Banking/Related Articles

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Index

See the economics index for an index to topics referred to in the economics articles.

Parent topics

  • Economics [r]: The analysis of the production, distribution, and consumption of goods and services. [e]
  • Financial economics [r]: the economics of investment choices made by individuals and corporations, and their consequences for the economy, . [e]
  • Financial system [r]: The interactive system of organisations that serve as intermediaries between lenders and borrowers. [e]

Subtopics

  • Bank failures and rescues [r]: an account of the occurrence , causes and consequences of bank failures, and of methods of dealing with them [e]
  • Financial regulation [r]: a regime that has the purpose of promoting the stability of banks and other financial institutions and the purpose of preserving the integrity of the financial system. [e]
  • Monetary policy [r]: The economic policy instrument that is regularly used to stabilise the economy, and that has sometimes been used as a temporary expedient to relieve severe credit shortages. [e]

Glossary

Five other glossaries are available:

ABCD

  • Asset (banking) [r]: The money and property owned by a bank, and the money that is owed to it. [e]
  • "Bad bank" [r]: A subsidiary, or separate corporation, created to hold and manage non-performing assets transferred to it by a rescued bank. [e]
  •   Banking panic - see Panic (banking)
  • Basel Committee on Banking Supervision [r]: The Basel Committee on Banking Supervision exchanges information on national supervisory issues and publishes guidelines and supervisory standards. [e]
  • Basel I [r]: A set of recommendations published in 1988 by the Basel Committee on Bank Supervision that were intended to ensure that banks have enough capital to cope with the risks that they may be expected to encounter. [e]
  • Basel II [r]: A replacement for Basel I published in 2004 by the Basel Committee on Bank Supervision that requires banks to identify the risks they may be expected to encounter and to improve their ability to manage them. [e]
  • Basel III [r]: A set of recommendations published in 2010, by the Basel Committee on Bank Supervision, introducing a leverage ratio requirement, a liquidity requirement, and a range of countercyclical proposals. [e]
  • Bill of Exchange [r]: A written order to pay the holder a stated sum of money at a stated date (otherwise known as a "draft", the person who is paid being termed the "drawer"). [e]
  • Bubble (economics) [r]: A surge in prices that raises expectations of further increases, so generating further increases: a process that continues until confidence falters, the bubble "bursts" and prices rapidly revert to an objectively-based level. [e]
  • Capital (banking) [r]: A bank's assets minus its liabilities. [e]
  • Capital adequacy ratio [r]: The ratio of a bank's capital to its risk weighted credit exposures. May be defined in terms of tier 1 (core) or tier 2 capital. [e]
  • Central Bank [r]: A government agency that is responsible for monetary policy and the support of the banking system (for example the Federal Reserve Board and the Bank of England). Usually responsible for controlling a country's monetary policy and preserving the value of its currency. [e]
  • Commercial bank [r]: a bank that accepts deposits and makes loans to individuals and businesses (also known as a "retail bank"). [e]
  • Commercial paper [r]: unsecured debt_instruments that are issued by corporations to meet short term financing needs (usually repayable after 3 months). [e]
  • Contagion (banking) [r]: the spread of a run, loss or insolvency from one bank to another, or the spread of a banking crisis from one country to another. [e]
  • Contingent convertible bond [r]: A bond that converts automatically into shares in a stipulated contingency (for a bank the stipulated contingency is normally that its reserve ratio falls below a stipulated level). Often called a "coco": also known as an "enhanced capital note". [e]
  • Countercyclical [r]: A term that is used to describe a policy of building up reserves of capital or credit during periods of economic growth so that they will be available to use as a cushion against the effects of an economic downturn or a financial crisis [e]
  • Credit easing [r]: A method of making credit more available to individuals and businesses by changing the composition of the assets of the central bank towards less liquid and riskier private sector assets. Unlike quantitative easing, it may be done without expanding the money supply. [e]
  • Credit risk [r]: The risk that the value of a loan-based security will fall as a result of defaults on the part of borrowers (as distinct from interest rate risks and exchange rate risks). [e]
  • Debt_instrument [r]: A formal obligation assumed by a borrower to replay the lender in accordance with the terms of an agreement, including bonds, debentures, promissory notes, leases and mortgages. [e]
  • Deposit (banking) [r]: Money lent to a commercial bank by its customers. [e]
  • Deposit insurance [r]: An arrangement under which depositors in a bank that becomes unable to meet demands for withdrawals, are compensated to the extent of a substantial proportion of the amount of their deposits. [e]
  • Derivative [r]: An asset whose value depends upon the expected value of another asset. [e]
  • Discounting [r]: (i) The action of selling a bill of exchange before its due payment (or "maturity") date "at a discount": that is to say after paying the purchaser a fee for accepting it. (ii) The practice of calculating the current equivalent of a future cost or benefit by the application of a chosen discount rate. [e]
  • Discount_rate [r]: (i) The percentage by which current value exceeds value in a year's time. (ii) The rate at which banks may borrow at their central bank's discount window. [e]
  • Discount window [r]: A facility provided by central banks that enables a bank to make secured short-term loans at its central bank's discount rate. [e]
  • Draft (finance) [r]: Another name for a bill of exchange (termed "bank draft" if issued by a bank: otherwise "trade draft"). [e]

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EFGHIJKL

  • Enhanced capital note [r]: A bond issued by a bank that converts automatically into that bank's shares if its reserve ratio falls below a stipulated level (also known as a "contingent convertible bond"}. [e]
  • Fair value [r]: An accounting convention under which the balance sheet valuation of an asset is an estimate of a price that would be fair to both a seller and a buyer of that asset, taking account of the advantages of the transaction to each (replacing the "historical" convention under which assets were valued at the price at which they had been acquired). [e]
  • Federal funds rate [r]: The overnight interest rate at which banks lend balances at the Federal Reserve to other banks. [e]
  • Federal Deposit Insurance Corporation [r]: Independent agency created by the United States Congress with a remit to maintain stability and public confidence in the financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships. [e]
  • Fiat money [r]: money whose value is determined solely by government order, or "fiat" (as distinct from commodity money that has value because of its scarcity or cost of production). [e]
  • Fractional-reserve banking [r]: The banking practice of lending out more money than is available as a reserve. [e]
  • Great moderation [r]: the period between 1980 and 2007 during which the volatility of US output was less than half that of the preceding post-war period. [e]
  • Interbank market [r]: a market in which a group of banks lend to each other (for example, see LIBOR). [e]
  • Interest rate risk [r]: The risk that the value of a fixed-rate security or loan will fall as a result of a rise in interest rates. [e]
  • Investment bank [r]: a bank that raises finance for businesses by marketing new issues of equity and bonds. [e]
  • Leverage [r]: (i) The use of borrowing to increase the amount of money that is available for investment or consumption. (ii) A proportional measure of indebtedness, such as the ratio of a company's debt to its shareholders' equity (the same as British "gearing"), or the ratio of the indebtedness of a household to the net value of its assets (ie net of its debts). [e]
  • Leverage ratio (banking) [r]: A bank's Tier 1 capital divided by its tangible assets. [e]
  • Liabilities (banking) [r]: A bank's deposits, its borrowings on the interbank market, and its other borrowings. [e]
  • LIBOR [r]: (London Interbank Offer Rate) the rate of interest at which a group of banks (16 banks from seven countries, including the United States, Switzerland and Germany) are willing to lend to each other for periods ranging from a day to a year . [e]
  • Liquidity [r]: (i) The quantity of available assets in its possession that an organisation could rapidly exchange for cash (assets that cannot be exchanged for cash at a particular time are considered to be "illiquid" at that time); (ii) the funding that is unconditionally available to settle claims through monetary authorities (termed "official liquidity"). [e]
  • Liquidity risk [r]: the risk that assets cannot be sold at time when cash is needed to meet a commitment. [e]
  • Liquidity trap [r]: a state of the economy in which an expansionary monetary policy has no effect upon output. [e]

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MNOPQ

  • Macroprudential financial policy [r]: a regime that has the purpose of promoting the stability of banks and other financial institutions and the purpose of preserving the integrity of the financial system. [e]
  • Margin account [r]: an arrangement that enables customers to buy securities with money borrowed from a broker, subject to a minimum maintenance level related to the market values of the securities. [e]
  • Margin call [r]: a demand for the additional securities required to maintain the minimum maintenance level of a margin account when security prices fall. [e]
  • Market risk [r]: The risk that the value of an investment in a financial product will fall as a result of a fall in the market for that product. [e]
  • Monetary base [r]: currency in circulation plus bank vault cash plus deposits held by banks at the central bank (termed "high-powered money" in the US, and referred to as M0 in the UK). [e]
  • Monetary policy [r]: The economic policy instrument that is regularly used to stabilise the economy, and that has sometimes been used as a temporary expedient to relieve severe credit shortages. [e]
  • Money market [r]: A market for short-term debt instruments (generally of maturity after less than one year) such as certificates of deposit, commercial paper, and Treasury bills. [e]
  • Moral hazard [r]: Motivation to take an otherwise unwarranted risk because the cost of an unfavourable outcome would be borne by someone other than the risk-taker. [e]
  • Open market operation [r]: The buying and selling of government securities in order to influence the level of banking reserves. [e]
  • Originate and distribute [r]: The practice under which a bank does not hold the loans that it originates, but distributes them to other financial institutions after they have been repackaged and converted into bonds by securitisation. [e]
  • Panic (banking) [r]: A fear of default that creates a generalised reluctance to grant credit. [e]
  • Prime rate [r]: The interest rate that commercial banks charge for loans involving the lowest risk of default - such as loans to large companies. [e]
  • Qualitative easing [r]: A shift in the composition of the assets of the central bank towards less liquid and riskier assets (in order to reduce credit [[spreads] and improve the functioning of private credit markets) - also known as credit easing. [e]
  • Quantitative easing [r]: An increase in the central bank's monetary liabilities as a result of its purchases of corporate or government securities. [e]

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RSTUVW

  • Recapitalisation (banking) [r]: The process of increasing a bank's capital in order to restore its capital adequacy ratio to an acceptable level. [e]
  • Reserves (banking) [r]: A bank's holding of deposits at its central bank plus the currency held in its vaults. [e]
  • Reserve ratio [r]: The ratio of a bank's reserves to its deposits, a minimum value of which is set by its central bank with the effect of limiting the proportion of its deposits that the bank is permitted to lend. [e]
  • Run (banking) [r]: An attempt by a large number of investors to withdraw their deposits. [e]
  • Securitisation [r]: The conversion of a cash flow into a marketable security (usually a claim upon debt repayments) and often categorised according to the expected risk of default (examples include collateralised debt obligations and structured investment vehicles.) [e]
  • Sterilisation, monetary [r]: Action taken by a central bank to counteract changes to its monetary base - for example by buying or selling government securities. [e]
  • Stress test (banking) [r]: a test of the adequacy a bank's capital structure by estimating the consequences for it of an imaginary recession. [e]
  • Structured investment vehicle [r]: (SIV) a fund that borrows money - usually at LIBOR rates - by the issue of asset backed commercial paper and uses it to finance longer term loans at higher interest rates. [e]
  • Swap contract [r]: An agreement to exchange financial obligations between two organisations with complementary needs, for example an agreement to swap fixed interest obligations for variable interest obligations. [e]
  • Syndicated bank loan [r]: A facility created by a conglomerate of banks for the provision of loans to borrowers who wish to raise larger sums than they could obtain from a single bank. [e]
  • Tier 1 capital [r]: A measure of a bank's financial strength used by the Bank for International Settlements (BIS): shareholders' funds plus irredeemable and non-cumulative preference shares and excluding hybrid forms of capital like goodwill [e]
  • Tier 2 capital [r]: A definition of banking capital that includes subordinated debt, convertible securities, and a portion of the loan loss reserves for possible bad loans. [e]
  • Value at risk [r]: The maximum possible loss in the value of an asset within a given time span and at a given confidence level. [e]
  • Wholesale banking [r]: transactions other than those with a bank's retail customers, including trading in derivatives and in the interbank markets, stock markets and foreign exchange markets. [e]

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