pay taxes, insurance, and other mortgage-related items when due.Estate Account: An account held in the name of adecedent that is administered by an executor or administrator of the estate.Exception Hold: A period of time that allows the banks to exceed the maximum hold periods definedin the Expedited Funds Availability Act.Fair and Accurate Credit Transactions Act of

2003 (FACT Act or FACTA):The purpose of thisAct is to help consumers protect their credit

identities and recover from identity theft. One of thekey provisions of this Act is that consumers canrequest and obtain a free credit report once every 12months from each of the three nationwide consumercredit reporting companies (Equifax, Experian, andTrans Union). AnnualCreditReport.com providesconsumers with the secure means to request their

free credit report.Fair Credit Reporting Act (FCRA): A Federallaw, established in 1971 and revised in 1997, thatgives consumers the right to see their credit recordsand correct any mistakes. The FCRA regulatesconsumer credit reporting and related industries toensure that consumer information is reported in anaccurate, timely, and complete manner. The Act wasamended to address the sharing of consumerinformation with affiliates.

Fair Debt Collection Practices Act (FDCPA): TheFair Debt Collection Practices Act is a set of UnitedStates statutes added as Title VIII of the ConsumerCredit Protection Act. Its purpose is to ensure ethica practices in the collection of consumer debts and to provide consumers with an avenue for disputing andobtaining validation of debt information in order toensure the information's accuracy. It is often used inconjunction with the Fair Credit Reporting Act.Federal Deposit Insurance Corporation (FDIC)

A government corporation that insures the deposits

of all national and State banks that are members ofthe Federal Reserve System.Federal Emergency Management Agency

(FEMA): Federal agency responsible for theemergency evaluation and response to all disasters,natural and man-made. FEMA oversees theadministration of flood insurance programs and thedesignation of certain areas as flood prone.Federal Reserve System: The central bank of theUnited States. The Fed, as it is commonly called,regulates the U.S. monetary and financial systemThe Federal Reserve System is composed of acentral governmental agency in Washington, D.C(the Board of Governors) and twelve regionalFederal Reserve Banks in major cities throughoutthe United States.You can divide the Federal Reserve's duties into fourgeneral areas:y Conducting monetary policyy Regulating banking institutions and protecting the

credit rights of consumers



y Maintaining the stability of the financial systemy Providing financial services to the U.S.

governmentFiduciary: Undertaking to act as executor,administrator, guardian, conservator, or trustee for afamily trust, authorized trust, or testamentary trust,or receiver or trustee in bankruptcy.Finance Charge: The total cost of credit a customer must pay on a consumer loan, including interest. TheTruth in Lending Act requires disclosure of thefinance charge.Financial Regulatory Agency: An organizationauthorized by statute for ensuring the safe and soundoperation of financial institutions chartered toconduct business under that agency's jurisdiction.The primary regulators are the following:y OCC (Office of the Comptroller of the Currency)y

FDIC (Federal Deposit Insurance Corporation)y FRB (Federal Reserve Board)y NCUA ( National Credit Union Administration)y State regulatory agenciesFirst Mortgage: A real estate loan which is in a firstlien position, taking priority over all other liens. Incase of a foreclosure, the first mortgage will berepaid before any other mortgages.Fixed Rate Loan: The interest rate and the paymentremain the same over the life of the loan. Theconsumer makes equal monthly payments of

principal and interest until the debt is paid in full.Fixed Rate Mortgage: A mortgage with paymentsthat remain the same throughout the life of the loan because the interest rate and other terms are fixedand do not change.Float:1) The amount of uncollected fundsrepresented by checks in the possession of one bank but drawn on other banks. 2) The time that elapses between the day a check is deposited and the day itis presented for payment to the financial institutionon which it is drawn.Flood Insurance: Flood insurance protects againstwater from an overflowing river or a hurricane'stidal surge and also covers damage from water that builds up during storms.Flood Plain: A strip of relatively flat and normallydry land alongside a stream, river, or lake that iscovered by water during a flood.Foreclosure: A legal process in which property thatis collateral or security for a loan may be sold tohelp repay the loan when the loan is in default.

Foreign Transaction Fees: A fee assessed by your bank for making a transaction at another bank'ATM.Forged Check: A check on which the drawer'ssignature has been forged.Forgery: The fraudulent signing or alteration ofanother's name to an instrument such as a deed

mortgage, or check. The intent of the forgery is todeceive or defraud.Fraud Alert: A key provision of the Fair andAccurate Credit Transactions Act of 2003 is theconsumer's ability to place a fraud alert on theircredit record. A consumer would use this option ifthey believe they were a victim of identity theft.The alert requires any creditor that is asked toextend credit to contact the consumer by phone andverify that the credit application was not made by an

identity thief.Freedom of Information Act (FOIA): A Federallaw that mandates that all the records created andkept by Federal agencies in the executive branch ofgovernment must be open for public inspection andcopying. The only exceptions are those records thatfall into one of nine exempted categories listed inthe statute.Frozen Account: An account on which funds maynot be withdrawn until a lien is satisfied and a courtorder or other legal process makes the account

available for withdrawal (e.g., the account of adeceased person is frozen pending a court orderdistributing the funds to the new lawful owners).An account may also be frozen when there is adispute regarding the true ownership of an accountThe bank will freeze the account to preserve theexisting funds until legal action can determine thelawful owner.Furnisher: An entity that provides informationabout a consumer to a consumer reporting agencyfor inclusion in a consumer report.Garnishment/Garnish: A legal process that allowsa creditor to remove funds from your bank accountto satisfy a debt that you have not paid. If you owemoney to a person or company, they can obtain acourt order directing your bank to take money out ofyour account to pay off your debt.Guaranteed Student Loan: An extension of creditfrom a financial institution that is guaranteed by aFederal or State government entity to assist withtuition and other educational expenses. The



government entity is responsible for paying theinterest on the loan and paying the lender to manageit. The government entity also is responsible for theloan if the student defaults.Guarantor: A party who agrees to be responsiblefor the payment of another party's debts should that party default.Hold: Used to indicate that a certain amount of acustomer's balance may not be withdrawn until anitem has been collected, or until a specific check or debit is posted.Home Equity Line of Credit (HELOC):A line of credit secured by the equity in a consumer's home. Itcan be used for home improvements, debtconsolidation, and other major purchases. Interest paid on the loan is generally tax deductible (consulta tax advisor to be sure). The funds may be accessed

by writing checks against the line of credit or bygetting a cash advance.Home Equity Loan: A home equity loan allowsyou to tap into your home's built-up equity, which isthe difference between the amount that your homecould be sold for and the amount that you stillowe. Homeowners often use a home-equity loan for home improvements, to pay for a new car, or tofinance their child's college education. The interest paid is usually tax-deductible. Because the loan issecured by your home's equity, if you default, the

bank may foreclose on your house and takeownership of it.This type of loan is sometimes referred to as asecond mortgage or borrowing against your home.Inactive Account: An account that has little or noactivity; neither deposits nor withdrawals having been posted to the account for a significant period of time.Index-linked Certificate of Deposit: An index-linked CD is a deposit obligation of the issuing bank and is often sold through bank branches andaffiliated and unaffiliated brokers. Index-linked CDs provide the investor the ability to participate in theappreciation, if any, of a particular index, during theterm of the CD. Index-linked CDs may havecomplicated payout structures and may not besuitable or appropriate for all investors. Investorsshould carefully review the investment risk considerations detailed in the relevant offeringdocuments and disclosure statements. Index-linked

CDs are not securities and are not registered undersecurities laws.Individual Account: An account in the name of oneindividual.Individual Retirement Account (IRA):Aretirement savings program for individuals to whichyearly tax-deductible contributions up to a specified

limit can be made. The amount contributed is nottaxed until withdrawn. Withdrawal is not permittedwithout penalty until the individual reaches age 591/2.Insufficient Funds: When a depositor's checkingaccount balance is inadequate to pay a check presented for payment.Insurance (Hazard): Insurance to protect thehomeowner and the lender against physical damageto a property from sources such as but not limited to

fire, wind, or vandalism.Insured Deposits: Deposits held in financialinstitutions that are guaranteed by the FederalDeposit Insurance Corporation (FDIC) against lossdue to bank failure.Interest: The term interest is used to describe thecost of using money, a right, share, or title in property.Interest Rate: The amount paid by a borrower to alender in exchange for the use of the lender's moneyfor a certain period of time. Interest is paid on loans

or on debt instruments, such as notes or bondseither at regular intervals or as part of a lump sum payment when the issue matures.Interest Rate Index: A table of yields or interestrates being paid on debt that is used to determineinterest-rate changes for adjustable-rate mortgagesand other variable-rate loans.Joint Account: An account owned by two or more persons. Either party can conduct transactionseparately or together as set forth in the depositaccount contract.Kiting: Writing a check in an amount that willoverdraw the account but making up the deficiency by depositing another check on another bank. Foexample, mailing a check for the mortgage whenyour checking account has insufficient funds tocover the check, but counting on receiving anddepositing your paycheck before the mortgagecompany presents the check for payment.Late Charge: The fee charged for delinquent payment on an installment loan, usually expressed as



a percentage of the loan balance or payment. Also, a penalty imposed by a card issuer against acardholder's account for failing to make minimum payments.Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipmentin consideration of a payment (e.g., rent).Lender: An individual or financial institution thatlends money with the expectation that the moneywill be returned with interest.Lien: Legal claim against a property. Once the property is sold, the lien holder is then paid theamount that is owed.Line of Credit: A pre-approved loan authorizationwith a specific borrowing limit based oncreditworthiness. A line of credit allows borrowersto obtain a number of loans without re-applying each

time as long as the total of borrowed funds does notexceed the credit limit.Loan-to-Value Ratio (LTV): The ratio of the loan principal (amount borrowed) to the appraised value(selling price). For example, on a $100,000 home,with a mortgage loan principal of $80,000, the loan-to-value ratio is 80 percent. The LTV will affect programs available to the borrower; generally, thelower the LTV, the more favorable the programterms offered by lenders.Loan Contract: The written agreement between a

borrower and a lender in which the terms andconditions of the loan are set.Loan Fee: A fee charged by a lender to make a loan(in addition to the interest charged to the borrower).Loan Modification Provision: A contractualagreement in a loan that allows the borrower or lender to permanently change one or more of theterms of the original contract.Loan Proceeds: The net amount of funds that alending institution disburses under the terms of aloan, and which the borrower then owes.Local Check: A check payable by, at, or through a bank in the same check processing region as thelocation of the branch of the depository bank. Thedepository bank is the bank into which the check was deposited. As of February 27, 2010, the FederalReserve consolidated its checking processing centersinto one processing center. Therefore, all checks arenow considered local.Manufactured (mobile) home: A structure, built ona permanent chassis, transported to a site in one or

more sections, and affixed to a permanentfoundation. The term does not include recreationalvehicles.Maturity: The date on which the principal balanceof a loan, bond, or other financial instrument becomes due and payable.Media: Any organization in the business of

informing the public with news or commentary. Thevarious forms of media include print, television,internet, and radio.Minimum Balance: The amount of money requiredto be on deposit in an account to qualify thedepositor for special services or to waive a servicecharge.Minimum Payment: The minimum dollar amountthat must be paid each month on a loan, line ofcredit, or other debt.

Missing Payment: A payment that has been made but not credited to the appropriate account.Mobile home: To be eligible for coverage under the National Flood Insurance Program, a mobile homemust be on a permanent foundation and meetspecific anchoring requirements for it location. Seemanufactured (mobile) home.Money Market Deposit Account: A savingsaccount that offers a higher rate of interest inexchange for larger than normal deposits. Insured bythe FDIC, these accounts have limits on the number

of transactions allowed and may require higher balances to receive the higher rate of interest.Money Market Fund: An open-ended mutual fundthat invests in short-term debts and monetaryinstruments such as Treasury bills and pays moneymarket rates of interest. Money market funds usuallyoffer check writing privileges. They are not insured by the FDIC.Mortgage: A debt instrument used in a real estatetransaction where the property is the collateral forthe loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan.Mortgage Loan: A loan made by a lender to a borrower for the financing of real property.Mortgagee: The lender in a mortgage loanrelationship.Mortgagor: The borrower in a mortgage loanrelationship. (Property is used as collateral to make payment.)



Mutual Fund: A fund operated by an investmentcompany that raises money from shareholders andinvests it in stocks, bonds, options, commodities, or money market securities. These funds offer investorsthe advantages of diversification and professionalmanagement. To participate, the investor may payfees and expenses. (Mutual funds are not covered by

FDIC insurance.)National Bank: A bank that is subject to thesupervision of the Comptroller of the Currency. TheOffice of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have"national" or "national association" in its name.National Bank Examiner: An employee of theComptroller of the Currency whose function is toexamine national banks periodically to determine the

financial position of a bank and the security of itsdeposits. The examiner also verifies that the bank maintains procedures consistent with Federal banking laws and regulations.National Credit Union Administration (NCUA): The Federal regulatory agency that charters andsupervises Federal credit unions. ( NCUA alsoadministers the National Credit Union ShareInsurance Fund, which insures the deposits of Federal credit unions.)National Flood Insurance Program (NFIP):The

program of flood insurance coverage and floodplainmanagement administered under the Flood Disaster Protection Act (FDPA or Act) and applicableFederal regulations found in Title 44 of the Code of Federal Regulations, Subchapter B.Negotiable Order of Withdrawal Account

(NOW): A savings account from which withdrawalscan be made by negotiable orders of withdrawal(functional equivalent of checks). This is an interest- bearing account for which the bank must reserve theright to require the depositor to provide at leastseven days notice of his/her intent to withdrawfunds.Not Automatically Protected: There are severaltypes of Federal benefits that are not automatically protected under 31CFR 212: Federal benefitsreceived by check rather than direct deposit; Federal benefits received more than two months before the bank received the garnishment order or Federal benefits that were transferred to another bank account. The benefits may be exempt from

garnishment but you will have to alert the court orcreditor.Official Check: A check drawn on a bank andsigned by an authorized bank official. (Also knownas a cashier's check.)Offset, Right of: Banks' legal right to seize fundsthat a guarantor or debtor may have on deposit to

cover a loan in default. It is also known as right ofsetoff

Online Banking: A service that allows an accountholder to obtain account information and managecertain banking transactions through a personalcomputer via the financial institution's web site onthe Internet. (This is also known as Internet orelectronic banking.)Open-End Credit: A credit agreement (typically a

credit card) that allows a customer to borrow againsta preapproved credit line when purchasing goodsand services. The borrower is only billed for theamount that is actually borrowed plus any interestdue. (Also called a charge account or revolvingcredit.)Operating Subsidiary: National banks conductsome of their banking activities through companiescalled operating subsidiaries. These subsidiaries arecompanies that are owned or controlled by a national bank and that, among other things, offer banking

products and services such as loans, mortgages, andleases.The Office of the Comptroller of the Currencysupervises and regulates the activities of many ofthese operating subsidiaries.Outstanding Check: A check written by a depositorthat has not yet been presented for payment to or paid by the depositor's bank.Overdraft: When the amount of money withdrawnfrom a bank account is greater than the amountactually available in the account, the excess isknown as an overdraft, and the account is said to beoverdrawn.Overdraw: To write a check for an amount thatexceeds the amount on deposit in the account.Overlimit: An open-end credit account in which theassigned dollar limit has been exceeded.Participating Community: A community for whichthe Federal Emergency Management Agency(FEMA) has authorized the sale of flood insuranceunder the National Flood Insurance Program ( NFIP)



Passbook: A book in ledger form in which arerecorded all deposits, withdrawals, and earnings of acustomer's savings account.Past Due Item: Any note or other time instrumentof indebtedness that has not been paid on the duedate.Payday Loans: A small-dollar, short-term loan that

a borrower promises to repay out of their next paycheck or deposit of funds.Payee: The person or organization to whom a check,draft, or note is made payable.Paying (Payor) Bank: A bank upon which a check is drawn and that pays a check or other draft.Payment Due Date: The date on which a loan or installment payment is due. It is set by a financialinstitution. Any payment received after this date isconsidered late; fees and penalties can be assessed.

Payoff: The complete repayment of a loan,including principal, interest, and any other amountsdue. Payoff occurs either over the full term of theloan or through prepayments.Payoff Statement: A formal statement preparedwhen a loan payoff is contemplated. It shows thecurrent status of the loan account, all sums due, andthe daily rate of interest.Payor: The person or organization who pays.Periodic Rate: The interest rate described inrelation to a specific amount of time. The monthly

periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.Periodic Statement: The billing summary producedand mailed at specified intervals, usually monthly.Personal Identification Number (PIN): Generallya four-character number or word, the PI N is thesecret code given to credit or debit cardholdersenabling them to access their accounts. The code iseither randomly assigned by the bank or selected bythe customer. It is intended to prevent unauthorizeduse of the card while accessing a financial serviceterminal.PITI: Common acronym for principal, interest,taxes, and insurance²used when describing themonthly charges on a mortgage.Point of Sale (POS):1) The location at which atransaction takes place. 2) Systems that allow bank customers to effect transfers of funds from their deposit accounts and other financial transactions atretail establishments.

Power of Attorney: A written instrument whichauthorizes one person to act as another's agent orattorney. The power of attorney may be for adefinite, specific act, or it may be general in natureThe terms of the written power of attorney mayspecify when it will expire. If not, the power ofattorney usually expires when the person granting it

dies. Some institutions require that you use the bank's power of attorney forms. (The bank may referto this as a Durable Power of Attorney: The principal grants specific rights to the agent.)Preauthorized Electronic Fund Transfers: AnEFT authorized in advance to recur at substantiallyregular intervals.Preauthorized Payment: A system established by awritten agreement under which a financial institutionis authorized by the customer to debit the customer's

account in order to pay bills or make loan payments.Preferred Risk Policy (PRP): A policy that offersfixed combinations of building/contents coverage orcontents-only coverage at modest, fixed premiumsThe PRP generally is available for property locatedin B, C, and X Zones in Regular ProgramCommunities that meets eligibility requirements based on the property¶s flood loss history.Prepayment: The payment of a debt before itactually becomes due.Prepayment Clause: A clause in a mortgage

allowing the mortgagor to pay off part or all of theunpaid debt before it becomes due.Prepayment Penalty: A penalty imposed on a borrower for repaying the loan before its due date(In the case of a mortgage, this applies when there isnot a prepayment clause in the mortgage note tooffset the penalty.)Previous Balance: The cardholder's account balance as of the previous billing statement.Principal Balance: The outstanding balance on aloan, excluding interest and fees.Private Mortgage Insurance (PMI): Insuranceoffered by a private insurance company that protectsthe bank against loss on a defaulted mortgage up tothe limit of the policy (usually 20 to 25 percent ofthe loan amount). PMI is usually limited to loanswith a high loan-to-value (LTV) ratio. The borrower pays the premium.Real Estate Settlement Procedures Act (RESPA):

Federal law that, among other things, requireslenders to provide "good faith" estimates of



settlement costs and make other disclosuresregarding the mortgage loan. RESPA also limits theamount of funds held in escrow for real estate taxesand insurance.Reconciliation: The process of analyzing tworelated records and, if differences exist betweenthem, finding the cause and bringing the two records

into agreement. Example: Comparing an up-to-datecheck book with a monthly statement from thefinancial institution holding the account.Redlining: The alleged practice of certain lendinginstitutions of not making mortgage, homeimprovement, and small business loans in certainneighborhoods-usually areas that are deteriorating or considered by the lender to be poor investments.Refinancing: A way of obtaining a better interestrate, lower monthly payments, or borrow cash on the

equity in a property that has built up on a loan. Asecond loan is taken out to pay off the first, higher-rate loan.Refund: An amount paid back because of anoverpayment or because of the return of an item previously sold.Regular Program Community: A communitywherein a Flood Insurance Rate Map is in effect andfull limits of coverage are available under the FloodDisaster Protection Act (FDPA or Act).Release of Lien: To free a piece of real estate from

a mortgage.Renewal: A form of extending an unpaid loan inwhich the borrower's remaining unpaid loan balanceis carried over (renewed) into a new loan at the beginning of the next financing period.Residual Interest: Interest that continues to accrueon your credit card balance from the statement cycledate until the bank receives your payment. For example, if your statement cycle date was January10 and the bank received your payment on January20, there were ten days for which interest accrued.This amount will be posted on your next statement.Return Item: A negotiable instrument²principallya check²that has been sent to one bank for collection and payment and is returned unpaid by thesending bank.Reverse Mortgage: A reverse mortgage is a specialhome loan product that allows a homeowner aged 62or older the ability to access the equity that hasaccumulated in their home. The home itself will bethe source of repayment. The loan is underwritten

based on the value of the collateral (home) and thelife expectancy of the borrower. The loan must berepaid when you die, sell your home, or no longerlive there as your principal residence.Revolving Credit: A credit agreement (typically acredit card) that allows a customer to borrow againsta preapproved credit line when purchasing goods

and services. The borrower is only billed for theamount that is actually borrowed plus any interestdue. (Also called a charge account or open-endcredit.)Right of Offset: Banks' legal right to seize fundsthat a guarantor or debtor may have on deposit tocover a loan in default. It is also known as the rightof set-off.Right of Rescission: Right to cancel, within three business days, a contract that uses the home of

person as collateral, except in the case of a firsmortgage loan. There is no fee to the borrower, whoreceives a full refund of all fees paid. The right ofrescission is guaranteed by the Truth in Lending Act(TILA).Safe (or Safety) Deposit Box: A type of safeusually located in groups inside a bank vault andrented to customers for their use in storing valuableitems.Safekeeping: A service provided by banks wheresecurities and valuables are protected in the vaults of

the bank for customers.Satisfaction of Mortgage: A document issued by amortgagee (the lender) when a mortgage is paid infull.Service Charge: A charge assessed by a depositoryinstitution for processing transactions andmaintaining accounts.Signature Card: A card signed by each depositorand customer of a bank which may be used as ameans of identification. The signature cardrepresents a contract between the bank and thedepositor.Special Flood Hazard Area (SFHA):An areadefined on a Flood Insurance Rate Map with anassociated risk of flooding.Stale-Dated Check: Presented to the paying bank180 days (6 months) or more after the original issuedate. Banks are not required by the UniformCommercial Code to honor stale-dated checks andcan return them to the issuing bank unpaid. Themaker of a check can discourage late presentment by



writing the words "not good after X days" on the back of the check.State Bank: A bank that is organized under the lawsof a State and chartered by that State to conduct the business of banking.State Banking Department: The organization ineach State that supervises the operations and affairs

of State banks.Statement: A summary of all transactions thatoccurred over the preceding month and could beassociated with a deposit account or a credit cardaccount.Stop Payment: An order not to pay a check that has been issued but not yet cashed. If requested soonenough, the check will not be debited from the payer's account. Most banks charge a fee for thisservice.

Student Loan: Loans made, insured, or guaranteedunder any program authorized by the Higher Education Act. Loan funds are used by the borrower for education purposes.Substitute Check: A substitute check is a paper copy of the front and back of the original check. Asubstitute check is slightly larger than a standard personal check so that it can contain a picture of your original check. A substitute check is legally thesame as the original check if it accurately representsthe information on the original check and includes

the following statement: "This is a legal copy of your check. You can use it the same way you woulduse the original check." The substitute check mustalso have been handled by a bank. Substitute checkswere created under Check 21, the Check Clearingfor the 21st Century Act, which became effective onOctober 28, 2004Terms: The period of time and the interest ratearranged between creditor and debtor to repay aloan.Time Certificate of Deposit: A time depositevidenced by a negotiable or nonnegotiableinstrument specifying an amount and maturity.Time Deposit: A time deposit (also known as a termdeposit) is a money deposit at a bank that cannot bewithdrawn for a certain "term" or period of time.When the term is over it can be withdrawn, or it can be held for another term. The longer the term, the better the yield on the money. Generally, there aresignificant penalties for early withdrawal.

Trust Account: A general term that covers all typesof accounts in a trust department, such as estatesguardianships, and agencies.Trust Administrator: A person or institution thatmanages trust accounts.Truth in Lending Act (TILA): The Truth inLending Act is a Federal law that requires lenders to

provide standardized information so that borrowercan compare loan terms. In general, lenders must provide information ony what credit will cost the borrowers,y when charges will be imposed, andy What the borrower's rights are as a consumer?Uncollected Funds: A portion of a deposit balancethat has not yet been collected by the depository bank.Uniform Commercial Code (UCC): A set of

statutes enacted by the various States to provideconsistency among the States' commercial laws. Itincludes negotiable instruments, sales, stocktransfers, trust and warehouse receipts, and bills oflading.Uniform Gift to Minors Account: A UGMA provides a child under the age of 18 (a minor) with away to own investments. The money is in theminor's name, but the custodian (usually the parent)has the responsibility to handle the money in a prudent manner for the minor's benefit. The paren

cannot withdraw the money to use for his or her ownneeds.Usury: Charging an illegally high interest rate on aloan.Usury Rates: The maximum rate of interest lendersmay charge borrowers. The usury rate is generallyset by State law.Variable Rate: Any interest rate or dividend thatchanges on a periodic basis.Wire Transfer: A transfer of funds from one pointto another by wire or network such the FederalReserve Wire Network (also known as Fed Wire).Accretion of a Discount: A type of portfolioaccounting in which there is a straight-lineaccumulation of capital gains on discount notes and bonds.Accrued Interest: The interest accumulated on asecurity since the issue date or since the last coupon payment. The buyer of the security pays the marke price plus accrued interest.



Active Market: A securities market in which a highvolume of trading activity takes place.Advance Refunding: A treasury operation thatoffers owners of outstanding federal obligations theopportunity to exchange securities for longer-termissues that may bear a higher yield to maturity.Advance refunding on a municipal bond refers to the

sale of a refunding issue several years prior to theissue's first call date, with the proceeds being held intrust. Also called pre refunding.Advancing Market: A market in which prices aregenerally rising.Agent: Executes an order for or acts on behalf of someone else, the principal. The agent, whether afirm or an individual, is subject to the control of the principal and does not have title to the principal's property. The agent may charge a fee or

Commission for this service.All or None (AON): An all or none order requiresthat none of the order be executed unless all of it can be executed at the specified price. An AO N order usually involves an offering of new securities.American Stock Exchange: A leading securitiesexchange located in New York City. Also calledAMEX or ASE.Amortization: The gradual reduction of a debt bymeans of equal periodic payments sufficient to meetcurrent interest charges and to pay off the debt at

maturity.Amortization of Premium: The periodic chargesmade against the interest received on bonds in order to offset any premium price paid for the bonds.Arbitrage: Effecting sales and purchasessimultaneously in the same or related securities totake advantage of a market Inefficiency.Arrears: Amounts, such as interest or preferredstock dividends, that is overdue.Asked Price: See Bid and Asked.Assessed Valuation: The valuation placed on property for the purpose of taxation. In some areas,the property is assessed below 100 percent of themarket value. See Assessment Ratio.Assessment Ratio: The ratio of the assessed valueof property to the full or actual property value. Fullvalue is the fair market value at the bid side of themarket, less an allowance for sales and other expenses. The normal standard in California is of full value.

At the Market: A trading term for the buying orselling of securities at the current market price ratherthan at a predetermined price.At-the-Opening Order: A trading term for an orderthat is to be executed at the opening of the market ornot at all.Auction Coverage: The ratio of the total bids

offered in an auction to the number of accepted bids.This ratio is used to evaluate general interest in anygiven auction.Authorized Capital Stock: The total amount ofstock that a company is permitted to issue under itscharter.Average Life: The average holding period of amortgage-backed security. It is calculatedmathematically by weighting the time theinvestment is outstanding by the amount of principal

returned each month.Averaging Up or Down: The practice of purchasingthe same security at various prices to arrive at ahigher or lower average cost.Baby Bonds: Bonds whose face value is usually$100 or less.Balloon Maturity: Describes a bond issue in which bonds that come due close to the maturity date of theissue have a substantially larger value than those bonds that came due earlier in the issue. Very oftena provision is made for the redemption of part or all

of these bonds by purchase or call prior to maturity.Basis Book: A book of mathematical tables used toconvert yield-to-maturity to the equivalent dollar prices at different rates of interest. See DiscountBook.Basis Point: One-hundredth of 1 percent. Onehundred basis points equal 1 percent.Basis Price: Price expressed in yield to maturity orthe annual rate of return on the investment.Bearer Form: A negotiable instrument format thathas no registered owner. The instrument is therefore payable to the person who has physical possessionof the security.Bearer Security: A security that does not have thename of the owner or owner's agent registered on the books of the issuer. This allows the proceed(principal as well as interest) to be paid to thecurrent holder of the security.Bear Market: A period of generally pessimisticattitudes and declining market prices. Compare BullMarket.



Below the Market: A price below the currentmarket price for a particular security.Best-Efforts Basis: Where a securities dealer doesnot underwrite a new issue but sells it on the basis of what can be sold. In the money market, this usuallyrefers to a firm order to buy or sell a given amountof securities or currency at the best price that can be

found over a given period of time. It can also refer toa flexible amount up to a certain limit at a given rate.Bid and Asked/Bid and Offer: The price at whichan owner offers to sell (asked or off er) and the priceat which a prospective buyer offers to buy (bid). It isoften referred to as a quotation or a quote. Thedifference between the two is called the spread.Big Board: The New York Stock Exchange( NYSE).Blanket Bond: A bond secured by the general assets

of a company, as opposed to an unsecured bond or one secured by specific assets. See Bond.Block: A large number of securities dealt with as aunit.Blue-Chip Stocks: The securities of major companies known nationally for their record of earnings, dividend payments, and general pricestability. This term denotes high esteem on the partof investors. Blue List: A trade publication, published each business day that shows current municipal bond

offerings by banks and municipal bond dealersthroughout the country.Blue-Sky Laws: Laws enacted by states to regulatethe issuance and sale of securities.Bond: An interest-bearing security issued by acorporation, government, governmental agency, or other body. It is a form of debt with an interest rate,maturity, and face value, and it is usually secured byspecific assets. Most bonds have a maturity of greater than one year and generally pay interestsemiannually. See Debenture.Bond Anticipation Notes (BANS): Short-termnotes sold by states and municipalities to obtaininterim financing for projects that will eventually befinanced by the sale of bonds.Bond Averages: The average prices of certain bonds over a specific period. They usually reflecttrends in the bond market. Bond Buyer: A trade publication that describesupcoming municipal bond sales, posts the results of

those sales, and carries news items of special interestto the municipal bond industry. Bond Buyer Index : An index published weekly bythe Bond Buyer to indicate the level of long-termmunicipal bond yields.Bond Discount: The difference between a bond'sface value and a selling price, when the selling price

is lower than the face value.Bond Power: A "power of attorney" used inconnection with the sale and transfer of registered bonds. It is necessary to obtain bond powerwhenever registered bonds are pledged as collateralSee Power of Attorney.Bond Rating: The classification of a bond's

investment quality. See Rating.

Bond Resolution: A legal order or contract by agovernmental unit to authorize a bond issue. A bond

resolution carefully details the rights of the bondholders and the obligations of the issuer.Book-Entry Securities: Securities that are notrepresented by engraved certificates but aremaintained in computerized records of the issuer.Book Value: The amount at which a security iscarried on the books of the holder or issuer. The book value is often the original cost of the security plus or minus amortization and accretion; it madiffer significantly from the market value.Broker: An intermediary who brings buyers andsellers together and handles their orders, generallycharging a commission for this service. In contrastto a principal or a dealer, the broker does not own ortake a position in securities.Broker or Dealer Loans: Loans made to securities brokers and dealers, mainly by money center banksand secured by securities. These are usuallyovernight call loans to finance stock inventories,underwriting activities, or brokers' credit. See CallLoans.

Bull Market: A period of generally optimisticattitudes and increasing market prices. CompareBear Market.Buyer's Market: A market in which supply is

greater than demand, giving buyers an advantage

Call: An option to buy a specific asset at a certain price within a certain period of time.Callable: A bond or preferred stock that may beredeemed by the issuer before maturity for a call price specified at the time of issuance.



Call Date: The date before maturity on which a bond may be redeemed at the option of the issuer.Called Bonds: Bonds redeemed before maturity.Call Loans: Loans that may be terminated at thediscretion of the borrower or the lender.Call Money: Money loaned to brokers by banks andsubject to call at the discretion of the lender. See

Call Loans.Call Premium: The excess paid for a bond or security over its face value.Call Price: The price paid for a security when it iscalled. The call price is equal to the face value of thesecurity plus the call premium, if any.Call Provision: The details by which a bond may beredeemed by the issuer, in whole or in part, prior tomaturity. A security with such a provision willusually have a higher interest rate than comparable

non callable securities.Capital Gain/Loss: The amount that is made or lost, depending upon the difference between the sale price and the purchase price of any capital asset or security.Capital Market: The market in which buyers andsellers, including institutions, banks, governments,corporations, and individuals, trade debt and equitysecurities.Carry: The cost incurred in interest charges for financing and holding a securities inventory. See

Positive Carry; Negative Carry.Cash Sale: A transaction calling for the delivery and payment of the securities on the same day that thetransaction takes place.Circle: Indicating an interest in a specified amountof bonds by making a nonbinding commitment to buy the issue; may become a final sale that is binding to both parties.Clear: To carry out a trade: the seller deliverssecurities, and the buyer delivers funds. A trade thatdoes not clear is said to fail.Clearing House Funds: Monies within the NewYork Clearing House Interbank Payments System.Funds are transferred from bank to bank to allowsettlement in the various areas served by a particular clearing house. Clearing house funds are availablethe next day.CMO Class: A group of bonds within acollateralized mortgage obligation (CMO) issue.Each class has a specific rate and principal-redemption schedule. Also referred to as a tranche.

Collateral: Securities or other property that a borrower pledges as security for the repayment of aloan. Also refers to securities pledged by a bank tosecure deposits of public monies.Collateral Note: A promissory note that specificallymentions the collateral pledged by the borrower assecurity for the repayment of a loan or other

obligation.Collateral Trust Bonds: Bonds secured by a lien onspecified securities pledged as collateral and held bya trustee as collateral.Commercial Paper: Short-term, unsecurednegotiable promissory notes issued by businesses.Commission: Broker's or agent's fee for purchasingor selling securities for a client.Consolidated Debt: A debt in which all of theseparate entities of an organization are equally

responsible for repayment of the debt.Convertible: A feature of certain bonds, debenturesor preferred stocks that allows them to be exchangedfor another class of securities. A convertible bondcontains a provision that permits conversion to theissuer's common stock at some fixed exchange ratio.Cornering the Market: Buying securities on ascale large enough to give a buyer control over themarket price. This practice is illegal.Correspondent: A bank, securities firm, or otherfinancial organization that regularly performs

services for another in a market to which the otherdoes not have direct access..Correspondent Bank: A bank that is the depositoryfor another bank. The correspondent bank accepts aldeposits in the form of cash letters, and collectsitems for its bank depositor. The depository bankwill render all banking services to its correspondentin the region in which the depository bank is locatedCoupon Rate: The annual rate of interest that theissuer of a bond promises to pay to the holder of the bond.Coupons: Certificates attached to a bond thatindicates the interest due on a payment date. Thecoupons are detached as they come due (usuallysemiannually) and are presented for payment ofinterest. The term Coupon also refers to the rate ofinterest the issuer promises to pay the issue holder.Coupon Yield: The annual interest rate of a bonddivided by the bond's face value and stated as a percentage. This usually is not equal to the bond'current yield or its yield to maturity.



Covenant: A pledge on the part of an issuer of asecurity to perform in a way that may benefit thesecurity holders or to refrain from doing somethingthat might be disadvantageous to them.Cover: The spread between the winning bid/ offer and the next highest bid/next lowest offer. It isuseful as a basis for evaluation of the bids.Coverage Ratio: The ratio of income available to pay a specific obligation versus the total amountobligated. This is a measure of a firm's financialstability.Covering: Buying back a security previously soldshort, in order to eliminate one's short position (see

Short Sale). Also refers to the rate of return on a bondholder's investment.Credit Analysis: A critical review and appraisal of the economic and financial condition of a

government agency or corporation. Evaluates theissuing entity's ability to meet its debt obligations,and the suitability of such obligations underwritingor investment.Current Maturity: The amount of time left until anobligation matures. For example, a one year billissued nine months ago has a current maturity of three months.Current Yield: The coupon payments on a securityas a percentage of the security's market price. Inmany instances the price should be gross of accrued

interest, particularly on instruments where nocoupon is left to be paid until maturity.CUSIP: The Committee on Uniform SecurityIdentification Procedures, which was establishedunder the auspices of the American BankersAssociation to develop a uniform method of identifying municipal, U.S. government, andcorporate securities.Dated Date, or Issue Date: The date of a municipal bond issue from which the bond holder is entitled toreceive interest, even though the bonds may actually be delivered at some other date.Day Loan: A one-day loan granted for the purchaseof securities. When the securities are delivered, theyare pledged as collateral to secure a regular call loanfor a few hours of the business day in order tofinance the securities.Day Order: An order placed to buy or sell securitieson a specific day. If the order is not executed, itexpires at the end of that trading session.

Dealer: An individual or firm that ordinarily acts asa principal in security transactions. Typicallydealers buy for their own account and sell to acustomer from their inventory. The dealer's profit isdetermined by the difference between the price paidand the price received.Dealer Loans: See Broker or Dealer Loans.Dealer Market: The market for trading governmentsecurities.Debenture: A bond secured only by the generalcredit of the issuer rather than by a specific lien on property, as is a mortgage bond. Agency bonds arefrequently called debentures.Debt Coverage: The margin of safety for paymentof debt, reflecting how much the earnings for acertain period of time exceed the debt payableduring that same period. Normally used in

connection with revenue bonds and corporate bonds.Debt Instrument: A written pledge to repay debtsuch as a bill, a note, or a bond.Debt Limit or Debt Ceiling: the maximum amountof debt that can legally be acquired under the debt-incurring power of a state or municipality.Debt Service: Interest and principal obligation onan outstanding debt. This is usually for a one-year period.Default: Failure to pay principal or interest promptly when it is due.

Delivery: Either of two methods of deliveringsecurities: delivery vs. payment and delivery vsreceipt (also called "free"). Delivery vs. payment isdelivery of securities with an exchange of money forthe securities. Delivery vs. receipt is delivery of securities with an exchange of a signed receipt forthe securities.Demand Loan: A loan that has no fixed maturitydate but that is payable upon demand.Direct Debt: Debt incurred or assumed by an entityin its own name. Occasionally one governmentassumes the debt of another. When adjoining landsare annexed to a school district, for example, theremay be some assumed debt.Direct Placement: Selling a new issue not byoffering it for sale publicly but by placing it withone or several institutional investors.Discount: The reduction in the price of a securitythe difference between its selling price and its facevalue at maturity. A security may sell below facevalue in return for such things as prompt payment



and quantity purchase. "At a discount" refers to asecurity selling at less than the face value, asopposed to "at a premium," when it sells for morethan the face value.Discount Book: A book of mathematical tables usedto determine the rate of return on a dollar bond for aspecified discounted rate at a certain maturity. See

Basis Book.Discount Window: A facility provided by theFederal Reserve Bank.Discretionary Order: A securities transaction offer placed by a broker who is empowered to act on behalf of a customer with regard to price and timing.Dollar Bond: A bond that is quoted and traded indollars rather than on a yield basis. Not to beconfused with the term US. Dollar bond s, which iscommonly used in the Eurobond market.

Don't Know: Also DK or DKed, as in "don't knowthe trade." An expression used to denote a lack of knowledge of a particular trade or transaction.Trades are often DKed due to conflictinginstructions from one party or the other.Double Exemption: Being exempt from both stateand federal income taxes. Term used in relation tomunicipal bondsDownside Risk: The maximum amount that can belost in an investment.Dumping: Selling large amounts of securities

without regard to the effect on the marketplace.

Exempt Securities: Securities that are exempt fromthe registration requirements of the Securities andExchange Commission.Ex-Rights: Without rights. When a security is soldex-rights, the buyer of that security is not entitled tothe rights to purchase a new issue of the security at adiscount. See Rights.Extraordinary Redemption: Redemptionoccurring under an unusual circumstance such as

destruction of the facility financed. Different fromoptional redemption or mandatory redemption onmunicipal issues. C ompare Optional Redemption.Face Amount: The par value (i.e., principal or maturity value) of a security appearing on the faceof the instrument.Fail: The failure of a seller to deliver securities tothe purchaser or of the buyer to deliver the proper funds as contracted.

Fannie Mae: Trade name for the Federal NationaMortgage Association (F NMA).Fiduciary: An individual or group, such as a bankor trust company, that acts for the benefit of another party or to which property is given to hold in trust.Fill or Kill: The instructions to fill an entire orderimmediately or kill (cancel) the entire order.Firm: A term designating a buy or sell order madefor a security that will not change in price for aspecified period of time. It is sometimesaccompanied by a recall within a specified timesuch as five or ten minutes.Firming of the Market: A period of improvementwhen security prices tend to rise or to stabilize atcurrent levels.Fiscal Year: An accounting or tax periodcomprising any 12-month period. The federal

government's fiscal year starts October 1; the fiscalyear of national chartered banks begins on1January.Flat: The price at which a bond is traded, includingconsideration for all unpaid interest accrued. Bondsthat are in default of interest or principal are tradedflat. Income bonds, which pay interest only to theextent earned, are usually traded flat. With mostother bonds, the buyer pays the market price plusinterest accrued since the last coupon or paymentdate, which is referred to as "and interest."Floating-Rate Note/Bond: A note or bond with a

fluctuating interest rate. The rate is adjusted periodically according to a predetermined formula based upon specific market indicators. Thus, provides the investor with a rate of retucomparable to the rate prevailing in the currentmarket environment.Floating Supply: The total amount of securitiesavailable for immediate purchase from dealers andother investors who wish to sell.Freddie Mac: Trade name for the Federal HomeLoan Mortgage Corporation (FHLMC).Free: Delivery of securities upon presentation of asigned receipt. Payment is received by debiting orcrediting accounts or by check, wire transfer, orother means.Free and Open Market: A market in which supplyand demand indicate prices for securities.Full Faith and Credit: Indicator that theunconditional guarantee of the United Statesgovernment backs the repayment of a debt.



General Obligation Bonds (GOs): Bonds secured by the pledge of the municipal issuer's full faith andcredit, which usually includes unlimited taxing power.General Property Taxes: Taxes that are placed onreal estate and personal property.Ginnie Mae: Trade name for the Government National Mortgage Association (G NMA).Good Delivery: A security that meets all therequirements of the stock exchange for delivery to a banker when the security is sold.Good-Faith Check: The check that must beincluded with a bid on a bond sale. Usually, if the bonds are awarded to a syndicate that does not pick them up as agreed, the good-faith check is kept. Thegood-faith checks of unsuccessful bidders arereturned.

Good `till Canceled (GTC) Order: An order for securities that may be limited in terms of price butnot in terms of time. See Open Order.Government Bonds: Securities issued by thefederal government; they are obligations of the US.Treasury. Also known as "governments."Gross Debt: The sum total of a debtor's obligations.Gross Yield: The percentage of return on a security,determined by dividing the dollar price into theannual interest payment and calculating the return tomaturity. Also, the return on an investment before

deduction of costs.Guaranteed Bond: A bond in which repayment is

guaranteed by someone other than the debtor.

Hedging: A method used by traders to minimizelosses resulting from price fluctuations in the moneymarket. The method involves counterbalancing a present sale or purchase with the purchase or sale of a similar or different security, usually for delivery atsome future date. The desired result is that the profitor loss on a current sale or purchase will be offset by

the loss or profit on the future purchase or sale.Holder: The person or entity that has possession of a negotiable instrument.Hypothecation: An agreement that pledges

securities to guarantee a loan without transferring

title to the securities.

Immediate or Cancel Order: An order at market price (or some other limited price) that is to beexecuted in whole, or in part, as soon as it is

received. The portion that is not transacted isconsidered canceled.In and Out: Describes the purchase and sale of thesame security within a short period of time to takeadvantage of price fluctuations.Income Bonds: Bonds on which the payment ofinterest is due only when the issuer has attained

sufficient income. There is no guaranteed return. Insome cases, unpaid interest may accumulate as aclaim against the issuer when the principal comesdue.Indebtedness: The obligation assumed by a borrower, guarantor, or endorser to repay funds thathave been or will be paid out on the borrower's behalf.Indenture: A written agreement used in connectionwith a security issue. The document sets the

maturity date, interest rate, security, and other termsfor the issue holder, the issuer, and (whenappropriate) the trustee.Interest: Compensation paid or to be paid for theuse of money. The rate of interest is generallyexpressed as an annual percentage.Interest Rate: The interest payable each year on borrowed funds, expressed as a percentage of th principal.Investment Banking: A term used to describe thefinancing of the capital requirements of an

enterprise, as opposed to the working capital of a business. Investment bankers buy and sell securitiessuch as stocks, bonds, and mortgages. They act asthe intermediaries between the investor and thecorporation or government that needs to finance itsoperations. An investment bank charges a fee forservices relating to securities, such as advisorynegotiation, and distribution services. See Syndicate;Underwriter.Investment Portfolio: A collection of securitiesheld by a bank, individual, institution, orgovernment agency for investment purposes.Investment Securities: Securities purchased for aninvestment portfolio, as opposed to those purchasedfor resale to customers.Investor: A person who purchases securities withthe intention of holding them to make a profit.Issue: A group of identical securities, or themarketing and selling of such securities.Issue Price: The price at which a new group ofidentical securities (new issue) is put on the market.



Issuer: Any corporation or governmental unit that

borrows money through the sale of securities.

Joint and Several Obligations: A guarantee to theholder of a security in which the liability for a bondor note issue may be enforced against all parties jointly or any one of them individually. One party,

several, or all may be held responsible for payment.Legal List or Legal Investment: a list of securitiesin which certain institutions and fiduciaries, such asinsurance companies and banks, may invest. For the protection of depositors or liability holders, legallists are restricted by regulatory agencies to high-quality securities that meet certain specifications.Also known as legal. See Prudent Man Rule.Legal Opinion: An opinion concerning the validityof a municipal issue with respect to statutoryauthority, constitutionality, procedural conformity,

and usually the exemption of interest from federalincome taxes. The legal opinion is usually rendered by a law firm recognized as specializing in public borrowings, often referred to as "bond counsel."Limited Order: An order to buy or sell a certainamount of a security at a minimum price within aspecific period of time.Limited-Tax Bond: A bond guaranteed by a specialtax or taxes, or by a specified portion of the realestate tax. The rate and amount of such a bond islimited.Liquidity: The ease at which a security can be bought or sold (converted to cash) in the market. Alarge number of buyers and sellers and a highvolume of trading activity are important componentsof liquidity.Listed Securities: Securities that have beenadmitted for trading on a recognized securitiesexchange. Unlisted securities are usually sold over the counter.Locked Market: A securities market in which the

bid price is the same as the asked price.London Interbank Offered Rate (LIBOR): Theinterest rate on Eurodollar deposits traded between banks. The rate depends on the maturity of thedeposit as well as on which bank quotes the rate.Long: Owning more securities than one has

contracted to deliver.

Making a Market: Any specialist permitted to actas a dealer, any dealer acting in the capacity of a block positioned, and any dealer who, with respect

to a security, holds himself/herself out (by enteringquotations in an interdealer communications system)or otherwise as being willing to buy and sell asecurity for his/her own account on a regular orcontinuous basis.Margin: The difference between the collateral pledged to secure a loan and the amount of the loan

itself. Federal Reserve Board requirements formargin on stocks have ranged from 40 to 100 percent of the purchase price.Marketability: The ease with which a security can be sold in the secondary market.Market Order: An order to buy or sell securities atthe market's prevailing bid or asked price.Market Value: The price at which a security iscurrently being sold in the market.Market vs. Quote: Quote designates the current bid

and asked price on a security, as opposed to the price at which the last security order was sold.Maturity: The date that the principal or stated valueof a debt instrument becomes due and payable. Alsoused to denote the length of time between the issuedate and the due date.Money Market Instruments: Private andgovernment obligations with maturities of one yearor less.Money Market S ecurities: Short-ter m securitieswith market prices more closely tied to the current

interest rate than to a company's standing or togeneral business conditions.Moral Obligation Bond: A revenue bond that, inaddition to its primary source of security, possessesa structure whereby a state pledges to make upshortfalls in a debt service reserve fund, subject tolegislative appropriation. The state has no legalobligation to make such a payment, but market participants recognize that failure to honor th"moral" pledge would have negative consequencesfor the state's own creditworthiness.Mortgage Bond: A bond secured by a mortgage on property. The value of the property used as collaterausually exceeds that of the mortgage bond issuedagainst it.Municipals: Securities, usually bonds, issued by astate or its agencies. The interest on "munis" isusually exempt from federal income taxes and stateand local income taxes in the state of issuanceMunicipal securities may or may not be backed bythe issuing agency's taxation powers.



Municipal Securities Rulemaking Board

(MSRB): Registered under the Maloney Act in1975, MSRB is designed to create rules andregulations for municipal bond trading among brokers, dealers, and banks.National Association of Securities Dealers

(NASD): A self-regulatory organization that

regulates the over-the-counter market.Negative Carry: Negative carry occurs when thecost of borrowing to finance the holding of securitiesis in excess of the income on those securities.Compare also Positive Carry.Negotiable: A term used to designate a security, thetitle to which is transferable by delivery. The termalso indicates that the securities can be exchangedfor cash or near-cash instruments.Negotiated Sale: An arrangement in which the

terms of a securities issue are made privately between the parties involved, without competitive public bidding.Net Change: The difference in the closing price of asecurity from one day to the next.Net Debt: The gross debt of a state or governmentalagency, not including sinking-fund accumulationsand all self-supporting debt.Net Interest Cost (NIC): The average interest ratean issuer must pay in order to borrow funds over thelife of a bond.

New Issue: The first offering of a security.New Issue Market: The market for new issues of securities, as opposed to the secondary market, inwhich securities that have already been issued aresold.New York Stock Exchange: A corporationoperated by a board of directors responsible for setting policy, supervising exchange and member activities, listing securities, overseeing the transfer of members' seats on the exchange, and judgingwhether an applicant is qualified to be a specialist.No Par Value: Describes a security issued with nostated face or par value.No-Litigation Certificate: A statement issued bythe bond attorney and the issuer¶s not counsel thatno legal suits are pending against the bond issue, nor is there any knowledge of threatened litigation thatmight affect the validity of the bonds.Non callable: Describes a security that does notcontain a call provision. See Call Provision.

Non legal¶s: Securities that do not conform to therequirements of a state's legal list of lawfuinvestments for savings banks and trust funds. See

Legal List.Nonnegotiable: Describes a security whose title orownership is not transferable through simpledelivery or endorsement. See Negotiable.Note: A written document that contains a promise to

pay a specified amount to a certain entity on

particular date.

Obligation: A responsibility for repaying a debt.Odd Lot: A securities holding that contains lessthan the normal trading unit. Compare Round Lot.Odd-Lot Dealer: A broker or dealer who buys orsells securities in quantities smaller than the normaltrading unit.Offer: The price at which an owner is willing to sell

a security.Offering: The means by which securities are sold to buyers. Usually states the price and terms.Offering Price: The price at which members of anunderwriting syndicate for a new issue will offersecurities to investors.Official Statement: Document prepared by or forthe issuer that gives detailed security and financialinformation about the issue.Offset: The buying or selling of a security in anexact amount to counterbalance the sale or purchaseof a similar type of security. Upon completion of anoffset transaction, the initiator's position remainsunchanged.Open Order: An order to buy or sell a security at adesignated price, usually within a certain time limitSee Good 'till Canceled Order.Option: The right to trade a security during a certain period of time.Optional Redemption: A right to retire all or partof an issue prior to the stated maturity during a

specified period of years, often at a premium. Theright can be exercised at the option of the issuer.Original Issue Discount: A municipal bond issuedat a dollar price less than par that qualifies forspecial treatment under federal tax law. Under thatlaw, the difference between the issue price and par istreated as tax-exempt income rather than capitagain, if the bonds are held to maturity.Overbought/Oversold: Describes a security or amarket that has undergone a sharp rise or fall due to



vigorous buying or selling. Being overbought or oversold indicates that such buying or selling mayhave left prices temporarily too high or too low.Overlay or Over levy: An amount included in thegeneral property tax to cover abatements and taxesthat will probably not be collected.Over the Counter: A securities market in which

dealers negotiate directly, as opposed to anorganized securities exchange auction system. Themarket for U.S. government and municipal bonds is primarily an over-the-counter market.Paper Gain/Loss: Unrealized capital gain or loss onsecurities held in portfolio, based on a comparisonof current market price and the original cost of thesecurities. Actual appreciation or depreciation isrealized when the security is sold. Compare RealizedGain/Loss.

Par Value: The value of a security expressed as aspecific dollar amount marked on the face of thesecurity or the amount of money due at maturity. Par value should not be confused with market value.Pay down: The net reduction in debt that occurswhen the amount of a new issue is less than thematuring issue.Paying Agent: Usually a commercial bank thatdispenses the principal and interest payable on amaturing issue. Municipal bonds are usually also payable at the office of a public treasurer.

Pledged Assets: Bank-owned securities that are pledged as collateral for funds deposited by thefederal government or by a state or municipalgovernment. These pledged assets are generally U.S.government or municipal obligations or other typesof obligations as specified by law.Pool: A collection of mortgages assembled by anoriginator or master servicer as the basis for asecurity. Pools are identified by a number.Portfolio: A collection of securities held by anindividual or institution.Positive Carry: A condition in which the yield on asecurity is greater than the cost of borrowing fundsto hold it. Compare Negative Carry.Power of Attorney: The legal authorization for one party to sign for and act on behalf of another party.Premium: The amount by which the price paid for asecurity exceeds the par value of the security. Also,the amount that must be paid over the par value tocall or refund an issue before maturity.

Prepayment: An unscheduled principal payment ona mortgage or mortgage-backed security that forms part of the collateral for a mortgage-backed securityThis usually occurs when homeowners sell theirhomes or otherwise prepay their mortgage loans prior to maturity. Prepayments may significantlaffect the weighted average life and yield of

mortgage-backed bonds.Primary Distribution or Offering: the initial saleand distribution of an issuer's securities. See

Secondary Distribution.Primary Market: The demand for first issues ofsecurities.Principal: The face or par value of a security. Itdoes not include accrued interest.Pro Forma Statement: A financial statement basedon assumptions usually made on the basis of past

account relationships, how these relationships mightchange in the future, and likely financialdevelopments. A pro forma would be used, forexample, to determine the amount and timing of acompany's future cash requirements.Prospectus: A document issued by a company priorto the sale of a new issue of securities. The prospectus gives detailed information about thcompany, the offering, the prospects, and the risksas required by the Securities and ExchangeCommission.

Prudent Man Rule: A long-standing common-lawrule that requires a trustee who is investing foranother to behave in the same way as a prudentindividual of reasonable discretion and intelligencewho is seeking a reasonable income and preservation of capital.PSA Prepayment Model: The Public SecuritiesAssociation prepayment model is used in themortgage-backed securities market as ameasurement of prepayment speed. The 100% PSAmodel assumes that a brand-new mortgage will prepay at an annualized rate of 0.2 percentage pointin its first month and increase by 0.2 percentage point each month thereafter until the 30th month, atwhich time it reaches 6%, where it remains for thelife of the mortgage. Sometimes referred to asstandard prepayment assumption model, or simplyPSA.Public Debt: The total outstanding debt of thefederal government. May also refer to the totaloutstanding debt of the federal government along



with that of states, municipalities, and other politicalsubdivision.Public Offering: The offering of securities for sale

to the public.

Quotation, or Quote: The highest bid to buy or thelowest offer to sell a security in any market at a

particular time. See Bid and Asked.Rally: A brisk rise in the price of a security or arecovery in the market.Rate of Return: The yield that can be attained on asecurity, based on its purchase price or its currentmarket price. On a bond, the rate of return may bethe amortized yield to maturity or the current incomereturn. Also refers to income earned on aninvestment, expressed as a percentage of the cost of the investment.Rating: The designation used by investors' services

to rate a security. Moody's ratings range from Aaa(the highest) through Aa, A, Baa, Ba, B, and so on.Standard and Poor's ratings range from AAA (thehighest) through AA, A, BBB, BB, B, and so on.Realized Gain/Loss: Actual profit or lossexperienced upon the sale of a security. ComparePaper Gain/Loss.Redemption: Liquidating debt by retiring anoutstanding obligation. This may occur at maturity but usually occurs at the issuer's option, such aswhen a bond issue is retired before its maturity date.Redemption Fund: A fund created for the purposeof retiring a callable obligation that matures instages or for purchasing such an obligation as funds become available.Redemption Price: The price at which a bond may be redeemed, at the issuer's option, before maturity.Refinancing: Rolling over the principal onsecurities that have reached maturity or replacingthem with the sale of new issues. The object may beto save interest costs or to extend the maturity of the

loan. See Refunding.Refunding: Replacing an outstanding obligation onor before its maturity with a new issue in order toextend the length of the borrowing, change theinterest rate, consolidate issues, or postpone payment until a more opportune time.Registered Bond: A bond whose principal and/or interest is payable only to the person or organizationregistered with the issuer.

This bond can be transferred only when endorsed bythe registered owner.Regular-Way Delivery: Unless otherwise specifiedmost government securities sold are to be deliveredand paid for on the business day following thetransaction. Regular delivery for municipal andcorporate securities, however, is three business days.Retire: To withdraw a security from circulationusually by redeeming it.Revenue Anticipation Notes (RANs): Short-termnotes sold in anticipation of receiving futurerevenues. The notes are to be paid from the proceedsof those revenues.Revenue Bond: A state or local bond secured byrevenues derived from the operations of specific public enterprises, such as bridges, toll roads, outilities. Such bonds are not generally backed by the

taxation power of the issuer unless otherwisespecified in the bond indenture.Rich: Description of the price of a security when thecurrent market quotation appears to be high (or theincome return low) in comparison with either the past price record of the security or the current pricesof comparable securities.Rights: The privilege extended by an issuer to theholder of a security to subscribe to new or additionalsecurities, sometimes at a price lower than thesubscription price. This allows current stockholders

the opportunity to avoid diluting their percentage of ownership.Roll Over: To reinvest in a new issue of the same ora similar security after receiving funds from amatured security.Round Lot: The normal minimum unit of trading

for a particular issue or type of security. Compare

Odd Lot.

Safekeeping: Holding securities in a bank's vaultsfor protection. This is a service banks offer to

customers for a fee.Sallie Mae: Trade name for the Student LoanMarketing Association (SLMA).Scale: The terms on a serial bond issue that isreoffered to the public; the scale shows the prices oryields offered for each maturity in the issue.Seasoned Securities: Recognized securities that aregenerally accepted by the investing public.Secondary Distribution or Offering: the

redistribution of a large block of securities



previously sold by the issuer or underwriting groupin an initial or primary offering. See PrimaryDistribution.Secondary Market: The market in which previously issued securities are traded, as comparedto the new issue market. Also, the purchase or saleof securities in a special offering or through a means

other than the regular channel of trading.Secured Deposit: Bank deposits of state or localgovernment funds that, under the laws of certain jurisdictions, must be secured by the pledge of acceptable securities.Secured Loan: A loan that is secured by marketablesecurities or other marketable valuables. Securedloans may be either time or demand loans.Securities: Investment instruments such as stocksand bonds.

Securities and Exchange Commission (SEC): Anagency created by Congress to regulate securitiesissuance and trading. The SEC enforces varioussecurities acts that are intended to protect investors.Security Dealer: An individual or firm who buysand sells securities for his or her own account, actingas principal and taking title of the securities untilthey are sold to someone else. See Dealer.Self-Liquidating Bonds: Bonds that are paid for from the earnings of a municipally owned enterprise,usually a utility. The earnings of the enterprise must

be sufficient to cover the debt with a reasonablemargin of protection in order for the bonds to beregarded as entirely self-liquidating.Self-Supporting Debt: Debt that requires only thesupport of taxes that have been designatedspecifically for its repayment and for no other purpose.Selling below the Market: A security that iscurrently quoted at a price less than that quoted for similar securities.Senior Securities: Securities that have priority over other obligations for claims on the issuer's assets andearnings.Serial Bonds: Bonds of the same issue that havedifferent maturities over a number of years. Thisallows the issuer to retire the issue in small amountsover a long period of time.Short Covering: Buying back securities that were previously sold, to make delivery on a short sale.Short Sale: The sale of a security that is not owned by the seller on the expectation that the security can

be bought or borrowed from a broker in time to bedelivered to the buyer. The short seller's intent is to profit by buying the security at a lower price than isold for.Sinking Fund: A reserve fund set aside over a period of time for the purpose of liquidating oretiring an obligation, such as a bond issue, at

maturity.Special Assessment Bonds: Bonds that are paid back from taxes on a property that is being improvedwith funds financed by the bonds. The issuinggovernmental entity agrees to make the assessmentsand to earmark the tax proceeds to repay the debt onthese bonds.Special Tax Bond: A bond secured by a special taxsuch as a gasoline tax.Spread: The difference between two figures or

percentages. For example, the difference betweenthe bid and asked prices of a quote or between theamount paid when a security is bought and theamount received when it is sold.Stop Out: The lowest price that the US. Treasurywill accept for a new issue of bills, notes, or bondsin a particular auction.Subscription: An agreement to purchase a certainoffering for a specific price. The offer is not bindingunless it is accepted by the properly authorizedrepresentatives of the issuer. Also refers to the order

made for the purchase of new securities.Swap: The sale of a block of securities and the purchase of another block with similar market valueMay be made to achieve many goals, includingestablishing a tax loss, upgrading credit quality, orextending or shortening maturity.Syndicate: A partnership of banks or brokers that join together in enterprises that are too large for anymember to handle individually. An investment banking syndicate is headed by a manager who hasmade a successful bid for the wholesale purchase ofa securities lot. The syndicate members agree todistribute a specified amount of the securities. Themanager may allot the securities to them on a pro-rata or other agreed-upon basis. On final distributionof all securities, the syndicate is broken, and theobligation of all members to the terms of theagreement is terminated. See Underwriter.Taking a Position: The activities of a dealer who purchases a block of a certain security as inventoryfor the purpose of resale at a profit.



Tax and Revenue Anticipation Notes (TRANs):

Short-term notes issued by states or municipalities tofinance current operations in anticipation of futuretax receipts and revenue that will be used to repaythe debt.Tax Anticipation Notes (TANS): Short-term notesissued by states or municipalities to finance current

operations in anticipation of future tax collectionsthat will be used to repay the debt.Tax-Exempt Bonds: Bonds for which the interest paid is usually exempt from federal taxes and, insome cases, from state and local taxes in state of issuance. The interest rate paid on these bonds isgenerally lower than rates on securities that are nottax-exempt.Term Issue: A bond issue that matures all at onceon a specific date.

Terms: The conditions of the sale or purchase of asecurity.Thin Market: A market in which trading volume islow, with very few bids to buy or offers to sell.Trade Date: The date when a security transaction isexecuted.Trader: Someone who buys and sells securities for a personal account or a firm's account for the purpose of short -term profit.Trading Market: The secondary market for bondsthat have already been issued. See Secondary

Market.Treasury bill (T Bill): An obligation of the U.S.government with a maturity of one year or less. T - bills bear no interest but are sold at a discount.Treasury Bonds and Notes: Obligations of the U.S.government that bear interest. Notes have maturitiesof one to ten years; bonds have longer maturities.Trustee: A bank designated as the custodian of funds and the official representative of bondholders.In this capacity, the trustee is responsible for enforcing the bondholders' contract with the issuer.responsibility for paying the net purchase price. Inmost instances, the underwriter deals in new issuesand with the issuing entity. An investmentunderwriter guarantees the sale of a securities issue by purchasing the entire issue from the company andthen selling it to the public. Underwriting is onefunction of an investment banker. See al so

Syndicate.

Unlimited Tax Bond: A municipal bond secured bythe pledge of taxes that are not limited by rate oramount.Unlisted Securities: Securities that are traded in theover-the-counter markets rather than through arecognized exchange.Validation Proceedings: The legal proceedings

required in some states whereby the courts decidethe validity of proposed bond issues.Visible Supply: The total dollar volume of new

municipal bond issues coming up for sale within the

next 30 days.

When-Issued Basis (WIB): Describes securitiesthat are traded before they are actually issued, withthe stipulation that the transactions are null and voidif the securities are not issued. Usually abbreviatedto "w.i." following a market quotation for such

securities.Winning Bid: The successful bid for a particularissue. Generally, it produces the lowest net interestcost ( NIC) to a municipal borrower or offers thehighest premium in a single coupon bid.Yield: The annual rate of return on an investment,expressed as a percentage of the investment. Incomeyield is obtained by dividing the current dollarincome by the current market price for the security Net yield, or yield to maturity, is the current incomeyield minus any premium above par or plus anydiscount from par in the purchase price, with theadjustment spread over the period from the date of purchase to the date of maturity of the bond.Yield to Maturity: The average annual yield on asecurity, assuming it is held to maturity; equal to therate at which all principal and interest paymentswould be discounted to produce a present valueequal to the purchase price of the bond. Also callednet yield.Zero Coupon Bonds: Zeros do not pay periodic

coupon payments. They are sold at a discount fromface value. Interest income, which is received atmaturity, is the difference between the purchase price and the amount at maturity.

Repo transaction The term Repo has been derived

from the word repurchase which literally means

selling today and buying back at a later date. To be

specific, in money market terms, it means a repo

trader sells securities, gets funds for a certain

specified time, and after this time period, purchases



back the securities by paying the previously taken

(read borrowed) funds along with some interest for

the said period. The securities in question basically

act as an insurance against borrower¶s default.

A forex money market also repo works on similar

terms.

Repo rate In the above transaction, if the lender of the funds is RBI, it I termed as a repo transaction

with RBI. Following may be noted-

y Whenever the banks have any shortage of

funds they can borrow it from RBI.

y Repo rate is the rate at which banks borrow

rupees from Reserve Bank of India (RBI).

y A reduction in the Repo rate will help banks to

get money at a cheaper rate.

y When the Repo rate increases borrowing from

RBI becomes more expensive.

y The rate charged by RBI for its Repo operations

is 5.25%.

y When RBI lends money to bankers against

approved securities for meeting their day to day

requirements or to fill short term gap, it takes

approved securities as security and lends money.

These types of operations are generally for

overnight operations.

y

Repo rate is the medium through which RBIinfuses funds in the system. Recently, in view of

the decreased (read tightening) liquidity

conditions, RBI has allowed a second Repo facility

which means that RBI is giving banks to borrow

money from RBI and thus RBI is looking to infuse

more money into the system

y A bank¶s money market trader typically can use

RBI¶s LAF and money market for arbitrage

opportunities sometimes

Reverse repo rate If the borrower of the funds isRBI; it is termed as reverse repo transaction.

y Reverse Repo rate is the rate at which RBI

absorbs money from the system.

y Banks are always happy to lend money to RBI

since their money is in safe hands with a good

interest.

y An increase in Reverse Repo rate can cause the

banks to transfer more funds to RBI due t

attractive interest rates.

y It can cause the money to be drawn out of the

banking system.

y The rate charged by RBI for its Reverse Repo

operations is 3.25%. Cash Reserve Ratio (CRR) CRR is the amount of

funds that the banks have to keep with RBI. It is

calculated on the total deposits that the bank has as

on the date. If RBI decides to increase the percent of

this, the available amount with the banks comes

down. RBI is using this method (increase of CRR

rate), to drain out the excessive money from the

banks. In order to understand this, consid

following example-

y Suppose RBI says the CRR as 5%. Now if a bank

A receives Rs.100 as deposit then it can lend Rs.95

as loan and will have to keep Rs.5 as balance in

Deposit account.

y Now the Borrower who has received Rs.95 as loan

will deposit the same in his bank, borrower¶s bank

will now lend him Rs.90.25 and keep Rs.4.75 in

deposit account.

y This process continues in the banking system

resulting to expand its initial deposit of Rs.100 tomaximum of Rs.2000.

y Similarly if suppose RBI says the CRR as 10%

Now if a bank A receives Rs.100 as deposit then it

can lend Rs.90 as loan and will have to keep Rs.10

as balance in Deposit account.

y Now the Borrower who has received Rs.90 as loan

will deposit the same in his bank, borrower¶s bank

will now lend him Rs.81 and keep Rs.9 in deposit

account.

y This process continues in the banking systemresulting to expand its initial deposit of Rs.100 to

maximum of Rs.1000.

y Higher the CRR, the lower the money available for

lending, resulting into reduction in credit

expansion by controlling the money that goes out

of loans.



y Thus RBI increases the requirement of CRR

whenever they feel the need to control money

supply.

Central bank of any country uses a combination of

these 3 rates to influence the lending rate in the

economy and thus contain inflation and stimulate

growth. This adjustment of the 3 rates (commonlyknown as policy rates) is known as monetary policy.

Relation between Inflation and Bank interest

Rates: How does inflation affect rates? Inflation,

in simple terms is a sustained increase in general

price level. In other words, it can also be described

as a situation in which excess money chases fewer

goods, causing increase in demand of goods and

thus leading to an increase in price. Thus if this

demand created by excess money can be curtailed,

inflation would be contained. This is the genesis

behind controlling inflation through monetary

policy. If inflation is high, interest rates are

increased. If repo, ie rates at which banks borrow

from RBI, is increased, such borrowing will become

costly and banks would thus either borrow less or

pass on this increased cost to their borrowers. Again

if reverse repo is increased, banks would divert more

funds towards RBI and excess liquidity will be

absorbed by RBI rather than going at cheaper cost inthe economy. In either of the cases, actual lending

will be less and demand for goods and services will

be less In the case of CRR, if the rate is increased, it

affects in two ways. First, immediate liquidity in the

system is absorbed to the extent CRR is increased as

more money needs to be placed with the regulator.

Second, in the incremental lending, potential

capacity of banks to lend is curtailed. This again

leads to less lending by banks. Another ratio which

does not directly affect inflation but is important for banking is statutory liquidity ratio.

Statutory Liquidity Ratio (SLR) SLR is the

amount a commercial bank needs to maintain in

the form of cash or gold or approved securities

(Bonds) before providing credit to its customers.

SLR rate is determined and maintained by the RBI

in order to control the expansion of bank

credit. SLR is determined as the percentage of total

demand and percentage of time liabilities. Time

Liabilities are the liabilities a commercial bank

liable to pay to the customers on their anytime

demand. RBI ensures the solvency of a commercia

bank from SLR. It is helpful tocontrol the

expansion of Bank Credits. By changing the SLR

rates, RBI can increase or decrease bank creditexpansion. Also through SLR, RBI compels the

commercial banks to invest in government securities

like government bonds. Currently, in India, banks

have to maintain a SLR of 25% which means that

25% of the value of demand and time liabilities has

to be invested in approved securities. SLR of

banking system in India has a SLR of about 27% ie

above the statutory SLR because due to the

economic crisis, banks were conservative in lending

and invested in same heaven Government securities.

Hope this article would be useful and help you in

understanding the economic scenario better.Acquisition The process of buying or acquiringsome asset or an entire companyActivity This consists of the primary bankingactivity of an institution. For example, the primaryactivity of state member banks, non-member banksand national banks (which are all commercial banks)is Commercial Banking

As of DateThis represents a report date ortransaction date.Bank Insurance Fund (BIF) see InsuranceThefund that provides deposit insurance for commercial banks. It is administered by the Federal DeposiInsurance Corporation (FDIC)Bank Holding Companies Performance Report

(BHCPR)An analytical tool produced by theFederal Reserve System for supervisory purposes,including on-site examinations and inspections, off-site surveillance and monitoring, and analyses

performed in connection with applications filed withthe Federal Reserve regarding mergers, acquisitionsand other matters. The BHCPRs are designed toassist analysts and examiners in determining a bankholding company¶s financial condition and performance based on financial statemencomparative ratios, trend analyses, and percentileranks relative to its peers.Branch Locator A search option that provides acomprehensive list of all branches belonging to an



institution. Not all banks will have branchestherefore, the option will only be available to thosethat do.Branch Office An office of an institution that is physicallyseparated from its home office, but that offers thesame kinds of deposit taking, loan and other services

conducted at the home office.Charter (Chartering Authority)A state or federalagency that grants charters to new depositoryinstitutions. For state chartered institutions, thechartering authority is usually the state bankingdepartment; for national banks, it is the OCC; andfor federal savings institutions, it is the Office of Thrift Supervision.Closed Bank When an institution's charter is closedand there is no successor institution.

Failed Bank (failure)

The closing of a financialinstitution by its chartering authority, which rescindsthe institution¶s charter and revokes its ability toconduct business because the institution is insolvent,critically undercapitalized, or unable to meet depositoutflows.FDIC Certificate Number A unique number assigned by the FDIC used to identify institutionsand for the issuance of insurance certificates.Federal Financial Institutions Examination

Council (FFIEC) Interagency body composed of

representatives from the five regulatory agenciesresponsible for U.S. depository institutions.Head Office The headquarters of the entity, i.e., thehead office of a branch, agency, or other non-independent facility.Home Mortgage Disclosure Act (HMDA)

Respondents Certain financial institutions,including banks, savings associations, credit unions,and other mortgage lending institutions that provide public loan data in accordance with the HomeMortgage Discloser Act, which was enacted byCongress in 1975.Institution Profile Provides detailed characteristicinformation about an institution. Characteristicinformation includes attributes such as Institutiontype, Location, and Primary Federal Regulator andStructure information such as OrganizationHierarchy, Institutions Acquired, Institution History,and Branch Locator.Institutions Acquired These are institutions thatwere acquired by other institutions.

Institution History A description of an institution'scharacteristic and structure information over time.Institution TypeA classification describing theactivities of the institution. NIC also provides aglossary of Institution TypesInsuranceBank Insurance Fund (BIF) is theinsurance fund for insured banks.Savings

Association Insurance Fund (SAIF) is the insurancefund for insured savings associations.BIF and SAIFare managed by the FDICMergerThe consolidation of two or moreinstitutions into a single entity. Generally thesurvivor is the institution that remains in businessfollowing the merger, whereas the institution thatceases to exist is the non-survivor. There may bemore than one non-survivor for any given merger.Mortgage Banking CompanyCompany that makes

acquires, or services loans or other extensions ofcredit for the account of othersMutual FundFund that pools money from itsshareholders in stocks, bonds, governmentsecurities, and short-term money marketinstruments.National Information CenterThe NationaInformation Center ( NIC) is a central data repositorycontaining information about all U.S. bankingorganizations and their domestic and foreignaffiliates, as well as information on foreign banking

organizations located in the U.S.Organization HierarchyThe ownershiprelationships of institutions. The institution may bethe top tier or anywhere within the organizationhierarchy.Parent InstitutionThe Parent Institution owns orcontrols another institutionPurchase and AssumptionA Purchase andAssumption (P&A) is a transaction in which aninstitution purchases assets and liabilities of anotherinstitution. This transaction results in a major changeto the seller's primary business. The seller's chartermay or may not continueRegulatorFederal Banking Agencies that supervise banks and other financial institutions depending oneach institution¶s specific charter or mission. Thefive federal regulators are as follows:Federal Deposit Insurance Corporation (FDIC)Federal Reserve System (FRS) National Credit Union Administration ( NCUA)Office of the Comptroller of the Currency (OCC)



Office of Thrift Supervision (OTS)Report DateThis date generally corresponds to thelast day of the report period.Routing Transit Number (RTN)The RT N is a bank identifier found on the bottom of checks. It iscommonly referred to as an ABA (AmericanBankers Association) number and is nine numerical

digits in length.RSSD IDThe RSSD ID is a unique identifier assigned to institutions by the Federal Reserve.While the length of the RSSD ID varies byinstitution, it cannot exceed 10 numerical digits.Savings Association Insurance Fund (SAIF) see

InsuranceThe fund that provides deposit insurancefor savings institutions. SAIF was authorized byCongress in 1989 to take over the thrift depositinsurance role held by the former Federal Savings

and Loan Insurance Corporation (FSLIC). SAIF isadministered by the Federal Deposit InsuranceCorporation (FDIC).SplitWhen one entity (E1) transfers between 40 and94 percent of its assets to one or more newly formedentities (E2). Both entities continue to exist. E1 hasnot failed, and government assistance is notinvolved.StatusCurrent: institution that is open as of aspecified date Non-Current: institution that is closedas of a specified dateCurrent and Non-Current: all

institutions that are open or haven been closed as of a specified dateTop 50 BHCsThese are bank holding companieswith the largest consolidated total assets and areranked each quarter on a scale of 1 to 50. The listchanges periodically and is often referred to as the"Official Top 50 List."

ACH Processing (ACH - Automated Clearing

House) - Processing that occurs between anationwide network of financial institutions that

send electronic messages, via telecommunicationslines instead of paper (checks), to transfer money between two parties. The most common ACHtransactions are direct deposit, pre-authorizeddebits, cash concentration, and corporate tocorporate payments.Automated Teller Machine (ATM) - A machinethat allows the customer to perform some of themore common teller transactions, such as cashwithdrawals, deposits, and transfers. ATMs are

generally accessible 24 hours a day, 7 days a week.Cashier's Check - A check drawn by a bank onitself, signed by the Cashier or other authorized bank officer and payable to a third party named bythe customer. Cashier's Checks are universallyaccepted.Certificate of Deposit (CD) - A type of depositaccount with a fixed term (months until maturity)and a minimum initial deposit. Interest is earned atthe current rate in effect for the term. Interest payments may be added back to the CD or payable by check or deposit to another M&S checking orsavings account. Most CD's are automaticallyrenewable at the end of a term for the current ratein effect at the time of renewal.Check Safekeeping - The process of microfilmingcustomer's paid checks. The microfilm is the

official record of the transaction and is retained bythe financial institution. Canceled checks are storedrather than being returned to the customer.Check Card (Debit Card) - A plastic card with theVisa or MasterCard logo, designed to give acustomer access to funds in his/her checkingaccount to obtain cash, purchase goods andservices, or transfer funds from one account toanother. The cards are accepted around the worldwherever you see the Visa or MasterCard logo.Compound Interest - Interest that accrues when

earnings for a specific period are added to principal; thus interest for the following period iscomputed on the principal plus accumulatedinterest.Credit Cards - A plastic card that can be used bythe holder to make purchases or obtain cashadvances using a line of credit made available bythe card-issuing financial institution.Daily Compounding - A frequency of calculatinginterest whereby interest is added to the principal

each day. Interest is then earned on the new balance.Direct Deposit - A pre-authorized system in whichcustomer's government benefits or other paymentsare automatically deposited to their checking orsavings accounts. Some types of Direct Depositsare Social Security, SSI, VA benefits, annuities, pension benefits, payroll checks and dividenchecks.Education IRA - An investment tool created for



the purpose of paying for the future cost of a child's post-secondary education. Contributions and their earnings are tax-free when withdrawn to pay for qualifying education expenses.EFTPS - Electronic Federal Tax Payment Systemis a new way for taxpayers to pay federal taxeselectronically from the convenience of office or home. EFTPS interfaces with the TT&L programand is designed to replace the Federal Tax Depositcoupons with the electronic system. EFTPS offerstwo primary payment methods through the ACHnetwork, and the taxpayer is in full control oinitiating all tax payments.Grace Period - A time period within which adepositor can withdraw funds from a certificatewithout penalty.Individual Retirement Accounts - Two types to

choose from for eligible individuals, the TraditionalIRA and the Roth IRA.IOTA Accounts - Interest on Trust Accounts are NOW accounts established by attorneys or lawfirms for their clients, where the interest isforwarded to the Florida Bar Foundation.Money Market Deposit Account - A depositaccount offered by financial institutions that isdesigned to be directly equivalent to, andcompetitive with, money market mutual funds.These accounts, unlike mutual funds, are FDIC

insured.NOW Account - A deposit account, similar to achecking account, from which the account holder can withdraw funds by writing a negotiable order owithdrawal ( NOW) payable to a third party andwhich can earn interest.Online Banking & Bill Pay - Personal and business account information accessible through a personal computer, the Internet or Screen Phone.The Bill Pay service, available via these same

devices or a touch-tone phone, utilizes the ATMnetwork to electronically pay any bill (excludingthe federal government and IRS). Paper checks areissued when ACH payments are not available.Overdraft Protection - A service that allows thecustomer to write checks for an amount over andabove the amount in their checking account. Fundsare transferred from their line of credit or other designated account to their checking account asneeded.

Personal Identification Number (PIN) or

Personal Access Number (PAN) - A secretnumber or code used by the account holder toauthorize a transaction or obtain informationregarding his or her account. Often used inconjunction with a plastic card or with a telephonevoice response system.Qualified Retirement Plan - An employee benefit plan that qualifies for special tax treatment underInternal Revenue Code Section 401(a).Regular Savings Account - A form of depositaccount with no legal limits or requirements as toamount, duration, or times of additions orwithdrawals.Rollover IRA - A type of IRA that allowsemployees who receive a lump-sum distributionupon leaving an employer, or upon termination o

an employer's qualified retirement plan, to depositall or any portion of the funds in a self-directedIRA. The portion of eligible distribution that is putinto such an account enjoys the same tax-deferralstatus as a regular IRA.Roth IRA - Contributions are not deductible butdistributions can generally be withdrawn tax-free.Signature Card - A contractual form, executed byan account holder, establishing account ownershipand setting forth some of the basic terms of theaccount and provisions of the deposit contract.

Simple IRA - Savings Incentive Match Plan forEmployees of small employers. This retirement plan is simple to administer and offers contributionoptions that are both flexible and substantial;generally available to both for-profit and not-for- profit employers having no more than 10employees.Simplified Employee Pension Plan - A plan by anemployer to make contributions toward anemployee's retirement income. The employer

makes contributions, up to the annual contributionlimits, directly to an IRA set up by an employeewith a qualified financial institution.Tax Identification Number (TIN) - The numberused to identify an individual or entity for federalincome tax purposes.Tiered Interest Rate - An interest rate structure inwhich the entire account balance earns a higher rateonce it reaches the designated level, or interest isearned at various rates within tiers. The method



used must be disclosed.Traditional IRA - Contributions may be partiallyor fully deductible, but distributions are generallytaxable.Trustee Transfer - The moving of IRA funds fromone IRA trustee directly to another IRA trustee,with no check being made payable to the IRA participant. This type of transfer is not subject toany time or frequency restrictions.Uncollected Funds - Funds that have beendeposited in an account or cashed against anaccount by a check that has not yet been clearedthrough the check collection process and paid bythe drawee bank. Financial Institutions typically place a temporary hold on their customers'uncollected funds, making those funds unavailablefor withdrawal until the time period of the hold

expires.Uniform Transfer to Minors Act - An act thatsets forth provisions for giving a minor anintangible gift (i.e.- bank accounts, stocks or bonds)that results in income shifting with an adult servingas custodian. The custodian has direct control over the gift and can sell and reinvest proceeds from thegift for the minor recognizing any gain and/or annual income that results.Wire Transfer - An electronic transfer of fundsfrom one financial institution to another.

1. What is a Repo Rate?

A: Repo rate is the rate at which our banks borrowrupees from RBI. Whenever the banks have anyshortage of funds they can borrow it from RBI. Areduction in the repo rate will help banks to getmoney at a cheaper rate. When the repo rateincreases, borrowing from RBI becomes moreexpensive.2. What is Reverse Repo Rate?

A: This is exact opposite of Repo rate. Reverse Reporate is the rate at which Reserve Bank of India (RBI) borrows money from banks. RBI uses this tool whenit feels there is too much money floating in the banking system. Banks are always happy to lendmoney to RBI since their money is in safe handswith a good interest. An increase in Reverse reporate can cause the banks to transfer more funds toRBI due to this attractive interest rates.3. What is CRR Rate?

A: Cash reserve Ratio (CRR) is the amount of fundsthat the banks have to keep with RBI. If RBI decidesto increase the percent of this, the available amountwith the banks comes down. RBI is using thismethod (increase of CRR rate), to drain out theexcessive money from the banks.34. What is SLR Rate?

A: SLR (Statutory Liquidity Ratio) is the amount acommercial bank needs to maintain in the form ofcash, or gold or govt. approved securities (Bonds) before providing credit to its customers.SLR rate isdetermined and maintained by the RBI (ReserveBank of India) in order to control the expansion of bank credit. SLR is determined as the percentage oftotal demand and percentage of time liabilities. TimeLiabilities are the liabilities a commercial bankliable to pay to the customers on their anytime

demand. SLR is used to control inflation and propelgrowth. Through SLR rate tuning the money supplyin the system can be controlled efficiently.5. What is Bank Rate?

A: Bank rate, also referred to as the discount rate, isthe rate of interest which a central bank charges onthe loans and advances that it extends to commercial banks and other financial intermediaries. Changes inthe bank rate are often used by central banks tocontrol the money supply.6. What is Inflation?

A: Inflation is as an increase in the price of bunch ofGoods and services that projects the Indianeconomy. An increase in inflation figures occurswhen there is an increase in the average level of prices in Goods and services. Inflation happenwhen there are fewer Goods and more buyers; thiswill result in increase in the price of Goods, sincethere is more demand and less supply of the goods.7. What is Deflation?

A: Deflation is the continuous decrease in prices ofgoods and services. Deflation occurs when theinflation rate becomes negative (below zero) andstays there for a longer period.8. What is PLR?

A: The Prime Interest Rate is the interest ratecharged by banks to their most creditworthycustomers (usually the most prominent and stable business customers). The rate is almost always thesame amongst major banks. Adjustments to the prime rate are made by banks at the same timealthough, the prime rate does not adjust on any



regular basis. The Prime Rate is usually adjusted atthe same time and in correlation to the adjustmentsof the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of eachrespective month. Some banks use the name"Reference Rate" or "Base Lending Rate" to refer totheir Prime Lending Rate.9. What is Deposit Rate?

A: Interest Rates paid by a depository institution onthe cash on deposit. Policy Rates: · Bank Rate: 6.00%· Repo Rate: 5.25%· Reverse Repo Rate: 3.75%Reserve Ratios: · CRR: 6.00%· SLR: 25.0%

Lending/Deposit Rates: · PLR: 11.00%-12.00%.· Deposit Rate: 6.00%-7.50%.. Savings Bank rate: 3.5%.Note: Rates as on 14-05-10.10. What is FII?

A: FII (Foreign Institutional Investor) used to denotean investor, mostly in the form of an institution. Aninstitution established outside India, which proposesto invest in Indian market, in other words buyingIndian stocks. FII's generally buy in large volumes

which has an impact on the stock markets.Institutional Investors includes pension funds,mutual funds, Insurance Companies, Banks, etc.11. What is FDI?

A: FDI (Foreign Direct Investment) occurs with the purchase of the ³physical assets or a significantamount of ownership (stock) of a company inanother country in order to gain a measure of management control´ (Or) A foreign companyhaving a stake in a Indian Company.12. What is IPO?

A: IPO is Initial Public Offering. This is the firstoffering of shares to the general public from acompany wishes to list on the stock exchanges.13. What is Disinvestment?

A: The Selling of the government stake in publicsector undertakings.14. What is Fiscal Deficit?

A: It is the difference between the government¶stotal receipts (excluding borrowings) and total

expenditure. Fiscal deficit in 2009-10 is proposed at6.8% of GDP.15. What is Revenue deficit?

A: It defines that, where the net amount received (bytaxes & other forms) fails to meet the predicted netamount to be received by the government. Revenuedeficit in 2009-10 is proposed at 4.8% of GDP.16. What is GDP?

A: The Gross Domestic Product or GDP is ameasure of all of the services and goods produced ina country over a specific period; classically a yearGDP during 2008-09 is 6.7%.17. What is GNP?

A: Gross National Product is measured as GDP plusincome of residents from investments made abroadminus income earned by foreigners in domesticmarket.

18. What is National Income?A: National Income is the money value of all goodsand services produced in a country during the year.19. What is Per Capita Income?

A: The national income of a country, or region,divided by its population. Per capita income is oftenused to measure a country's standard of living. Percapita income during 2008-09 estimated by CSORs.25, 494.20. What is Vote on Account?

A: A vote-on account is basically a statement ,where

the government presents an estimate of a sumrequired to meet the expenditure that it incurs duringthe first three to four months of an election financialyear until a new government is in place, to keep themachinery running.21. Difference between Vote on Account and

Interim Budget?

A: Vote-on-account deals only with the expenditureside of the government's budget, an interim Budgetis a complete set of accounts, including bothexpenditure and receipts.22. What is SDR?

A: The SDR (Special Drawing Rights) is an artificialcurrency created by the IMF in 1969. SDRs areallocated to member countries and can be fullyconverted into international currencies so they serveas a supplement to the official foreign reserves ofmember countries. Its value is based on a basket ofkey international currencies (U.S. dollar, euro, yenand pound sterling).23. What is SEZ?



A: SEZ means Special Economic Zone is the one of the part of government¶s policies in India. A specialEconomic zone is a geographical region thateconomic laws which are more liberal than the usualeconomic laws in the country. The basic motto behind this is to increase foreign investment,development of infrastructure, job opportunities and

increase the income level of the people.What is corporate governance?

The way in which a company is governed and how itdeals with the various interests of its customers,shareholders, employees and society atlarge. Corporate governance is the set of processes,customs, policies, laws, and institutions affecting theway a corporation (or company) is directed,administered or controlled. Is defined as the generalset of customs, regulations, habits, and laws that

determine to what end a firm should be run.Functions of RBI?

The Reserve Bank of India is the central bank of India, was established on April 1, 1935 inaccordance with the provisions of the Reserve Bank of India Act, 1934. The Reserve Bank of India wasset up on the recommendations of the Hilton YoungCommission. The commission submitted its reportin the year 1926, though the bank was not set up for nine years.To regulate the issue of Bank Notes andkeeping of reserves with a view to securing

monetary stability in India and generally to operatethe currency and credit system of the country to itsadvantage." Banker to the Government: performsmerchant banking function for the central and thestate governments; also acts as their banker.Banker to banks: maintains banking accounts of allscheduled banks.What is monetary policy?

A Monetary policy is the process by which thegovernment, central bank, of a country controls (i)the supply of money, (ii) availability of money, and(iii) cost of money or rate of interest, in order toattain a set of objectives oriented towards the growthand stability of the economy.What is Fiscal Policy?

Fiscal policy is the use of government spending andrevenue collection to influence the economy. These policies affect tax rates, interest rates andgovernment spending, in an effort to control theeconomy. Fiscal policy is an additional method todetermine public revenue and public expenditure.

What is Core Banking Solutions?

Core banking is a general term used to describe theservices provided by a group of networked bank branches. Bank customers may access their fundand other simple transactions from any of themember branch offices. It will cut down time,working simultaneously on different issues and

increasing efficiency. The platform wherecommunication technology and informationtechnology are merged to suit core needs of bankingis known as Core Banking Solutions.What is bank and its features and types?

A bank is a financial organization where peopledeposit their money to keep it safe.Banks play animportant role in the financial system and theeconomy. As a key component of the financialsystem, banks allocate funds from savers to

borrowers in an efficient manner.Regional Rural Banks were established with anobjective to ensure sufficient institutional credit foragriculture and other rural sectors. The RRBsmobilize financial resources from rural / semi-urbanareas and grant loans and advances mostly to smaland marginal farmers, agricultural labourers andrural artisans. The area of operation of RRBs islimited to the area as notified by GoI covering oneor more districts in the State.ii. Banking services for individual customers is

known as retail banking.iii. A bank that deals mostly in but internationalfinance, long-term loans for companies andunderwriting. Merchant banks do not provideregular banking services to the general publiciv. Online banking (or Internet banking) allowscustomers to conduct financial transactions on asecure website operated by their retail or virtual bank.v. Mobile Banking is a service that allows you to do banking transactions on your mobile phone withoutmaking a call , using the SMS facility. Is a term usedfor performing balance checks, account transactions payments etc. via a mobile device such as a mobile phone.vi. Traditional banking is the normal bank accountswe have. Like, put your money in the bank and theyact as a security and you will get only the normalinterests (decided by RBI in our case, FED bank inUS).



vii. Investment banking is entirely different. Here, people who are having so much money (money inexcess which will yield only less interest if inBanks) will invest their money and get higher returns. For example, If i have more money insteadof taking the pain of investing in share market, buying properties etc. I will give to investment

banks and they will do the money management andgive me higher returns when compared to traditional banks.What is E-Governance?

E-Governance is the public sector¶s use of information and communication technologies withthe aim of improving information and servicedelivery, encouraging citizen participation in thedecision-making process and making governmentmore accountable, transparent and effective.

What is Right to information Act?The Right to Information act is a law enacted by theParliament of India giving citizens of India access torecords of the Central Government andState Governments.The Act applies to all States andUnion Territories of India, except the State of Jammu and Kashmir - which is covered under aState-level law. This law was passed by Parliamenton 15 June 2005 and came fully into force on 13October 2005.Credit Rating Agencies in India?

The credit rating agencies in India mainly includeICRA and CRISIL. ICRA was formerly referred tothe Investment Information and Credit RatingAgency of India Limited. Their main function is tograde the different sector and companies in terms of performance and offer solutions for up gradation.The credit rating agencies in India mainly includeICRA and CRISIL(Credit Rating InformationServices of India Limited)What is Cheque?

Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified accountheld in the maker/depositor's name with that Bank.A bill of exchange drawn on a specified banker and payable on demand. ³Written order directing a bank to pay money´.What is demand Draft?

A demand draft is an instrument used for effectingtransfer of money. It is a Negotiable Instrument.Cheque and Demand-Draft both are used for Transfer of money. You can 100% trust a DD. It is a

banker's check. A check may be dishonored for lackof funds a DD can not. Cheque is written by anindividual and Demand draft is issued by a bankPeople believe banks more than individuals.

What is a NBFC?

A non-banking financial company ( NBFC) is acompany registered under theCompanies Act, 1956and is engaged in the business of loans andadvances, acquisition ofshares/stock/bonds/debentures/securities issued bygovernment, but does not include any institutionwhose principal business is that of agricultureactivity, industrial activitysale/purchase/construction of immovable property. NBFCs are doing functions akin to that of

banks; however there are a few differences:(i)A NBFC cannot accept demand deposits (demanddeposits are funds deposited at a depositoryinstitution that are payable on demand --immediately or within a very short period -- likeyour current or savings accounts.)(ii) it is not a part of the payment and settlementsystem and as such cannot issue cheques to itscustomers; and(iii) Deposit insurance facility of DICGC is notavailable for NBFC depositors unlike in case of

banks.Diff between banking & Finance?

Finance is generally related to all types of financial,this could be accounting, insurances and policiesWhereas banking is everything that happens in a bank only. The term Banking and Finance are twovery different terms but are often associatedtogether. These two terms are often used to denoteservices that a bank and other financial institutions provide to its customers.What is NASSCOM ?

The National Association of Software and ServicesCompanies ( NASSCOM), the Indian chamber ofcommerce is a consortium that serves as an interfaceto the Indian software industry and Indian BPOindustry. Maintaining close interaction with theGovernment of India in formulating National IT policies with specific focus on IT software anservices maintaining a state of the art informationdatabase of IT software and services relatedactivities for use of both the software developers as



well as interested companies overseas. Mr. SomMittal ± President. Chairman-Pramod BhasinWhat is ASSOCHAM?

The Associated Chambers of Commerce andIndustry of India (ASSOCHAM), India's premier apex chamber covers a membership of over 2 lakhcompanies and professionals across the country. It

was established in 1920 by promoter chambers,representing all regions of India. As an apexindustry body, ASSOCHAM represents the interestsof industry and trade, interfaces with Government on policy issues and interacts with counterpartinternational organizations to promote bilateraleconomic issues. President-Swati PiramalWhat is NABARD?

NABARD was established by an act of Parliamenton 12 July 1982 to implement the National Bank for

Agriculture and Rural Development Act 1981. Itreplaced the Agricultural Credit Department (ACD)and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinanceand Development Corporation (ARDC). It is one of the premiere agencies to provide credit in ruralareas. NABARD is set up as an apex DevelopmentBank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries,handicrafts and other rural crafts.

What is SIDBI?The Small Industries Development Bank of India isa state-run bank aimed to aid the growth anddevelopment of micro, small and medium scaleindustries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a whollyowned subsidiary of Industrial Development Bank of India.What is SENSEX and NIFTY?

SE NSEX is the short term for the words "SensitiveIndex" and is associated with the Bombay (Mumbai)Stock Exchange (BSE). The SE NSEX was firstformed on 1-1-1986 and used the marketcapitalization of the 30 most traded stocks of BSE.Where as NSE has 50 most traded stocks of NSE.SE NSEX IS THE I NDEX OF BSE. A ND NIFTY IS THE I NDEX OF NSE.BOTH WILLSHOW DAILY TRADI NG MARKS. Sensex and

What is SEBI?

SEBI is the regulator for the Securities Market inIndia. Originally set up by theGovernment of India in 1988, it acquired statutoryform in 1992 with SEBI Act 1992 being passed bythe Indian Parliament. Chaired by C B Bhave.What is Mutual funds?

Mutual funds are investment companies that poolmoney from investors at large and offer to sell and buy back its shares on a continuous basis and use thecapital thus raised to invest in securities of differentcompanies. The mutual fund will have a fundmanager that trades the pooled money on a regular basis. The net proceeds or losses are then typicallydistributed to the investors annually.What is Asset Management Companies?

A company that invests its clients' pooled fund into

securities that match its declared financialobjectives. Asset management companies provideinvestors with more diversification and investingoptions than they would have by themselves. Mutualfunds, hedge funds and pension plans are all run byasset management companies. These companies earnincome by charging service fees to their clients.What are non-perfoming assets?

Non-performing assets, also called non-performingloans, are loans,made by a bank or finance companyon which repayments or interest payments are not

being made on time. A debt obligation where th borrower has not paid any previously agreed uponinterest and principal repayments to the designatedlender for an extended period of time. Thenonperforming asset is therefore not yielding anyincome to the lender in the form of principal andinterest payments.What is Recession?

A true economic recession can only be confirmed ifGDP (Gross Domestic Product)growth is negativefor a period of two or more consecutive quarters.What are foreign exchange reserves?

Foreign exchange reserves (also called Forexreserves) in a strict sense are only the foreigncurrency deposits and bonds held by central banksand monetary authorities. However, the term in popular usage commonly includes foreign exchangeand gold, SDRs and IMF reserve positions.

banking terms and phrases

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