Glossary of Terms
Here is a list of helpful banking lingo.
Title |
Definition |
|---|---|
| Account or (Bank account) |
A fund established in a bank by a customer who deposits money against which the customer may make withdrawals |
| Accrued interest | Interest owed but not yet paid. |
| Adjustable rate mortgage (ARM) | A mortgage plan with an interest rate tied to some economic index. |
| Amortization | The process of paying or reducing a debt by periodic payments sufficient to cover current interest and to extinguish part of the principal. |
| Annuity | A contract to make periodic payments in the future. |
| Appraisal | An estimate of the value of property, especially real estate, to be used as collateral for a loan. |
| Arbitrage | The process of simultaneously buying and selling identical or similar securities in related markets, thus providing a profit to the investor. |
| Automated clearinghouse (ACH) | A clearinghouse in which the information enters the system in an electronically readable form, such as magnetic tape. |
| Automated teller machine (ATM) | Equipment that can provide certain banking services without the involvement of bank personnel. Customers access an ATM by using a plastic card (a "debit" card) issued by their bank. |
| Available funds | Funds that may be withdrawn or used immediately or on demand. |
| Balance | The amount standing to the credit of a depositor's account, representing the amount that may be withdrawn. |
| Bank capital | The difference between the value of a bank's assets and its liabilities. The total of the capital accounts of the bank sometimes includes, for regulatory purposes, loan loss reserves and subordinated debt. Many banking regulations are tied to the amount of the bank's capital. |
| Bank check | A check drawn by a bank on itself and signed by an authorized officer |
| Bank examination | An on-site investigation of the bank's financial condition, management, and policies by representatives (bank examiners) of the regulatory agencies. |
| Bank holding company | Any corporation that controls one or more banks. The corporation is subject to the Bank Holding Company Act, administered by the Federal Reserve Board. |
| Bank Insurance Fund (BIF) | Insurance fund for depositors in failed commercial banks, created in 1989 to assume the responsibilities of the FDIC insurance fund. |
| Bank notes | Instruments issued by banks evidencing a promise to pay bearer on demand, intended to be used as money. Currently, only Federal Reserve bank notes are in circulation. During the 19th century, bank notes constituted the bulk of the money supply of the United States. |
| Bank statement | A statement of a customer's account, showing all deposits recorded, checks paid, and charges made during a period, as well as the balance at the end of the period. The statement is usually accompanied by the customer's canceled checks. |
| Banker's acceptance | A short-term marketable security guaranteed by a bank, generally resulting from trade in staple commodities. A "trade acceptance" is a draft drawn by the seller of goods on the buyer and "accepted" by the buyer. In a bank acceptance the bank substitutes its credit for that of its customer. The customer is to provide funds to pay acceptances at maturity. |
| Basis point | One one-hundredth of a percentage point. A unit commonly used to express differences in or changes in interest rates. |
| Bearer | Holder or person in possession of money or of a check, note, or other instrument. |
| Beneficiary |
The person specified by a depositor in connection with an account in trust for another |
| Bond | An interest-bearing certificate of debt that promises that the issuer (a government or corporation) will pay a certain sum of money to the holder of the bond at a specified date. In effect, it is a long-term loan by the bondholder to the issuer. |
| Call loan | Money loaned by banks, usually to securities dealers or brokers, for which demand may be made at any time. Also called demand loans. |
| Call option | Contract that provides the owner with the right to purchase a specified financial instrument at a specified price within a specified period of time. |
| Cash items | Checks or coupons that accepted for tentative credit to a depositor's account, subject to reversal if the items are not paid. |
| Certificate of deposit (CD) |
Written description of deposit payable on a satisfied date, generally interest-bearing. The depositor usually may not withdraw the funds prior to maturity wthout incurring a penalty. |
| Chargeback |
A chargeback is the return of funds to a consumer, forcibly initiated by the consumer's issuing bank. Specifically, it is the reversal of a prior outbound transfer of funds from a consumer's bank account, line of credit, or credit card. |
| Check | A draft drawn on a checking account payable on demand. It is, in general, a negotiable instrument. |
| Check kiting | Writing checks against deposits that have not cleared throught the banking system, thus taking advantage of the "float" - the time needed for checks to clear. |
| Checking account | A bank account against which checks may be drawn. May also be referred to as a transaction account or a demand deposit. |
| Classified loans | Those loans criticized by an examiner as having a greater than normal degree of risk, The ratings used include "substandard", "doubtful", and "loss". |
| Clearinghouse | A place where representatives of local banks meet at an agreed time each day to exchange checks and other items drawn on each other, and to settle the resulting balances. |
| Collateral | Specific property that a borrower pledges as security for a loan, agreeing that the lender shall have the right to sell the collateral if the borrower fails to respay the loan at maturity. |
| Commercial paper | Short-term securities issued by corporations, usually of high credit quality. |
| Comptroller of the Currency | The federal official responsible for supervision and examination of national banks. |
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