Dictionary of Banking Terms
By Students’ Academy
Copyright@2011Students’ Academy
Smashwords Edition
Chapter 1
A
AAA
AAA is a banking term used for rating a particular bond. The highest rated bond provides the maximum returns at the time of maturity. Generally the grade AAA is given by a credit rating agency to the best debt obligation.
ABA Transit Number
American Bankers Association issues this number. This numeric coding is used among different banks at the clearing house.
ABO
The full form of ABO is Accumulated Benefit Obligation. It pertains to the pension plans.
Absorption
Absorption generally refers to the process of renting a real estate property that is newly built or is recently renovated.
Absorption Time
It refers to the time which is required to complete the process of Absorption.
Abstract of Title
It is a kind of written report which defines records and identifies the history and ownerships of a particular asset, usually a real estate.
Acceleration
Acceleration refers to the process where the lender demands the full payment of a debt or a loan, as per the clause given in the agreement.
Acceleration Clause
Acceleration Clause is a written clause in the debt document that gives power to the lender to demand the payment before the maturity of the period or date of maturity.
Accelerated Depreciation
Accelerated Depreciation refers to a method of depreciation of fixed assets, where the early deductions are greater in monetary terms and later ones are smaller.
Acceptance
Acceptance is a banker’s signed document. In this all conditions are accepted, agreed to, and signed.
Accepting House
An accepting house refers to a specialized banking organization in the service of acceptance and guarantee of bills of exchange. Two prominent functions are performed by this organization: 1. Facilitating the different negotiable instruments.2. Merchant banking.
Accepting Party
Accepting Party refers to an individual or a group that accept the terms and conditions of a proposed agreement or contract put forth by another party.
Account
In banking and financing terms, an account is a record of all financial transactions that are related to an asset, individual, transaction or any organization. It is denoted by the A/c. It can also be defined as a transaction between a buyer and a seller about payments and dues which develop creditor-debtor relations.
Account Aggregation
Account Aggregation is an online facility provided by some banks or financial organizations. This facility enables a person to handle and operate all the transactions related to the bank account, credit facilities, debts and investments with the help of a single interface or account.
Account Balance
Account Balance refers to the total amount of money in a particular bank account.
Account Reconciliation
Account Reconciliation refers to a process which helps to verify the account balance, usually at the end of a week.
Account Statement
Account Statement is the financial record of an individual or a company, etc. that indicates the transaction and its effect on an account (usually bank account), in terms of debit and credit.
Account Value
Account Value refers to the total value of any account, applicable when a person has many accounts and transactions in the same bank or financial institution. The account value is a total value that is expressed in monetary terms.
Accessions
Accessions refer to the addition of new goods to the older goods, in the manner where identity, of both the goods remains the same.
Accommodation Maker
While applying for a loan, the person who signs the note and provides his credit history is called an accommodation maker. The accommodation maker usually receives no direct financial benefit from the loan. The term is also used in the concept of 'accommodation bills', when two or more people help each other by rendering liquidity of a negotiable instrument.
Account Analysis
Account Analysis is the study and conclusion of a single account.
Account Analysis refers to a procedure, where the profitability of a single demand account or many demand accounts is projected and analyzed.
Account Control Agreement
It is a kind of written agreement which perfects the interests of the creditor in a securities account.
Account Debtor
A person or an organization that is in debt is called an Account Debtor.
Account Reconciliation Services
Account reconciliation services refers to those services which specialize in the compilation of reconciliation documents and statements.
Accounts Payable
It is a list of the liabilities of an organization or an individual that are due but not paid to creditors.
Accretion
Accretion refers to a process which shows the increments and periodic increases in the book value or the balance sheet value of an asset.
Accretion also refers to the process where the price of a bond that has been bought at a discount is changed to the par value of the bond. It is also defined as a change in the price of a bond that has been bought at a discount to the par value of the bond.
Accretion Bond
Generally, a bond that has been purchased at a discount and whose book value is incremented to the par value or the face value is called an Accretion Bond.
Accreting Swap
Accreting swap is defined as a swap of interest which has an increasing notional amount.
Accrual Basis
Accrual Basis refers to a method of accounting in which each item is entered as it is earned or incurred regardless of when actual payments are received or made.
Accrual Bond
An Accrual Bond generally has a tendency of paying above the market rate. It is also defined as a security that does not have a period payment for the rate of interest. The interest is accrued and then added later on at the time of maturity.
Accrual Convention
Accrual Convention refers to a method of calculating the time period on a specific investment by the investors.
Accrued Interest
Accrued Interest is accumulated on an investment but is not yet paid. Accrued Interest is also called the receivable interest.
Accumulated Depreciation
Accumulated Depreciation is an allowance for depreciation.
Accumulated Depreciation is the total of all the periodic reductions from the book value of fixed assets. It is also termed as an allowance for depreciation.
Accumulator
Accumulator is also called Capital Appreciation Bond. It is a type of security that is related to capital and is issued on face value, but the interest is not paid to the investor on the basis of the time period. Instead, the total amount of accrued interest is paid along with the face value upon the maturity of the security.
ACH
The full form of ACH is Automated Clearing House. It operates on a national level and helps banks and financial institutions in the clearance of balances and negotiable instruments that are used at personalized as well as business transactions.
Active Tranche
Active Tranche refers to Real Estate Mortgage Investment Conduit. It is a bond that is backed up by a large set of mortgages. The principal and interest that are paid by the borrowers, are transferred to the people who hold tranche (tranche refers to a portion or money) in REMIC.
Actual Delay Days
Actual Delay Days refers to the actual days of lag times. The lag time is the time period that starts after the expiry of the last date of repayment.
ARM
The full form of ARM is Adjustable Rate Mortgage. It is basically a type of loan, where the rate of interest is calculated on the basis of the previously selected index rate.
Adjusted Trading
Adjusted trading is a trade understanding between an investor and the broker or dealer. The investor has to overpay the broker for a purchased security. On the other hand the broker overpays the investor for the security he wants to sell.
Administered Rates
Administered rates are the rates of interest which can be changed contractually by lender. In some cases, these rates can also be changed by the depositor and also the payee. The laws and provisions that monitor the concept of administered rates differ in each jurisdiction.
Administrative Float
Administrative float is the time period which has already been missed in order to administratively sort the checks, or for that matter, any type of currency and negotiable instruments in the bank itself or in the clearing house.
Administrative Review
An administrative review usually refers to the appraisal of the book value of a real estate and basically, deals in the underwriting issues. The administrative review is usually written from the point of view of loan underwriting during an estate appraisal. Read more on Mortgage Loan Underwriting
ADR
The full form of ADR is American Depository Receipt. American depository receipts are equal to a specific number of shares of a corporate stock that has been issued in a foreign country. American depository receipts are traded only the United States of America.
AICPA
The full form of AICPA is American Institute of Certified Public Accountants.
Amortization of Loans
Amortization of loans refers to a process of liquidation of loans or securities with the help of periodic reductions.
Amortization Period
Amortization Period refers to the beginning of the time of the credit, investment or negotiable instrument and ends upon the maturity or expiry of the instrument.
Amortizing Swap
Amortizing swap refers to the rate of interest that has a declining notional principal.
AMT
The full form of AMT is Alternative Minimum Tax. This tax is levied by the US government; it is a kind of Federal Income Tax.
Analytical Solution
Analytical Solutions are very simple mathematical techniques and models which are used to calculate projections and interest rates by the lending, banking and finance organizations.
Analytical VAR
Analytical VAR is also referred to as the correlation VAR. It is is basically the measurement of a financial instrument, portfolio of the financial instruments or an entity's exposure to the reductions in its value resulting from changes in the prevailing interest rates.
APR
The full form of APR is Annual Percentage Rate. It is calculated by dividing the total financing costs associated with a loan divided by the principal amount of the loan.
APY
The full form of APY is Annual Percentage Yield. It usually refers to a very accurate and calculated measure of yield that is paid on a standard bank deposit account.
Annuities
Annuities are contracts that guarantee income or return, in exchange of a huge sum of money that is deposited, either at the same time or is paid with the help of periodic payments. Some of the common types of annuities include the deferred, fixed, immediate or variable variants.
Anticipated Income Doctrine of Liquidity
The anticipated income doctrine of liquidity is basically an explanation of bank liquidity development in which the net cash flow of the borrowers is considered as the source of loan repayment instead of usual subsequent new borrowings.
Appraisal
An appraisal is basically a statement, document or an estimated rise or drastic climb in the price of a particular real estate. The term 'appraisal' is also used in connection to raising the book value of a real estate.
Appraisal Surplus
An appraisal surplus is the difference between the historical cost and the appraised cost of the real estate.
Arbitrage
Arbitrage is the simultaneous purchase and sale of two identical commodities or instruments. This simultaneous sale and purchase is done in order to take advantage of the price variations in two different markets. For example, purchase of gold in one nation and the simultaneous sale in another nation, (international markets) to achieve profit.
Arbitrage Free
Arbitrage free is a type of financial model that generates market structures that exclude scenarios generated by the arbitrage transactions and dealings.
Arbitrageur
An independent and individual broker who deals in arbitrage is called an arbitrageur.
Article of Agreement
Article of Agreement is also called a land agreement. Article of agreement enables a buyer to purchase real estate from the seller over a period of time, and pays the consideration in installments.
As-extracted Collateral
Extracted Collateral refers to mined or non-mined minerals.
Ascending Rate Bond
Ascending Rate Bond refers to a security which has a coupon rate that increases in previously defined increments at scheduled intervals.
ABS
The full form of ABS is Asset Back Security. This type of security is backed with the help of some kind of valuable assets, is known as an asset backed security. Sometimes, ABS is also referred to as the monthly rate of repayment of a secured loan.
Asset and Liability Management
Asset and liability management refers to the coordinated management of all the financial risks inherent in the business conducted by financial institutions. In real practice, asset and liability management aims at minimization of loss and maximization of profit.