Banking Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Term Definition

A
Accruals The beginning accrual balance to be used on the next scheduled statement (with accrual option on financial statement only) for the respective frequency code. One accrual balance for each frequency code.
ACH Automated clearing house
Acquisition date A date located in the Tax Lot Record (‘W’ Record) of a Financial Transaction. This date should be the same as the trade date from a Purchase Transaction. The system will use this date in computing gains or losses at the time of sale. If the Financial Transaction is a receipt of an asset, this field will be the Acquisition Date. For the disposition of an asset this field will be the Disposition Date.
Advance A loan made to a financial institution.
Advisor An agent retained by an investor to aid in his/her decision-making process. The advisor’s role is to look at the bigger picture of his/her customer, a picture that will satisfy the investor’s objectives.
Agency An account in which the title to the property constituting the agency does not pass to the trust institution but remains in the owner of the property, who is known as the principal, and in which the agent is charged with certain duties with respect to the property.
Agent A person who acts for another person by the latter’s authority. The distinguishing characteristics of an agent are (1) that he acts on behalf and subject to the control of his principal, (2) that he does not have title to the property of his principal, and (3) that he owes the duty of obedience to his principals’ orders.
AHP Affordable housing program
Amendments Additions, deletions, or changes to a legal document. All parties to the agreement must formally consent to an amendment by signing it. Only then does the amendment become an integral part of the document and is binding on all parties to the original agreement.
Articles of Association An instrument filed with the appropriate government agency on the incorporation of a business. It sets forth the purposes of the corporation, its duration, the rights and liabilities of shareholders and directors, classes of stock, etc.
As of transactions Any transaction posted as of a given date.
ATM's Automated Teller Machines. The terminal for user initiated banking transactions.

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Basis point One basis point equals 1/100th of one percent, or .01%. For example, 50 basis points is equal to 1/2 percent. Basis points are frequently used to describe spreads or changes in yields of interest rates.
Batch header A log sheet used to tally and control a batch of transactions readied for data input.
Bond A certificate that is evidence of a debt. The debt is initiated when the issuer sells the bond to the holder for a specific amount of cash. The issuer is obligated to pay the holder of the bond a fixed sum (the bond's face value) at a stated future date and to pay interest (usually twice a year) at a specified rate during the life of the bond. Bonds may be issued by corporations, the federal government, and by state and local governments as a means of raising funds in the capital markets. Bonds may be issued in registered form, in which the name of the holder is on record with the issuer, or in bearer form, in which the name of the owner is not registered and the bond is payable to whomever bears, or presents the bond to the issuer for redemption.
Book value (1) The price at which assets are carried on a financial statement. (2) The value of each share of common or capital stock based on the values at which the assets of a corporation are carried on its balance sheet. It is obtained by deducting from total assets all liabilities of the corporation and dividing the remainder by the number of shares outstanding.

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CAMEL Regulatory examination. Institution composite rating done by the FDIC. The evaluation is based on Capital, Asset Quality, Management, Earnings and Liquidity
Capital The net assets of a firm, partnership , etc. Including the original investment, plus all gains and profits.
Cash Any currency or recognized travelers checks.
Cashier's check A cash instrument drawn on a bank.
Certificate of Appointment A legally binding document which designates the appointment of an individual/institution to full stated obligations.
Checking account/ debit account A demand deposit account, withdrawals from which may be made by a written, negotiable instrument.
CIF Customer Information File - a common banking term used to describe the central customer information file house in the banking systems. It typically provides a composite picture of banking relationships and transactions for a given customer.
CIP Community investment program
CIP+ Community investment program plus
Commercial bank A financial institution chartered by a state or federal agency that accepts demand deposits and offers commercial loans. Other types of financial services usually are provided as well.
Compliance exam An examination of a savings institution to determine how well it is complying with federal law and regulations, particularly those dealing with consumer protection and non-discrimination.
Compliance period The period of time during which a thrift institution must comply with a regulation, ruling, order, or resolution of its regulatory agency.
CRA Community reinvestment act
Custodian A financial institution that holds in custody and for safekeeping the securities and other assets of an investment company.
Custody The service of safekeeping customer assets, including securities, and collecting interest and dividends. Custody also involves the buying, selling, receiving, and delivering of securities.
Cycle A predetermine sequence of systems tasks assembled to accomplish a given function. Ex. The statement release cycle.

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DDA Demand deposit account
Disbursement Money paid out in discharge of a debt or an expense; to be distinguished from distribution.
Distribution The apportionment of personal property (or its proceeds) among those entitled to receive the property according to the applicable statute of distribution or under the terms of the will or trust agreement; to be distinguished from disbursement.
DK A securities’ term used to denote a trade which is rejected back to the originating broker.
DTC Acronym for Depository Trust Company. A national non-profit clearinghouse, located in New York, for the settlement of trades dealing with corporate and municipal securities. DTC was established to address the enormous paperwork crisis that existed on Wall Street as a result of the inefficiencies of physical transfers of security certificates.

There are currently over $7.5 trillion (as of year-end 1993) in assets that are held by DTC.

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EBT Electronic benefits transfer
EDGAR The SEC database which houses 10Q and 10K filings of public companies. Annual reports can be accessed on line.
EFT Electronic funds transfer
 Electronic funds transfer systems (EFTS) Any system that moves funds from one institution to another, by means of electronic signals transmitted by wire, rather than the physical exchange of some other medium such as paper checks.
Escrow Money, securities, instruments, or other property deposited by two or more persons with a third person, to be delivered on a certain contingency or on the happening of a certain event. The subject matter of the transaction (the money, securities, instruments, or other property) is the escrow; the terms upon which it is deposited with the third person constitute the escrow agreement; and the third person is termed the escrow agent.
Europay European payments consortium for Mastercard.

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FANNIE MAE Nickname for the federal national mortgage association
FDIC An acronym for the Federal Deposit Insurance Corporation
Fiduciary An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them. A trustee and a beneficiary is an example of a fiduciary relationship.
FIVES Financial Instrument of Valuation and Engineering System
FREDDIE MAC Popular name for the Federal Home Loan Mortgage Corporation.
Free delivery Security sent out of a client’s account to a broker in exchange for which no funds are received.

A failed trade, usually involving a substantial amount of money, that is settled the same day between 3:00 p.m. And 5:30 p.m. By delivering units in the amount of the trade "Free" (no depository money is involved) through the Depository. The receiving broker then wires payment back through the Federal Reserve Bank.
Free receipt Securities brought into a client’s account from a broker for which the client sends no funds to the broker.

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G/l General ledger
Glass-Steagle act See Banking Act of 1933.

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Idealway The sweep account for members at the Home Loan Bank of Bank. It enable effective cash management and transaction accounting.
Identification The production of and examination by staff of documents issued by reputable sources as proof of the customer's identity. Such documentation should be pre-signed by the customer and bear a current photograph. The following forms are acceptable: a) current valid passport; b) social security card with picture identification; c) European identification number. Where appropriate, copies should be made and retained on file.
Income The returns from property, such as rent, interest, dividends, profits and royalties: as opposed to the principal or capital.
Indemnification Protection or exemption from loss or damage.
Intermediary A financial institution, such as a bank, that acts as a conduit between suppliers of funds (depositors) and users of funds (borrowers).

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Letter of Credit A credit instrument or document issued by a bank guaranteeing payments on behalf of its customers to a beneficiary for a stated period of time and when certain conditions are met. A letter of credit substitutes the bank’s credit for the credit of another party who is authorized to write drafts up to a specified amount, payable by the issuing bank.
LIBOR London interbank offered rate.
Loan A sum of money transferred to another for temporary use, to be repaid with or without interest according to terms of the loan agreement written in the accompanying bond, note, mortgage or other document of indebtedness. Loan is the noun. Lend (past tense lent) is the verb.
LOC Line of Credit or Letter of Credit
Lockbox A service performed by a vendor in which customers' incoming payments are picked up from a Post Office box and processed.

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Mark to Market Security pricing based upon actual market value.
Market value The price at which an investment may be sold at free sale at a recognized trading center.
Miscellaneous cash receipt The receipt of cash income derived from the sale of property, services provided, or payments made.
Money laundering The conversion or transfer of property derived from a criminal offense for the purpose of concealing, or disguising, the illicit origin of the property, or of assisting any person who is involved in the commission of such an offense, to evade the legal consequences of the action; the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from a criminal offense.
Money order An instrument of exchange purchased for a fee from the U.S. Postal Service or from a financial institution. The instrument is an order to pay on demand a sum of money specified on the face of the order to a party (the payee) named by the purchaser. Since the purchaser has already paid the face amount of a money order to the issuer, the payee presenting the order to an agent of the issuer is sure of collecting the funds. Thus, money orders are easily converted to cash anywhere in the United States, or anywhere the issuer has agents.
Mortgage A legal document by which real property is pledged as security for the repayment of a loan; the pledge is canceled when the debt is paid in full.
Mortgaged backed securities Securities that convey ownership of a fractional part of each mortgage in a pool of mortgages backing the securities. Mortgage payments are sent to the issuer of the securities and then passed through to those who bought the securities. Each security owner shares proportionally the interest and principal payments generated by the underlying pool of mortgages.

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NEACH New England automated clearing house
Nominee A person named for an office, position, or duty; in trust business, usually the person, firm, or corporation in whose name registered securities are held.

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OCC Office of the Comptroller of the Currency
Officer code The system code for each account officer with the Trust Division.

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Payment That which is paid. The sum of money or other item(s) of value that is transferred from one party to another.
Pledged mortgage collateral Mortgage assets used to pledge or guarantee loans
Principal Face value of an obligation, such as a bond or a loan, that must be repaid at maturity, as separate from the interest.
Promissory note A written promise to repay a certain sum of money to a bearer on demand or as specified.
Proxy (1) A person empowered by another to act as his agent in voting shares of stock. (2) The instrument evidencing the authority of the agent to vote.

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Real estate The right, title, or interest that a person has in real property, as distinguished from the property itself, which is the subject matter of the interest.
Registration (of securities) The recording of a security in the name of the owner or trustee.
Reorganization The altering of a firm's capital, organizational, and/or management structure following a plan worked out

During bankruptcy proceedings under chapter 11. The objectives of a reorganization are to eliminate the cause of the failure,

Settle with creditors, and allow the firm to remain in business.

Resolution A formal documentation of a decision made relative to fiduciary powers.

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S.W.I.F.T. Society for Worldwide Information and Financial Technologies - headquarters in Belgium; managed by JP Morgan;
Safe deposit box A container in a secure vault that is rented to an individual or organization for the safekeeping of valuables
Savings The total accumulated amount of income that is not spent on consumption.
Savings bank A financial intermediary that accepts savings deposits and invests these funds in loans primarily for

Commercial and residential real estate, plus investments in government and high quality corporate bonds and blue chip stock.

Savings banks may be state-or federally chartered and insured by the SAIF or the FDIC. In 1982, congress removed all differences between federally chartered savings banks and federally chartered savings and loan associations. There difference are reflected in the kinds of loans and investments they can make.

SEC Securities and Exchange Commission. The branch of the government that regulates the securities industry.
Securities Literally, things given, deposited, or pledged to assure the fulfillment of an obligation. In its narrow sense, a mortgage is a security; but the general meaning includes stocks, bonds, notes, and other evidences of indebtedness.
Security (1) The collateral that is given, deposited, or pledged to guarantee an obligation or the payment of a debt. For example, the property on which a mortgage is issued is the security for the mortgage loan. (2) A financial instrument that provides evidence of a debt, or of rights to share in earnings or the distribution of property. Stocks and bonds are securities. (3) Measures taken to protect property against theft or vandalism.
Settlement The winding up and distribution of an estate by an executor or an administrator.
Short-term deposits Deposits with a maturity of less than one year.
Small business administration (sba) A federal government agency that makes, guarantees and purchases participations

In loan to small wholesale, retail, service and manufacturing businesses.

Stand-by Letter of Credit A guaranty issued by a Federal Home Loan Bank on behalf of a member thrift institution wishing to

Enter into an interest rate swap agreement on its own. If the member institution defaults on its swap contract, the standby letter of credit obligates the District Bank either to pay a stated amount to the counter-party or to assume the swap obligation of the Member institution.

Statements An accounting of holdings and transaction of a given account.
Swap (1) A technique of the Federal Home Loan Mortgage Corporation by which original lenders exchange the mortgages they have made for Freddie Mac Participation Certificates (pcs), which provide the lender with ownership interests in the same mortgages. Freddie Mac refers to the transaction as the Guarantor Program, because the corporation adds its own guarantees to the safety of the mortgage investment. (2) a financial transaction in which two counterparties agree to exchange terms of payments over a period of time according to a predetermined rule. For example, the counterparties may swap interest payments, with each paying the other's interest on the same amount of principal. Usually a fixed rate interest obligation s swapped for a floating rate interest obligation, so that both parties can match the form of interest they owe on their debts with the form of interest income they expect to receive on their assets fixed with fixed, or floating with floating. Or, the counterparties may swap payments in one denomination of currency for payments in another country's currency. Both interest ate swaps and currency swaps are designed to lessen market exposure of paying off debt in an environment of potentially hanging interest rates.
Sweep An arrangement to maximize the interest earned by a customer who has both a high-interest rate account and a low- or no-interest account at the same financial institution. Funds not being immediately used in the low-interest account are automatically transferred (swept) to the high-interest account, where they remain until the balance in the low-interest account drops below a certain minimum and the funds are transferred back to the first account. The funds may be swept to the high-interest account overnight, or for longer periods of time
Sweep account A cash management account at a bank that systematically polls all designated bank accounts of a given customers collecting all excess cash and placing it in a higher yield instrument. It is used to optimize cash management.

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T plus 2 An industry standard for securities trading and settlement; trade date plus two days to settle
Tax participation clause A provision in a lease stipulating that the tenant will pay all or part of the real estate taxes on the leased property. Also called a tax stop clause
Taxable year The 12-month period used as the basis for calculating federal tax on income received during that time period. Also called the tax year.  
Tax-exempt The state of an investment that produces income not subject to federal and/or state income tax. For example, tax-exempt bonds are sold by local governments to finance such public projects as sewers, school construction and parks.  
Teller An employee of a depository institution who waits on customers, usually from behind a counter or some other partition. Tellers accept deposits, provide cash or checks for withdrawals, and perform most other routine customer services involving transfers of funds.
Term The period of time established to repay a loan or redeem a security.
Terms The details, specifications, obligations, requirements, and conditions of an agreement, or contract.
Trade The sales or purchase of a security or other financial instrument.
Trader An individual who buys and sells securities for his or her own account for short-term profit (loss). The term also refers to an employee of a broker, dealer or financial institution who buys and sells securities for the firm or its clients.
Transaction (1) any agreement between two or more parties that establishes a legal obligation. (2) the act of carrying out such an obligation. (3) all activities that effect a deposit account that are performed at the request of the account holder. (4) all events that cause some change in the assets, liabilities or net worth of a business.
Transfer agent An agent of a corporation to effect the transfer of its stock or bonds from one owner to another. A transfer agent for bonds usually is known as a registrar.
Traveler's check A type of check designed especially for business or vacation travelers. The traveler pays for the checks in advance. Thus the check is an order from the issuing company to pay on demand. Traveler's checks are issued in various fixed denominations, may be cashed almost anywhere in the world, and are insured against loss, theft, or destruction.
Treasury bill (T-bill) A short-term debt obligation issued by the U. S. Treasury at a discount under competitive bidding, with a maturity of up to one year. The bills are issued payable to the bearer only, and are sold at a minimum face value of $10,000.
Treasury bond A federal government debt obligation, ordinarily payable to the bearer, that is issued at par, with maturities of more than five years, and with interest payable semiannually.
Treasury certificate A U. S. Treasury security usually issued at par with a specified rate of interest and a maturity of one year or less. It is issued payable to the bearer and sold in minimum amounts of $l0,000.
Treasury note A debt obligation of the U. S. Treasury, usually issued payable to the bearer with a fixed maturity of not less than one year nor more than seven years. It is issued at par, with a specific interest return payable semiannually.
Trust A legal entity created to manage property for the benefit of a specific person or persons. A trust is funded when the owner (the grantor) transfers ownership of property to another (the trustee) for the immediate or eventual benefit of a third person, (the beneficiary). The person who creates a trust is called a grantor, settlor or trustor. The person designated to receive assets at the end of the trust term is called a remainderman.
Trust account (1) a savings account, established under a trust agreement, containing funds administered by a trustee for the benefit of another person or persons. (2) an escrow account.
Trustee The individual or financial institution who holds legal title to property for the benefit of another person. Accepts a fiduciary responsibility to execute the terms of the Trust as outlined in the Trust Deed.

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Uncollected funds Funds that have been deposited in an account by means of a check drawn on another institution that has not yet paid the check.
Underwrite (1) to sign one's name at the end of a document, thus signifying agreement or concurrence with the contents of the document. (2) to assume risk and liability for specified events in return for a fee. An insurance company, by signing a policy, becomes the policy's underwriter, thereby assuming the risk of being liable for losses if events specified in the policy occur. (3) in mortgage lending, the act of assessing the risk of a loan and matching it to an appropriate rate of interest and term. (4) to guarantee the sale of a new issue of securities, usually by a securities dealer or a syndicate of dealers.
Uniform commercial code A set of business related laws dealing with the sale of goods, their transportation and delivery, financing, storage, payments, and various other commercial transactions. These model laws have been adopted, with minor modifications, by most states to provide some consistency among states' commercial laws. They were drafted by the national conference of commissioners on uniform state laws.
Unusual assets The monetary worth attributed to the acquisition of objects of value, such as art, musical instruments, automobiles, etc.

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Valuation An estimated value or worth of something.
Value The monetary worth of property, goods or services. See fair market value, fair value, and net realizable value.
Vault A large room or rooms in a bank or financial institution used for storage or safekeeping of customer valuables in safe deposit boxes, a bank’s portfolio of investment grade securities, and cash balances sufficient to meet daily cash needs.
Venture capital Initial money invested in high-risk companies or small companies specializing in new technologies, often in return for an equity position in the firm. Entails some investment risk, but offers the potential for above average future profits.
Voucher (1) a written statement that bears witness or substantiates a transaction; for example providing evidence that services have been rendered, goods purchased, or some other expenditure has been made. (2) a printed form authorizing a disbursement.

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Yield (1) the return on an investment, expressed as a percentage of the price originally paid for it. If the investment, such as a security, is to be sold, its yield is its return expressed as a percentage of its current market price. (2) income derived from an investment in property. (3) to give up possession; to pay.
Yield curve A chart in which yield levels are plotted on the vertical axis and the terms to maturity of debt instruments of similar creditworthiness are plotted on the horizontal axis.
Yield to maturity The average annual yield of a fully amortized loan, that is held by an investor for the life of the loan. The average rate takes into the account the fact that the outstanding principal, and consequently the amount of interest, declines each year until the loan is fully paid. When the term is used in reference to a bond or other security, it means the average annual rate of return of the security when held to maturity, taking into account discounts or premiums paid when the security is purchased and capital gains or losses.

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Zero-coupon bond A security sold at a deep discount from its face value and redeemed at its full face value at maturity. These bonds pay no interest. Instead, the investor's return is the difference between the purchase price of the bond and its face value when redeemed. Since these bonds do not pay interest, there are no interest coupons attached to the bond document, hence the name "zero-coupon bond." Even though the yield is not paid until maturity, the return accrues and is taxable on a prorated basis each year of the bond's life.
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