Glossary of Terms & Definitions

Acquisition | The process by which one company purchases another, either in whole or in part, to expand or consolidate its operations.

Account Freeze | A restriction placed on an account by a financial institution, preventing any transactions from being made until the restriction is lifted.

Account Takeover Fraud | A form of identity theft where a fraudster gains unauthorized access to a victim's bank account, often to initiate unauthorized transactions.

Acquirer | A financial institution that processes and settles transactions on behalf of merchants, enabling them to accept electronic payments.

Additional Tier 1 bonds (AT1) | Unsecured perpetual bonds (meaning no maturity date) issued by financial institutions to increase their common equity base.

Advisory services | Professional guidance offered by investment banks to clients on various financial matters, such as mergers, acquisitions, and capital raising.

Aggregation | A service that consolidates financial account information from different institutions, allowing users to view all accounts in one place.

Alternative funds | Funds that invest in non-traditional securities (i.e. not equities), such as real estate, commodities, and leveraged loans.

Alternative Payment Method (APM) | A non-traditional way of making payments, which usually bypasses traditional banking systems, such as mobile wallets or online payment platforms.

American depositary receipt (ADR) | A negotiable certificate issued by a US-based bank and representing share(s) of a non-US company. American depositary receipts are traded on US financial markets like regular shares of stocks and offer a way for investors to buy shares in foreign companies.

Amortization | The gradual reduction of a debt through scheduled principal and interest payments over a specified period.

Anti-Money Laundering (AML) | A set of regulations, procedures, and laws designed to prevent the generation of income through illegal activities, such as drug trafficking or terrorism financing.

Annuity | A series of payments made at equal intervals. For example, an annual pension payment.

Application Programming Interface (API) | A set of rules and protocols that enable software applications to communicate and share data with one another.

Arbitrage | The simultaneous buying and selling of securities, currencies, or commodities in different markets to exploit price differences and generate profits.

Artificial intelligence (AI) | A set of tools and programs that makes software "smart" enough that an outside observer would think its output is generated by a human.

Asset | Any resource owned or controlled by a company that can be used to produce positive economic value.

Asset allocation | An investment strategy that looks to balance risk and reward by adjusting the percentage of each asset according to an investor's risk tolerance, investment goals, and time frame.

Asset-Backed Security (ABS) | A financial security backed by a pool of assets, such as mortgages, loans, or credit card debt, which is created by pooling and repackaging the cash flows from these assets into new securities that can be sold to investors.

Asset-Backed Commercial Paper (ABCP) | A short-term debt instrument issued by a special purpose vehicle (SPV) that is backed by a pool of underlying assets, such as mortgages, auto loans, or credit card receivables, providing a source of funding for the originators of the assets.

Asset management | The professional management of financial assets, such as stocks, bonds, and cash, on behalf of clients to achieve specific investment objectives.

Asset structuring | The practice of optimizing the asset structure in order to optimize costs and reduce risks.

Assets under management (AUM) | The total market value of all the investments or assets managed by a company or broker.

Asymmetric Encryption | A cryptographic system that uses a pair of different keys - a public key and a private key - to encrypt and decrypt data.

Automated Clearing House (ACH) | A centralized electronic payment system that processes and settles batches of credit and debit transactions, typically used for low-value or recurring payments, such as payroll, social security benefits, or bill payments.

Authentication | The process of verifying the identity of a user, device, or system to ensure the legitimacy of a transaction or communication.

Automated Payment System (APS) | A technology that enables the automatic processing of recurring payments, such as utility bills or loan payments, by transferring funds electronically from a payer's account to a payee's account.

Balance of Payments (BOP) | A record of all economic transactions between residents of one country and the rest of the world over a specific period, typically a year.

Balance sheet | A financial statement that presents a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time.

Bank Draft | A payment order issued by a bank on behalf of a payer, instructing another bank to pay a specified amount to the payee, usually used for large-value transactions.

Bank Guarantee | A promise by a bank to cover a debtor's obligations to a creditor in case the debtor fails to fulfill their contractual obligations.

Bankers' Acceptance | A short-term debt instrument issued by a company and guaranteed by a bank, used primarily in international trade transactions.

Basel III | A set of international banking regulations developed by the Basel Committee on Banking Supervision to enhance the resilience and stability of the global banking system, including higher capital and liquidity requirements, a leverage ratio, and a countercyclical capital buffer.

Basel Committee on Banking Supervision (BCBS) | A global regulatory body that provides recommendations and guidelines for the banking industry to promote financial stability and improve risk management practices.

Basis Point (bp) | A unit of measure equal to 0.01% or 1/100th of a percentage point, often used to describe changes in interest rates or other financial percentages.

Bear market | A market characterized by falling prices, pessimism, and negative investor sentiment, typically marked by a decline of 20% or more from recent highs.

Benchmark Rate | A reference interest rate used as a basis for pricing various financial products and derivatives, such as loans, bonds, or swaps, which may be based on a central bank's policy rate, an interbank rate, or a market-determined rate.

Bid-ask spread | The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security.

Biometric Authentication | A security process that relies on unique physical or behavioral characteristics, such as fingerprints, facial recognition, or voice patterns, to verify a user's identity for secure access to a system or device.

Blockchain Technology | A decentralized, distributed ledger that records transactions across multiple devices, ensuring data security and immutability through cryptographic techniques.

Blue chip stocks | Shares of well-established companies with a history of stable earnings, reliable dividends, and strong financial performance.

Bonds | Fixed-income securities issued by corporations, governments, or other entities that represent a loan from investors, who receive periodic interest payments and the return of principal at maturity.

Book building | A process used by investment banks to gauge investor interest and determine the price at which a new security issue, such as an IPO, will be offered.

Book value | The net asset value of a company, calculated as total assets minus total liabilities; also referred to as shareholders' equity.

Bridge Bank | A temporary bank established by a financial regulator to maintain the essential functions of a failing bank until a permanent solution can be found, such as a merger or acquisition.

Broker-dealer | A firm that buys and sells securities on behalf of clients (as a broker) and for its own account (as a dealer); must be registered with the SEC and meet certain regulatory requirements.

Buddhist banking | Buddhist banking is not as established as Islamic, Jewish, or Christian banking, but there are financial initiatives based on Buddhist principles. These principles emphasize ethical behavior, social responsibility, and the avoidance of harm to living beings. Buddhist banking practices may focus on microfinance and community development, as well as environmentally friendly investments.

Bull market | A market characterized by rising prices, optimism, and positive investor sentiment, typically marked by a sustained increase of 20% or more from recent lows.

Business Continuity Plan (BCP) | A comprehensive plan that outlines the procedures an organization will follow in the event of a disruption or disaster, ensuring the continuity of critical operations and services.

Buy-side | The side of the financial industry that involves institutional investors, such as mutual funds, pension funds, and insurance companies, which buy and manage investments for their clients.

Callable bond | A bond that can be redeemed (called) by the issuer before its maturity date, usually at a specified price, which provides the issuer with the flexibility to refinance debt if interest rates fall.

Capital Adequacy Ratio (CAR) | A measure of a bank's financial strength, expressed as a percentage of its capital to its risk-weighted assets, used to ensure that banks have sufficient capital to absorb potential losses and support their operations.

Capital expenditures (CapEx) | Investments made by a company in long-term assets, such as property, plant, and equipment, which are expected to generate revenue over an extended period.

Capital markets | Financial markets where long-term debt, equity, and other securities are bought and sold, including stock exchanges and over-the-counter markets.

Capital structure | The mix of a company's debt and equity financing, which determines the proportion of funds raised from debt and equity sources and affects the firm's risk profile and cost of capital.

Card-Not-Present (CNP) Transaction | A payment transaction that occurs when the physical card is not present during the transaction, such as online or telephone purchases.

Card Verification Value (CVV) | A security feature on credit and debit cards that consists of a 3- or 4-digit code, used to validate the authenticity of the card during card-not-present transactions.

Cash Advance | A short-term loan obtained by using a credit card or line of credit, typically subject to high interest rates and fees.

Cash Equivalents | Short-term, highly liquid investments that can be easily converted to cash with minimal risk, such as treasury bills or money market funds.

Cash flow | The movement of money in and out of a business, representing the operating activities, investing activities, and financing activities of the company.

Chargeback | The process of reversing a payment transaction, typically initiated by the cardholder's bank, due to a dispute or fraudulent activity.

Christian banking | Although Christian banking is not as clearly defined as Islamic or Jewish banking, there are financial institutions that follow Christian principles. These institutions often emphasize ethical and socially responsible investments, avoiding industries that are in conflict with Christian values, such as gambling, alcohol, and tobacco. They may also prioritize community development and charitable initiatives. Some Christian banks and credit unions in the United States and Europe promote the concept of "Biblical banking," which discourages usury and encourages profit-sharing and ethical lending practices.

Clearing | The process of transmitting, reconciling, and confirming the details of financial transactions between the transacting parties, often involving the use of a clearinghouse to manage the exchange of funds and securities and to mitigate the risks associated with the transactions.

Clearinghouse | A central counterparty (CCP) that interposes itself between the buyers and sellers in a market, managing the exchange of funds and securities, and guaranteeing the performance of the transacting parties, reducing counterparty risk and increasing the efficiency of the settlement process.

Clearing House Interbank Payments System (CHIPS) | A large-value payment system in the United States that processes and settles payments in US dollars between participating banks, operated by The Clearing House Payments Company L.L.C.

Collateral | Assets, or property, pledged to secure the repayment of a loan.

Collateralized Debt Obligation (CDO) | A structured financial product that pools various types of debt, such as mortgages or corporate bonds, and repackages the cash flows into new securities with different risk profiles, which can be sold to investors.

Collateralized Loan Obligation (CLO) | A type of structured financial product that pools a portfolio of leveraged loans, such as corporate loans or syndicated loans, and issues tranches of securities with different risk profiles and returns, allowing investors to gain exposure to the underlying loan portfolio.

Commercial Paper (CP) | A short-term, unsecured debt instrument issued by a corporation, typically used to finance its working capital needs or other short-term obligations.

Common stock | A type of equity ownership in a corporation, representing a claim on a portion of the company's assets and earnings; common shareholders typically have voting rights.

Consumer Credit | A type of credit extended to consumers for personal, household, or family purposes, such as credit cards, personal loans, or mortgages.

Contactless Payment | A payment method that allows users to make transactions by tapping or waving a contactless-enabled card, smartphone, or device near a compatible point-of-sale terminal.

Convertible bonds | A type of bond that can be converted into a specified number of shares of the issuer's common stock at the bondholder's discretion, typically at specific times and under certain conditions.

Core Banking System | A central technology platform used by banks to manage their core business functions, such as deposit-taking, loan processing, and account management.

Corporate finance | The area of finance dealing with the financial decision-making processes and strategies of corporations, including capital structure, investment, and dividend policies.

Correspondent accounts | also known as nostro and vostro accounts, are specialized accounts that financial institutions establish with one another to facilitate cross-border transactions and international banking services. As a banking expert, it is important to understand the role and function of correspondent accounts in the global financial system

Cost of capital | The rate of return required by an investor to commit funds to an investment, reflecting the opportunity cost and the risk associated with the investment.

Counterparty | The other party involved in a financial transaction, such as a buyer or seller, lender or borrower.

Covered Bond | A debt security issued by a financial institution that is backed by a pool of high-quality assets, such as mortgages or public sector loans, which remain on the issuer's balance sheet. Covered bonds provide investors with a higher level of security and often carry lower interest rates than unsecured debt.

Credit Default Swap (CDS) | A financial derivative contract that allows one party (the buyer) to transfer the credit risk of a reference entity, such as a bond issuer or a loan borrower, to another party (the seller) in exchange for periodic payments. In the event of a default or credit event by the reference entity, the seller is required to compensate the buyer.

Credit Enhancement | A technique used in structured finance transactions to improve the credit quality of a security or a pool of assets, such as providing additional collateral guarantees, obtaining credit insurance, or subordinating the payment rights of certain tranches, thereby reducing the risk of loss for investors and potentially lowering the cost of funding for the issuer.

Credit Facility | A possibility to get credit line,

Credit Line | A credit line, also known as a line of credit, is a flexible financing arrangement provided by a financial institution, such as a bank or credit union, that allows a borrower to access funds up to a predetermined limit on an as-needed basis. It is a form of revolving credit, similar to a credit card, and can be used by individuals, businesses, or governments to meet short-term financing needs or manage cash flow fluctuations. As an expert, it is crucial to highlight the key features and considerations of a credit line:

Credit Rating | An assessment of the creditworthiness of a borrower or the risk of default of a debt instrument, expressed as a letter grade or a numerical score, provided by a credit rating agency, such as Standard & Poor's, Moody's, or Fitch Ratings.

Credit Risk | The risk that a borrower or counterparty will fail to meet its financial obligations, resulting in a loss for the lender or the holder of a debt instrument.

Cross-Currency Settlement | The process of settling a transaction involving two or more currencies, typically using a correspondent bank or a foreign exchange settlement system.

Cross Currency Swap | A financial derivative contract in which two parties agree to exchange principal and interest payments in different currencies over a specified period, often used to manage foreign exchange risk, hedge investments in foreign assets, or raise funds in a foreign currency.

CSDs | Central securities depositories (CSDs) are financial infrastructures that manage and transfer securities, typically as book entries rather than physical certificates. They play a notary role in securities issuance and maintain the integrity of issued securities throughout their life cycle. CSDs securely store certificates and regularly reconcile total issued securities with individual holdings of participants. Usually, CSDs don't know the end-investors, as securities are held by custodian banks in omnibus accounts. However, in some countries like Greece and Finland, CSDs manage accounts at the end-investor level due to legal requirements (direct-holding markets).

CSDR | Central Securities Depositories Regulation. The aim of CSDR is to harmonise certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for CSDs operating securities settlement systems across the EU. CSDR plays a pivotal role for post-trade harmonisation efforts in Europe, as it enhances the legal and operational conditions for cross-border settlement in the EU. Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (CSDR) was published in the Official Journal on 28 August 2014, and entered into force on 17 September 2014.

Currency Swap | A financial derivative contract in which two parties agree to exchange principal and interest payments in different currencies over a specified period, often used to manage foreign exchange risk, hedge investments in foreign assets, or raise funds in a foreign currency.

Custodian | A financial institution, such as a bank or a trust company, that holds and safeguards the assets of clients, including securities, cash, or other valuables, and provides various services, such as transaction settlement, recordkeeping, or reporting.

Cryptography | The practice of securing and protecting information by using codes, ciphers, and algorithms to encrypt and decrypt data.

Customer Due Diligence (CDD) | The process of gathering and verifying information about a customer to assess their risk profile and ensure compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.

Data Breach | A security incident in which unauthorized individuals gain access to sensitive or confidential data, potentially leading to identity theft, fraud, or other adverse consequences.

Data Encryption Standard (DES) | A symmetric-key algorithm for the encryption of digital data, widely used in the past but now considered insecure due to advances in computing power.

Debentures | A type of unsecured, long-term debt instrument backed by the general creditworthiness and reputation of the issuer, rather than specific collateral.

Debt financing | The process of raising capital by borrowing money from lenders or investors, typically through the issuance of bonds, loans, or other debt instruments.

Debt Restructuring | A process by which a borrower or issuer of debt instruments negotiates new or modified terms for its outstanding debt obligations, such as extending maturities, reducing interest rates, or converting debt into equity, often in response to financial distress or to improve its credit profile.

Debt-to-equity ratio | A financial ratio that measures the proportion of a company's debt relative to its equity, used to assess a company's financial leverage and risk profile.

Default | The failure of a borrower to meet their debt obligations, such as making interest or principal payments, which can result in legal actions or loss for the lender.

Derivative | A financial contract whose value is derived from the performance of an underlying asset, index, or reference rate, such as stocks, bonds, commodities, currencies, or interest rates, allowing investors to manage risks, speculate on price movements, or gain exposure to specific market segments.

Direct Debit | A type of electronic payment initiated by the payee, with the authorization of the payer, reconfirmed by their bank per SWIFT MT204 and information to central bank, to transfer funds from the payer's bank account to the payee's bank account, typically used for recurring payments, such as utility bills, insurance premiums, or loan installments.

Discount Rate | The interest rate at which a central bank lends funds to eligible financial institutions on a short-term basis, often used as a monetary policy tool to influence market interest rates, credit conditions, and money supply.

Diversification | A risk management strategy that involves allocating investments across various asset classes, sectors, or geographical regions, with the aim of reducing the overall risk of a portfolio and enhancing its long-term performance by minimizing the impact of individual asset price movements.

Divestiture | The process of selling or disposing of a business, division, or asset, typically to streamline operations, raise capital, or focus on core competencies.

Digital Signature | A cryptographic technique used to verify the authenticity and integrity of a digital document or message, by creating a unique code based on the sender's private key and the message content.

Direct Deposit | The electronic transfer of funds directly into a recipient's bank account, often used for payroll, tax refunds, or benefit payments.

Disbursement | The act of paying out or distributing funds, typically from a bank, government, or financial institution to a customer or beneficiary.

Dividends | Regular payments made by a corporation to its shareholders, usually in the form of cash or additional shares, representing a portion of the company's earnings.

Dodd-Frank Act | A U.S. federal law enacted in response to the 2008 financial crisis, aimed at improving the stability and transparency of the financial system and protecting consumers from abusive financial practices.

Due diligence | A comprehensive appraisal of a business, asset, or investment conducted by a potential buyer or investor to assess its value and uncover potential risks.

Durable Payment System | A payment system designed to continue operating during periods of stress or disruption, ensuring the timely completion of critical payment and settlement functions.

Earnings per share (EPS) | A financial metric that measures the portion of a company's profit allocated to each outstanding share of common stock, used to assess profitability and growth.

EBITDA (Earnings before interest, taxes, depreciation, and amortization) | A financial metric used to measure a company's operating performance, calculated as revenue minus operating expenses, excluding interest, taxes, depreciation, and amortization.

Electronic Data Interchange (EDI) | The computer-to-computer exchange of business documents, such as invoices, purchase orders, or shipping notices, in a standardized electronic format, reducing the need for paper-based communication.

Electronic Funds Transfer (EFT) | A system that allows the transfer of funds between bank accounts through electronic means, such as wire transfers, direct deposits, or automated clearing houses, providing a fast, secure, and cost-efficient method for processing payments and managing cash flows.

Emerging Market | A country or market that is in the process of transitioning from a developing to a developed economy, characterized by rapid economic growth, increasing integration with the global financial system, and improving standards of living, but also by higher levels of risk and volatility compared to developed markets.

End-of-Day (EOD) Processing | The process of updating and reconciling financial records, transactions, and balances at the close of a business day.

Equity financing | The process of raising capital by selling ownership stakes in a company, typically through the issuance of shares, to investors who assume a level of risk in exchange for potential returns.

Euro Interbank Offered Rate (EURIBOR) | A reference interest rate representing the average rate at which a panel of European banks are willing to lend unsecured funds to each other in the euro interbank market.

Excess Reserves | The amount of reserves held by a bank in excess of the minimum reserve requirements set by a central bank, which can be used for lending or investment purposes.

Exchange Traded Fund (ETF) | A type of investment fund that holds a diversified portfolio of securities, such as stocks, bonds or commodities, and is traded on a stock exchange, allowing investors to gain exposure to specific market segments, indices, or investment strategies with the liquidity and transparency of a listed security.

Extended Settlement | A settlement arrangement that allows for a longer settlement period than the standard settlement cycle, typically used for complex or illiquid securities transactions.

Federal Deposit Insurance Corporation (FDIC) | A U.S. government agency that provides deposit insurance to protect depositors in the event of a bank failure, up to specified limits.

Fees  | These encompass the monetary levies imposed for the initiation, sustenance, and various transactions pertinent to your account. This includes, inter alia, the account opening fee and any transactional or service-related charges.

Financial Action Task Force (FATF) | An intergovernmental organization that develops and promotes policies and standards to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system.

Financial leverage | The use of borrowed funds to increase the potential return on investment, which can amplify both gains and losses; also referred to as "gearing" or "leverage."

Financial Market Infrastructure (FMI) | A system that facilitates the clearing, settling, or recording of payments, securities, derivatives, or other financial transactions, such as payment systems, central securities depositories, securities settlement systems, central counterparties, or trade repositories.

Financial modeling | The process of creating mathematical representations of the financial performance and future prospects of a company, project, or investment, using various assumptions and scenarios.

Financial Stability Board (FSB) | An international body established by the G20 to promote financial stability, monitor and assess vulnerabilities in the global financial system, coordinate the development and implementation of regulatory and supervisory policies, and enhance cooperation among national authorities and international organizations.

Fixed Income | A type of investment that pays a fixed or predictable stream of income, such as interest or dividends, over a specified period, including bonds, preferred stocks, or annuities, often considered less risky and more stable than equity investments.

Fixed income securities | Debt instruments that pay a fixed rate of interest to investors over a specified period, such as bonds, notes, or preferred stock.

Foreign Exchange (FX) Market | The global market for trading currencies, including the spot market, the forward market, and the options market, allowing participants to exchange one currency for another, speculate on exchange rate movements, or hedge foreign exchange risk.

Forward Contract | A privately negotiated agreement between two parties to buy or sell a specified asset, such as a commodity, currency, or security, at a predetermined price and future date, often used to manage price risk or hedge investments.

Futures Contract | A standardized, exchange-traded agreement between two parties to buy or sell a specified asset, such as a commodity, currency, or security, at a predetermined price and future date, often used to manage price risk, speculate on market trends, or gain exposure to specific market segments.

G20 | An international forum for the governments and central bank governors from 19 major economies and the European Union, which addresses global economic and financial issues and aims to promote financial stability and sustainable economic growth.

General Data Protection Regulation (GDPR) | A European Union regulation that governs the processing and handling of personal data, providing individuals with greater control over their data and setting strict data protection standards for organizations.

Global Custodian | A financial institution, such as a bank or a trust company, that provides custody and related services to institutional investors, asset managers, or other financial institutions on a global scale, including the safekeeping of assets, transaction settlement, recordkeeping, reporting, or securities lending.

Global Systemically Important Bank (G-SIB) | A large, interconnected bank that is considered to be of critical importance to the global financial system, and whose failure could have significant negative consequences for the broader economy. G-SIBs are subject to additional regulatory requirements and oversight to ensure their stability and resilience.

Going public (IPO) | The process of offering shares of a privately-held company to the public for the first time through an initial public offering (IPO).

Good Funds Model | A settlement model where the transfer of funds is considered final and irrevocable once the receiving bank has confirmed the availability of funds, reducing the risk of settlement failure.

Goodwill | An intangible asset representing the value of a company's reputation, brand, customer relationships, and other non-physical factors that contribute to its earning power.

gpi | SWIFT gpi, or Global Payments Innovation, is a service introduced by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to enhance and streamline cross-border payment transactions. SWIFT is a global financial messaging network that enables financial institutions to securely exchange information related to various types of financial transactions, including payment instructions, securities trading, and treasury transactions.

Gross Settlement System | A payment system in which individual transactions are settled on a one-to-one basis, without netting or bundling, typically used for large-value or time-critical transactions.

Haircut | A discount applied to the market value of a collateral asset when determining its eligibility or the amount of credit that can be extended against it, reflecting the potential risk of loss due to price fluctuations, illiquidity, or other factors.

Hedge Fund | A type of alternative investment fund that employs a wide range of investment strategies and instruments, such as long/short equity, event-driven, or global macro, to generate absolute returns, with a focus on risk-adjusted performance and capital preservation.

High-Frequency Trading (HFT) | A type of algorithmic trading that involves the rapid execution of a large number of trades, often in fractions of a second, to exploit small price discrepancies or market inefficiencies.

Hostile takeover | An unsolicited attempt by a company or investor to acquire control of another company, often through a tender offer or proxy fight, without the approval of the target company's board of directors.

Immediate Funds Transfer | A real-time electronic funds transfer system that enables the immediate and final transfer of funds between accounts, often used for retail or low-value transactions.

Income statement | A financial statement that summarizes a company's revenues, expenses, and profits or losses over a specific period, used to assess its financial performance.

Index | A statistical measure or benchmark that tracks the performance of a specific group of assets, such as stocks, bonds, or commodities, often used as a reference for the pricing of financial products, the construction of investment portfolios, or the evaluation of investment performance.

Initial Public Offering (IPO) | The first sale of a company's shares to the public, through a stock exchange or an over-the-counter market, allowing the company to raise capital, diversify its ownership, and increase its visibility and credibility.

Inflation Targeting | A monetary policy strategy in which a central bank sets a specific inflation rate as its goal and adjusts its monetary policy actions accordingly to achieve and maintain that target.

Insider trading | The illegal practice of trading securities based on non-public, material information obtained through a person's position or relationship with the company.

Interbank Funds Transfer System | A system that facilitates the transfer of funds between banks, enabling banks to settle payment transactions with one another.

Interest Rate Swap | A financial derivative contract in which two parties agree to exchange interest rate payments on a specified principal amount, typically involving the exchange of a fixed interest rate for a floating interest rate.

International Bank Account Number (IBAN) | A standardized international numbering system for bank accounts, designed to facilitate the automatic processing of cross-border transactions and reduce the risk of errors.

International Securities Identification Number (ISIN) | A unique 12-digit alphanumeric code that identifies a specific security, such as a stock or bond, and is used to facilitate the clearing and settlement of securities transactions.

Intraday Liquidity | The availability of funds within a financial institution during the course of a single business day, which can be used to meet payment and settlement obligations on a real-time basis.

Investment Banking | A segment of the financial services industry that provides advisory, financing, and risk management solutions to corporations, governments, or other institutions, including mergers and acquisitions, capital raising, securities underwriting, or structured finance.

Investment Grade | A credit rating that indicates a low level of default risk for a bond or other debt security, typically assigned by credit rating agencies such as Standard & Poor's, Moody's, or Fitch Ratings.

IPIP | The term "IPIP" refers to an "International Payment Instruction Protocol." It is an informal term used in the context of high-value, cross-border transactions, specifically in the realm of private banking and the transfer of large sums between financial institutions. The term is not commonly used in formal banking settings and is not a standardized banking protocol. The concept behind IPIP transactions is that they involve the secure exchange of payment instructions between sender and recipient banks through a private server, aiming to facilitate the swift transfer of funds from the sender, subject to sufficient funds being in senders nostro account with receiver. This process is intended to bypass the traditional correspondent banking system, which can be slower and more expensive for large transactions. However, it is important to note that IPIP transactions are often associated with high risks and a lack of transparency, as they might be employed in attempts to evade necessary regulatory oversight or doubtful finance activities. Consequently, financial institutions may not engage in IPIP transactions and instead adhere to formal, regulated channels for cross-border payments, such as SWIFT, SEPA, etc.

Islamic Finance | A financial system that complies with the principles of Islamic law (Sharia), which prohibits the payment or receipt of interest (riba), speculative transactions (gharar), or investments in certain activities, such as gambling, alcohol, or pork production, and promotes risk-sharing, asset-backed financing, and ethical investing.

ISO 20022 | An international standard for electronic data interchange between financial institutions, providing a common framework for the development of messages and ensuring the compatibility and interoperability of payment systems.

Jewish banking | Jewish banking practices are based on the principles of the Halakha, the collective body of Jewish laws, and include prohibitions against usury (charging interest on loans) among Jews. Traditional Jewish banking follows the concept of "heter iska" (business permit) a partnership agreement that allows both parties to share profits and losses, instead of charging interest on loans. This ensures that financial transactions are conducted in accordance with Jewish ethics and values.

Junk bonds | High-yield, high-risk bonds issued by companies or governments with lower credit ratings, offering higher yields to compensate investors for the increased risk of default.

Know Your Customer (KYC) | The process of verifying the identity of a customer and assessing their risk profile, as part of a financial institution's compliance with anti-money laundering (AML) and customer due diligence (CDD) regulations.

Large-Value Payment System (LVPS) | A payment system that primarily handles high-value and time-critical transactions between financial institutions, typically offering real-time gross settlement and a high level of security and reliability.

L2L | Ledger to ledger refers to the transfer of funds between accounts held within the same financial institution or from nostro accounts with other institutions to the recipient client. These transfers typically occur internally, without the need for external clearing or settlement systems. Ledger to ledger transactions are generally faster and more cost-effective compared to transfers between different financial institutions, as they bypass intermediary banks and third-party service providers. This type of transfer is commonly used for transactions between accounts owned by the same individual or entity, or for transfers between different branches of the same bank.

Leverage | The use of borrowed funds to increase the potential return on an investment or to amplify the impact of financial decisions, such as in the case of a bank that uses deposits or other borrowed funds to make loans or invest in securities. Leverage can magnify both gains and losses.

Leveraged buyout (LBO) | The acquisition of a company or a significant portion of its assets using a large amount of borrowed funds, often secured by the assets of the target company.

Letter of Credit (LC) | A financial instrument issued by a bank or a financial institution on behalf of a buyer, guaranteeing the payment to a seller upon the fulfillment of certain terms and conditions, often used in international trade to mitigate the risks associated with cross-border transactions and differences in legal systems.

LIBOR (London Interbank Offered Rate) | A benchmark interest rate at which a panel of major global banks are willing to lend unsecured funds to each other in the London interbank market, widely used as a reference rate for various financial products and derivatives. LIBOR is being phased out and replaced by alternative reference rates.

Liquidation | The process of converting a company's assets into cash, typically to pay off debts or distribute proceeds to shareholders, often resulting from bankruptcy or insolvency.

Liquidity | The ability to quickly buy or sell a financial asset without causing a significant change in its price or incurring significant transaction costs, reflecting the efficiency of the market and the ease with which assets can be converted into cash.

Liquidity Risk | The risk that an individual or institution will not be able to meet its financial obligations as they come due, due to an inability to convert assets into cash or access funding quickly and at a reasonable cost.

Loan | A loan is an arrangement in which a lender provides funds to a borrower with the agreement that the borrower will repay the funds, along with any applicable interest and fees, over a predetermined period.

Loan syndication | The process of involving multiple lenders in providing portions of a loan to a single borrower, spreading the risk and enabling the financing of large-scale projects or transactions.

Margin | The amount of collateral, expressed as a percentage of the market value of a financial instrument, that is required to secure a loan, a credit facility, or a derivative position, protecting the lender or the counterparty against the risk of loss due to price fluctuations, credit events, or other factors.

Market capitalization | The total market value of a company's outstanding shares of stock, calculated by multiplying the share price by the number of shares outstanding.

Market maker | A financial intermediary that continuously quotes both buy and sell prices for a security, facilitating trading and providing liquidity to the market.

Master account | A record of financial transactions that reflects the financial rights and obligations of an account holder and of the Central Bank with respect to each other, and where opening and closing balances are determined. Reserve administration is managed through the master account, unless an institution has entered into a pass-through arrangement with a correspondent.

Margin Call | A demand from a broker or financial institution for additional funds or securities to maintain a required level of equity in a margin account, typically triggered when the value of the account falls below a specified threshold.

Market capitalization | The total market value of a company's outstanding shares of stock, calculated by multiplying the share price by the number of shares outstanding.

Market Infrastructure | The systems, institutions, and arrangements that facilitate the trading, clearing, settlement, and reporting of financial transactions, such as exchanges, trading platforms, clearing houses, or payment systems.

Market maker | A financial intermediary that continuously quotes both buy and sell prices for a security, facilitating trading and providing liquidity to the market

Market Risk | The risk of financial loss due to fluctuations in the value of assets or securities as a result of changes in market conditions, such as interest rates, exchange rates, or equity prices.

Mergers and acquisitions (M&A) | The process of combining, acquiring, or divesting companies or assets to achieve strategic objectives, such as growth, diversification, or cost savings.

Minimum Balance | Minimum Amount or Minimum Balance - The minimum amount of money a bank may require to be in your account at all times. Sometimes, if the amount of money in your account is less than the minimum balance required you may be charged a fee or the account could be blocked or the operational integrity could be restricted. Furthermore, it is incumbent upon account holders to ensure the maintenance of a minimum balance, as stipulated, for a period not less than twelve months.

Minimum Payment | A minimum payment is the amount you are required to pay each month on a debt.

Mobile Payment | A type of electronic payment made using a mobile device, such as a smartphone or tablet, which may involve the use of a mobile wallet, a mobile app, or contactless technology.

Money Market | A segment of the financial market that deals with short-term debt instruments, such as treasury bills, commercial paper, or certificates of deposit, providing a source of liquidity and a means of investing surplus funds for participants, such as banks, corporations, or governments.

Money market instruments | Short-term, low-risk debt securities with maturities of one year or less, such as Treasury bills, commercial paper, and certificates of deposit.

Money Market Fund (MMF) | A type of mutual fund that invests in short-term, high-quality debt securities, such as treasury bills or commercial paper, with the aim of providing investors with a low-risk investment option that offers liquidity and capital preservation.

Multilateral Netting | A process that consolidates and offsets multiple payment obligations between a group of participants, resulting in a single net amount payable or receivable for each participant, which can reduce the number of transactions and the associated risks and costs.

Mutual funds | Pooled investment vehicles that collect funds from individual investors and invest in a diversified portfolio of securities, managed by a professional investment manager.

Near Field Communication (NFC) | A short-range wireless communication technology that enables the exchange of data between devices, such as smartphones, tablets, or payment terminals, typically used for contactless payments or data transfer applications.

Net Asset Value (NAV) | The total value of a fund's assets minus its liabilities, divided by the number of outstanding shares or units, often used as a measure of a fund's performance and as the basis for calculating its fees and expenses.

Net income | A company's total revenue minus its expenses, taxes, and costs, representing its profit or loss for a specific period; also known as "bottom line" or "net earnings."

Net Settlement System | A payment system in which transactions are accumulated and netted against one another before being settled, usually at specified intervals or at the end of the business day, reducing the amount of funds that need to be transferred between participants.

Net transaction accounts | Net transaction accounts are comprised of total transaction accounts (demand deposits, ATS accounts, NOW accounts/share drafts, and telephone and preauthorized transfers), plus ineligible acceptances and obligations issued by affiliates maturing in less than seven days, net of demand balances due from depository institutions in the U.S. and cash items in the process of collection. In terms of the FR 2900 report, net transaction accounts are calculated as the sum of line items A.3 and AA.1 less the sum of line items B.1 and B.2. The FR 2900 reporting instructions define all of these deposit types.

Non-Performing Loan (NPL) | A loan in which the borrower is in default or has failed to make scheduled principal or interest payments for a specified period, typically 90 days or more, indicating a higher likelihood of default.

Nostro accounts | also known as nostro and vostro accounts or correspondent accounts, are specialized accounts that financial institutions establish with one another to facilitate cross-border transactions and international banking services. As a banking expert, it is important to understand the role and function of correspondent accounts in the global financial system

Open Banking | A system that allows banks and other financial institutions to securely share customer data with third-party providers, such as fintech companies or other banks, through the use of application programming interfaces (APIs), enabling the development of new financial products and services and increased competition in the market.

Open Market Operations (OMO) | The purchase or sale of financial instruments, such as government securities or repurchase agreements, by a central bank in the open market, with the aim of influencing money supply, interest rates, and credit conditions as part of its monetary policy.

Operating margin | A financial metric that measures a company's operating profitability as a percentage of its total revenue, calculated by dividing operating income by total revenue.

Options | Financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date.

Over-the-Counter (OTC) Market | A decentralized market for the trading of financial instruments, such as stocks, bonds, or derivatives, directly between buyers and sellers, without the use of a centralized exchange or trading platform.

Payment | The transfer of funds from one party to another in exchange for goods, services, or to fulfill a financial obligation.

Payment System | A set of instruments, procedures, and rules that enable the transfer of funds between participants, such as individuals, businesses, or financial institutions, providing a mechanism for clearing, settlement, and finality of transactions, and promoting the efficiency, safety, and stability of the financial system.

Payment Card Industry Data Security Standard (PCI DSS) | A set of security standards designed to protect cardholder data and ensure the secure processing, storage, and transmission of payment card information by merchants, service providers, and financial institutions.

Payment Gateway | A technology service that enables merchants to accept electronic payments, such as credit cards or mobile wallets, by securely transmitting and processing transaction data between the customer, the merchant, and the acquiring bank.

Payment System | A set of instruments, procedures, and rules used to transfer funds between parties, typically involving the use of a clearing and settlement mechanism to complete transactions.

Peer-to-Peer (P2P) Lending | A type of online lending platform that connects borrowers and lenders directly, without the intermediation of a traditional financial institution, enabling borrowers to obtain loans at potentially lower interest rates and lenders to earn higher returns on their investments.

Point-of-Sale (POS) Terminal | A device used by merchants to accept electronic payments, such as credit cards, debit cards, or mobile wallets, by reading the customer's payment information and transmitting the transaction data for authorization and settlement.

Portfolio Management | The process of selecting, monitoring, and adjusting a mix of investments to achieve a specific investment objective or risk-return profile, including asset allocation, security selection, risk management, and performance evaluation.

Preferred stock | A type of equity security that typically pays a fixed dividend and has a higher claim on assets and earnings than common stock but generally does not carry voting rights.

Prepaid Card | A type of payment card that is loaded with a specific amount of funds, which can be used to make purchases or withdraw cash up to the available balance, without the need for a credit check or a linked bank account.

Price-to-earnings (P/E) ratio | A valuation ratio calculated by dividing the market price of a share of stock by its earnings per share, used to assess the relative value of a company's stock.

Primary Dealer | A financial institution that is authorized to buy and sell government securities directly with a central bank, playing a key role in the implementation of monetary policy and the functioning of the government securities market.

Primary Market | The market where new securities, such as stocks, bonds, or other financial instruments, are issued and sold to investors, often through a public offering or a private placement, allowing the issuer to raise capital, diversify its ownership, or refinance its debt.

Prime Rate | A reference interest rate used by banks to price various loans and credit products, such as mortgages or personal loans, typically based on the central bank's target rate or the rate at which banks lend to their most creditworthy customers.

Private Equity | A type of alternative investment that involves the direct or indirect acquisition of ownership stakes in privately-held companies or assets, with the objective of generating capital gains through the improvement of their operational performance, financial restructuring, or strategic repositioning, and their eventual sale or public listing.

Private placement | The sale of securities directly to a limited number of institutional or accredited investors, rather than through a public offering, typically to raise capital or restructure debt.

Project finance | The financing of long-term, capital-intensive projects or infrastructure developments, with funds typically provided by a consortium of lenders based on the project's cash flow projections.

Promissory Note |  A written contract between a borrower and a lender that is essentially the borrower's promise to pay the lender.

Prospectus | A legal document that provides detailed information about a security offering, such as an IPO or bond issue, including the company's financial statements, management team, and risk factors.

Public offering | The issuance and sale of securities to the general public, typically through an initial public offering (IPO) or a secondary offering, to raise capital for a company or government.

Quantitative Easing (QE) | A form of unconventional monetary policy in which a central bank purchases large quantities of financial assets, such as government bonds or mortgage-backed securities, from the market, with the aim of lowering interest rates, increasing the money supply, and stimulating economic activity.

Real Estate Investment Trust (REIT) | A type of investment vehicle that owns, manages, or finances income-producing real estate properties, such as shopping centers, office buildings, or residential complexes, and distributes the majority of its income to shareholders in the form of dividends, allowing investors to gain exposure to the real estate market with liquidity and diversification.

Real-Time Gross Settlement (RTGS) | A type of payment system that processes and settles individual payment transactions on a real-time basis, ensuring the immediate and final transfer of funds between parties, typically used for high-value or time-critical transactions.

Recapitalization | The process of altering a company's capital structure by issuing, repurchasing, or exchanging debt and equity securities, often to improve financial stability or optimize the cost of capital.

Reconciliation | The process of comparing and verifying financial records, transactions, or account balances to ensure accuracy and consistency, often performed at the end of a business day or accounting period.

Registered securities | Securities that are registered with the Securities and Exchange Commission (SEC), subject to regulatory oversight and disclosure requirements.

Regulation D (Reg D) | A set of SEC rules governing private placements, allowing companies to raise capital from accredited investors without registering the offering with the SEC.

Remittance | The transfer of funds from one party to another, typically across borders or between individuals, such as when a worker sends money to their family in another country.

Repurchase Agreement (Repo) | A short-term financing arrangement in which a borrower sells a security, such as a government bond or mortgage-backed security, to a lender with the agreement to repurchase it at a specified price and date, effectively creating a secured loan.

Return on equity (ROE) | A financial metric that measures a company's profitability as a percentage of its shareholders' equity, calculated by dividing net income by shareholders' equity.

Return on investment (ROI) | A measure of the profitability of an investment, calculated by dividing the net profit or loss by the initial investment, often expressed as a percentage.

Reverse Repo (Reverse Repurchase Agreement) | A short-term financing arrangement in which a party buys a financial asset, such as a government security or a corporate bond, from another party with a commitment to resell it at a specified price and future date, effectively lending funds against the collateral of the asset.

Reserve Requirement | The minimum amount of reserves, typically in the form of cash or deposits at a central bank, that a financial institution is required to hold as a percentage of its customer deposits, to ensure its ability to meet its financial obligations and maintain stability.

Retail Banking | The provision of financial services to individual consumers, such as deposit accounts, loans, mortgages, or credit cards, as opposed to corporate or institutional banking.

Risk Management | The process of identifying, assessing, and controlling the various risks that may affect the performance, stability, or integrity of a financial instrument, a portfolio, or a financial institution, including market risk, credit risk, operational risk, or liquidity risk, and implementing appropriate mitigation measures, such as diversification, hedging, or insurance.

Risk-Weighted Assets (RWA) | A measure of a bank's assets, adjusted for their risk profile, used to calculate the bank's regulatory capital requirements, with higher risk assets requiring a larger capital buffer to absorb potential losses.

Roadshow | A series of presentations made by a company's management to potential investors, typically during an IPO or bond issuance, to generate interest and explain the investment opportunity.

RTGS | Real-Time Gross Settlement (RTGS) is a system for the processing and settlement of high-value financial transactions on a real-time basis. Unlike other payment systems that may use net settlement, in RTGS, transactions are settled individually and immediately, without being bundled or netted with other transactions.

Rule 144 | Rule 144 is a regulation enforced by the U.S. Securities and Exchange Commission (SEC) that establishes guidelines for the public resale of restricted and control securities. Restricted securities are privately placed securities acquired directly or indirectly from the issuer or an affiliate of the issuer, while control securities are those held by an affiliate of the issuing company, such as a director, officer, or large shareholder. Rule 144 sets forth specific conditions under which these securities can be sold publicly to ensure an orderly and transparent market, and to prevent the illegal distribution of unregistered securities. The main conditions outlined by Rule 144 are as follows:

  1. Holding period: For restricted securities, investors must hold them for a certain period before selling. For reporting companies under the Securities Exchange Act of 1934, the holding period is six months. For non-reporting companies, the holding period is one year. This requirement helps ensure that restricted securities are not used for illegal distributions or market manipulation.
  2. Current public information: The issuing company must have adequate and up-to-date information available to the public. For reporting companies, this means that they must be current in their SEC filings (such as 10-K, 10-Q, and 8-K reports). Non-reporting companies must make certain information publicly available, including their business description, financial statements, and information about the management team.
  3. Trading volume limitations: The number of securities that an individual can sell in any three-month period is subject to limitations. For affiliates, the amount that can be sold is the greater of 1% of the outstanding shares of the same class or the average weekly trading volume during the four weeks preceding the sale. Non-affiliates are not subject to volume limitations after meeting the holding period requirements.
  4. Ordinary brokerage transactions: Sales must be conducted through regular brokerage transactions, and brokers cannot solicit orders to buy the securities.
  5. Filing Form 144: Affiliates must file a notice with the SEC on Form 144 if the intended sale during a three-month period exceeds 5,000 shares or has an aggregate sales price greater than $50,000.

It's important to note that Rule 144 does not apply to non-affiliates selling unrestricted securities, as those can be sold without any restrictions.

By providing a clear framework for the sale of restricted and control securities, Rule 144 helps maintain investor confidence in the market and ensures compliance with federal securities laws.

Secondary Market | The market where previously issued securities, such as stocks, bonds, or other financial instruments, are traded between investors, often through a stock exchange, an over-the-counter market, or an alternative trading system, providing a mechanism for price discovery, liquidity, and risk transfer.

Securities | Financial instruments representing ownership interests, debt obligations, or other rights, such as stocks, bonds, or options, that can be traded in financial markets.

Securities and Exchange Commission (SEC) | The US federal agency responsible for regulating securities markets, protecting investors, and maintaining fair and orderly markets.

Securities Lending | The temporary transfer of a security from one party (the lender) to another (the borrower), usually in exchange for collateral and a fee, with the agreement that the security will be returned at a specified date or upon demand. Securities lending can provide liquidity to the market and generate additional income for the lender.

Securitization | The process of pooling various types of debt instruments, such as mortgages, auto loans, or credit card receivables, and packaging them into tradable securities that can be sold to investors, spreading the risk of default and providing a source of funding for the originators of the underlying loans.

Sell-side | The part of the financial industry that focuses on creating, underwriting, and distributing new issues of securities, as well as providing research and trading services to institutional clients.

Settlement | The process of transferring the ownership of a financial instrument, such as a stock, bond, or derivative, from the seller to the buyer, and the payment of the corresponding amount from the buyer to the seller, usually through a clearinghouse or a custodian, ensuring the finality and integrity of the transaction.

Settlement Risk | The risk that one party to a transaction will fulfill its payment or delivery obligations, but the counterparty will not, resulting in a loss for the first party. Settlement risk can arise from various factors, such as operational issues, liquidity constraints, or the default of a participant in the transaction.

Share repurchase | The process by which a company buys back its own shares from the open market, reducing the number of outstanding shares and potentially increasing the value of the remaining shares.

Short Selling | The practice of selling a financial instrument that the seller does not own, with the expectation that its price will decline, allowing the seller to buy it back at a lower price and profit from the difference, often used to speculate on market downturns, hedge long positions, or take advantage of arbitrage opportunities.

Society for Worldwide Interbank Financial Telecommunication (SWIFT) | A global messaging network that enables financial institutions to securely exchange financial information, such as payment instructions, account statements, or securities transactions, using standardized formats and protocols.

Spin-off | The creation of an independent company from an existing business unit or division, typically by distributing shares of the new entity to the parent company's shareholders.

Spread | The difference between the bid and ask prices of a financial instrument, such as a stock, bond, or currency, representing the cost of trading and the liquidity of the market; or the difference between the yields or interest rates of two different instruments or maturities, reflecting the relative risk or value of the assets.

Spot Exchange Rate | The exchange rate at which a foreign currency can be bought or sold for immediate delivery, reflecting the current market price.

Standing Facilities | Central bank facilities that allow eligible financial institutions to borrow or deposit funds on an overnight basis, typically at a penal rate, to manage their liquidity needs and support the implementation of monetary policy.

Stock options | Contracts that give employees the right, but not the obligation, to purchase a certain number of shares of their company's stock at a predetermined price, often as a form of compensation.

Stock split | An increase in the number of a company's outstanding shares by issuing additional shares to existing shareholders, typically done to make the stock more affordable for smaller investors.

Straight-Through Processing (STP) | An automated process for the handling of financial transactions, from initiation to settlement, without the need for manual intervention, reducing the risk of errors and increasing efficiency.

Structured Finance | A segment of the financial services industry that focuses on the creation, distribution, and management of complex financial instruments, such as asset-backed securities, collateralized debt obligations, or credit derivatives, designed to meet specific investor needs, transfer risks, or optimize the use of capital and funding resources.

Swap | A financial derivative contract in which two parties agree to exchange cash flows or other financial variables, such as interest rates, currencies, or commodities, over a specified period, often used to manage risks, hedge investments, or speculate on market trends.

Syndicated loan | A large loan provided by a group of lenders, typically banks or other financial institutions, to a single borrower, often used to finance major projects or transactions.

Systemically Important Financial Institution (SIFI) | A financial institution whose failure or distress could have significant negative consequences for the stability and functioning of the financial system and the broader economy, due to its size, interconnectedness, or complexity. SIFIs are subject to additional regulatory requirements and oversight to ensure their stability and resilience.

T2 | The real-time gross settlement system used by the European Central Bank and the central banks of the euro area countries to process large-value euro payments between banks and other financial institutions.

Tender offer | A public proposal by an investor or company to buy a specified number of shares of another company's stock at a certain price, often as part of a takeover attempt.

Time Deposit | A deposit account that requires the funds to be held for a specified period, often in exchange for a higher interest rate, with penalties for early withdrawal.

Time value of money | The concept that a dollar today is worth more than a dollar in the future due to its potential earning capacity, used in financial calculations to discount future cash flows to their present value.

Total Return | The overall gain or loss on an investment, including the change in its market value, the income generated, such as interest or dividends, and any other realized or unrealized gains or losses, expressed as a percentage of the initial investment amount.

Trade finance | The financing of international trade transactions, including the provision of short-term credit, letters of credit, and export/import financing, to facilitate the exchange of goods and services across borders.

Transaction Cost | The costs associated with the execution, clearing, and settlement of a financial transaction, such as fees, commissions, or bid-ask spreads.

Underwriter | A financial institution, such as an investment bank, that assumes the risk of bringing a new issue of securities to market, purchasing the securities from the issuer and reselling them to investors.

Underwriting | The process by which a financial institution, such as a bank or an insurance company, assesses the risk of a potential borrower, issuer, or insured party and decides whether to extend credit, provide financing, or issue an insurance policy, often in exchange for a fee or commission.

Valuation | The process of determining the current worth of an asset, such as a company, security, or property, based on financial and economic factors, as well as market conditions.

Value at Risk (VaR) | A statistical measure of the potential loss in the value of a portfolio or investment over a specified time period and at a given confidence level, used to estimate the risk of financial loss due to market volatility or adverse market movements. VaR is commonly used by financial institutions to assess and manage their market risk exposure.

Vault cash | Currency and coin owned by a depository institution. The average end-of-day holdings of vault cash over the computation period can be used to satisfy some or all of an institution's reserve requirement in the corresponding maintenance period.

Venture Capital | A type of private equity that involves the financing of early-stage, high-potential companies or projects, with the objective of generating capital gains through their growth, development, and eventual exit, such as a merger, acquisition, or initial public offering, often focusing on innovative industries, such as technology, biotechnology, or clean energy.

Volatility | A measure of the degree of fluctuations in the price or return of a financial instrument, index, or market, often used as an indicator of risk, uncertainty, or investor sentiment, and calculated as the standard deviation, the average true range, or other statistical methods.

Warrants | Financial instruments that give the holder the right, but not the obligation, to buy a specified number of shares of a company's stock at a predetermined price within a certain time period.

Wholesale Banking | The provision of financial services to large corporations, institutions, or government entities, as opposed to individual consumers, including corporate lending, investment banking, asset management, or securities trading.

Wire Transfer | An electronic transfer of funds between banks or financial institutions, often used for large-value or time-sensitive transactions, and typically processed through a payment system or network.

Working capital | A measure of a company's short-term financial health and operational efficiency, calculated as current assets minus current liabilities.

Write-down | The reduction in the book value of an asset to reflect its decreased market value, often due to impairment, obsolescence, or other adverse changes in its value.

Yield | The income generated by a financial instrument, such as interest or dividends, expressed as a percentage of its market price or its face value, often used as a measure of its performance, risk, or relative value, and influenced by various factors, such as market conditions, credit quality, or the time to maturity.

Yield Curve | A graphical representation of the relationship between the interest rates or yields on bonds of the same credit quality but with different maturities, such as government bonds, often used as an indicator of market expectations for future interest rates and economic conditions.

Zero-Coupon Bond | A type of bond that does not pay periodic interest or coupons but is sold at a discount to its face value, providing the investor with a return in the form of capital appreciation when the bond matures.

See also: 

  1. Glossary Bundesbank 
  2. Glossary Bank of England
  3. Glossry ECB
  4. Glossary Federal Reserve Bank 
  5. Glossary BIS