Glossary of Banking Terms

Glossary of Banking Terms
ACH (Automated Clearing House) - A type of electronic funds transfer system that operates within a US nationwide network between banks and individual consumers.
Affidavit - A sworn statement in writing before a proper official, such as a notary public.
Anti-Money Laundering (AML) – Rules, regulations, and processes aimed at preventing criminals from committing financial crimes.
AQB (Average Quarterly Balance) – The sum of the end of the day balances in the quarter divided by total number of days in the quarter.
ATM (Automated Teller Machine) – A machine, activated by a magnetically encoded card or other medium, that can process a variety of banking transactions, such as withdrawing cash, depositing checks or making balance inquiries.
Bankability – The term bankability refers to the willingness of financial institutions to finance a project or proposal. In other words, a project is considered bankable if banks and financial institutions are inclined to finance it. Different criteria are considered by investors for a project to be bankable, such as adequate planning, demonstration of political will and rational risk allocation as well as a coordinated enabling environment and a solid return on the investment.
Banking Ombudsman – An authority formed to resolve the complaints customers of banks have.
Bankruptcy – When someone is declared bankrupt, it means officially that they are unable to pay their debts and what assets they do have are seized in order to try and repay their creditors.
Blockchain – A distributed database that is shared among the nodes of a computer network that stores large amounts of information, without allowing any of that information to be edited. All the data is stored electronically in a digital format. Blockchains are best known for their critical role in cryptocurrency systems. An example is the Cryptounit blockchain.
Blue chip – Adjective used to describe high quality and specifically in the banking world to describe stocks which are a reliable investment.
Boutique – An investment bank which offers some but not all banking services, generally in corporate finance.
Business Bank Account – An account that helps an entrepreneur keep business transactions separate from personal ones.
Capital Market – The financial system which raises capital by dealing in shares, bonds and long term investments.
Cash Equivalents – Highly liquid accounts holding funds that can be accessed immediately without penalty or risk of loss.
Credit Limit – The maximum amount of credit that is available on a credit card or other line of credit account.
Credit Rating – An evaluation of credit worthiness based on financial resources and credit history.
Cryptocurrency Exchange – An exchange where people can buy and sell cryptocurrencies. People trade them using fiat currencies, other cryptocurrencies, or other digital assets.
CVV (Card verification value) – An anti-fraud security feature that helps verify that you are in possession of your credit card and making the transaction. CVV is usually a three-digit number printed on the signature panel at the back of your credit card.
Default – Failure to repay a loan.
Digital Card – A replica of your credit or debit card on your phone, used for purchases on Apple Pay or Google Pay.
Digital Currency – A type of currency that only exists electronically and allows people to make payments directly to each other through an online system.
Direct Bank – A financial institution licensed to offer services remotely and without branch locations.
Direct Debit Mandate – An authorization you give to a vendor or an institution to collect recurring payments automatically from your bank account.
Dishonour of Cheque – Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.
Drawee Bank – The bank upon which a check is drawn.
Electronic Banking – Allows an account holder to manage certain banking transactions through a personal computer via the bank's website.
Electronic Funds Transfer (EFT) – A method of transferring funds between banks, businesses or individual people. An example is a wire transfer.
EMV Chip – An update to simple magnetic stripe cards. By encrypting data, this feature helps prevent data from being intercepted. EMV stands for Europay, MasterCard and Visa.
Euribor (Euro Interbank Offer Rate) – Is based on the average interest rates offered by a group of large European banks when lending money to each other in euros for terms ranging from one week to one year.
Fiat Money – A government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.
Fintech – Fintech refers to the integration of technology into offerings by financial services companies to improve their use and delivery to consumers.
Foreign Currency – Money that’s used in a country other than your own. There are 180 different currencies recognized by the United Nations.
Foreign Exchange (Forex) – A global, decentralized market in which currencies are traded.
Funds on Hold – Funds not available until they’re processed.
Gold Standard – A monetary system in which the standard economic unit of account is based on a fixed quantity of gold.
Golden Rule of Banking – Short term transactions should be financed with short term money, and long term transactions with long term funds.
Grace Period – A certain amount of time when a borrower can delay making a payment on a loan or credit card account without paying a penalty or incurring interest charges.
Hard Currency – A currency that people trust, because they expect it to maintain its value. Examples of include the US dollar, euro, British pound sterling, Japanese yen and Swiss franc.
Hidden Fees – Fees that are not clear and transparent. For example, when you withdraw cash from an ATM in a foreign country, some banks may charge you an additional currency conversion fee on top of a set transaction fee.
Hypothecation – Agreeing to use an asset as collateral in exchange for a loan.
IBAN (International Bank Account Number) – An identification code for bank accounts that is used globally.
Inflation – An increase in prices which means that the purchasing power of money falls.
Installments – Instead of repaying the entire amount at once, you pay smaller amounts of money at regular intervals over a period of time.
Interest – Used to describe the cost of using money, a right, share, or title in property.
Interest Income – Earnings on savings accounts, certificates of deposit and money markets.
Investment Bank – Helps individuals and businesses with their complex financial needs, such as mergers and acquisitions or raising capital through investment.
Joint Account – An account with two or more owners. Either party can conduct transactions separately or together as set forth in the deposit account contract. The primary account holder receives the bank statements and any other correspondence. Joint accounts are great for sharing expenses or assisting someone with their finances. Kiting – A fraudulent use of a financial instrument to obtain additional credit that is not authorized.
Know Your Customer (KYC) – An important due-diligence process to ensure that customers deal only in legitimate banking operations and not in money laundering or fraud.
LIBOR (London Interbank Offered Rate) – The rate at which banks offer to lend wholesale money to other financial institutions in the international interbank market.
Liquidity – The measure of how quickly an investment can be turned into cash.
Livret A – A savings, free of charge account offered by French banks.
Local Check – A check payable through a bank in the same check processing region as the location of the branch of the depository bank.
Mastercard – A payment network that processes card transactions worldwide when you use a credit, debit, or pre-paid card.
Metal Card – A credit or debit card made of metal, typically stainless steel.
Micro-deposits – Small deposits made to verify an account you’re trying to link. Once verified, you can use the account you’ve linked to your bank account for actions such as money transfers.
Mobile Banking – A service provided by banks and financial institutions that allows you to do your banking on your smartphone or tablet.
Money Laundering – A customer uses banking channels to cover up his suspicious and unlawful financial activities.
Nominal Interest Rate – An interest rate that you agree on when you take out a loan, without taking into consideration the effects of inflation.
Non-fungible token (NFT) – A unique digital asset, like an art piece, music or video file, verified by the blockchain.
NSF (Non-sufficient Funds) – An account balance too low to cover a check presented for payment.
Offshore – Made, situated, or registered abroad, especially in order to take advantage of lower taxes or costs or less stringent regulation.
Online Banking – The digital version of all the financial services that a traditional bank can offer. Today, most banks offer banking services from a desktop computer or a mobile device. Also known as internet or electronic banking.
Open-End Credit – A credit agreement that allows a customer to borrow against a pre-approved credit line when purchasing goods and services.
Outstanding Check – A check written by a depositor that has not yet been presented for payment to or paid by the depositor's bank.
Overdraft – Occurs when you make a purchase with your debit card or write a check for an amount that exceeds your checking account’s available balance.
Overnight Money – A type of loan that a bank borrows from another for one business day, therefore it is charged an overnight rate that is virtually the lowest rate at which banks lend money.
Peer-to-Peer (P2P) – A payment method that allows you to instantly transfer funds from your bank account to another account over the internet.
PIN (Personal Identification Number) – A code to access and operate a payment account or your bank card.
Plastic Money – Credit Cards, Debit Cards and ATM Cards are considered plastic money.
POS (Point of Sale) – An in-store terminal where you make a payment for something you buy.
Prepaid Card – A card that you use for purchases just like a normal credit or debit card, but the money you spend has already been pre-loaded on the card.
Prepayment – The payment of a debt before it actually becomes due.
Prime Rate – The interest rate that banks use to establish the indexed rate for certain loan products.
Quarter – Three months of the financial calender, often used as a basis for reporting performance and normally expressed as Q1, Q2, Q3, and Q4. Refinancing – Replacing an existing loan with a new loan that offers better terms and conditions, such as a lower interest rate or fees.
Reserve Currency – A large amount of currency held by central banks and major financial institutions to use for international transactions. The most important reserve currency today is the US dollar.
Retail Banks – Banks which provide high street services such as savings accounts and mortgages.
Routing Number – The first nine numbers that appear at the bottom of a check to identify the financial institution responsible for holding the account.
Safety Deposit Box – A type of safe located inside a bank vault and rented to customers for their use in storing valuable items.
SEPA (Single Euro Payments Area) – European payment system that allows individuals, businesses, and other economic agents to send and receive payments in euros.
Solvency – When banks have enough money to cover potential losses.
SSL (Secure Socket Layer) – A type of technology that protects your credit card and personal details when you shop or bank online.
State Bank – A bank that is chartered by that State to conduct the business of banking.
SWIFT Code (Society for Worldwide Interbank Financial Telecommunications) – A code that contains 11 characters as a form of bank identification which helps facilitate international wire transfers.
TAN (Transaction Authentication Number) – A one-time code used when you make online payments. It offers an additional security layer for your transaction and helps avoid fraud.
Tier 1 Capital – A bank’s core capital, opposed to Tier 2 capital, which is an element used to measure a bank’s total capital base. Tier 1 is considered to be more reliable.
Time Deposit – A money deposit at a bank that cannot be withdrawn for a certain period of time.
TIN (Tipo de Interés Nominal) – The interest rate on the money you have borrowed or invested. It is a percentage that shows you what must be paid in addition to the principal of your loan.
Transaction Account – A bank account from which payments can be made to a third party.
Universal Banking – A banking system that offers a wide range of banking and financial services compared to traditional banking institutions.
Usury – Loaning money at exorbitant interest rates. Some countries have legislation to protect borrowers from abusive lenders.
Variable Rate – An interest rate that changes on a periodic basis.
Virtual Card – A digital version of your payment card which is stored in the digital wallet.
Visa – An electronic payment solution that processes transactions worldwide when you use your credit, debit, or pre-paid card.
Volcker Rule – A regulation that prohibits banks from engaging in certain types of speculative investment activities. It was proposed by former United States Federal Reserve Chairman Paul Volcker.
Wire Transfer – A domestic or international electronic payment that is made across a network of banks or transfer agencies. Wire transfers cannot be revoked by the sender after the transfer.
Wooden Card – A credit or debit card made of wood.
World Bank – An organization affiliated with the United Nations dedicated to aiding developing nations by providing finance, advice and research.

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