• Banking Terms – A

    Term Meaning
    1003 Form A standardized application form to be filled in by the borrower. This is also known as the Fannie Mae form.
    AAA This is the best credit rating provided by any Credit rating agency… This is normally termed as almost risk free investment.
    ABA ABA is the unique nine digit number which is given by American Bankers Association. It is used to identify the bank. The first nine digits denote the ABA number. The ABA number was developed in 1910 by the American bankers association. This number is assigned to the banks or financial institution which holds an account with the Federal Reserve Bank.
    ABA Transit Number The ABA transit number is assigned by the American Bankers Association. It is a numeric coding that indicates and facilitates the amount of check payments, balances and dues that are to be cleared among different banks at the clearing house.
    Abandonment Turning a property to an insurer and claiming the value.
    ABO ABO is an abbreviation for the term ‘Accumulated Benefit Obligation’. It is basically the measure of the liability of the pension plan of an organization and is calculated when the pension plan is to be terminated.
    Absolute title A legal document given to a particular person who is unqualified rite for some property.
    Absorption Absorption is a term related to real estate, banking and finance fields. It  means the process of renting a property that is newly built or is recently renovated.
    Absorption Time The term ‘absorption time’ is used to define the time period that is required to complete the process of absorption.
    Accelerated Depreciation A method of depreciation of fixed assets, where the rate of depreciation is higher during the early years compared to later years.
    Acceleration Acceleration usually empowers the lender to accelerate the time period. In the process, the lender demands a full and final payment of the debt or loan, before the allotted time period for repayment.
    Account It is the contractual relation with the bank and the customer where customer’s amount can be kept safely. Reference numbers will be given which are called as Account Number.
    Account Balance The total amount of money in a particular bank account, along with the debit and credit amounts, the net amount is also termed as the account balance. The total amount in the credit and debit transaction should be balanced.
    Account History The history of the particular account number for a specified period of time, which shows the details of the transaction.
    Account Reconciliation The process of reviewing and matching the balance of one’s personal check book with the bank statement is called account reconciliation. The checks that are issued will be noted in the check book. Once the check is cleared the balance in the check book and the bank statement should match. It helps the account holder to keep track of the money so that the bank statement can be verified. In case of corporate accounts, account reconciliation helps in cash management and helps the business to prevent from fraudulent activities.
    Account Routing Number It is the unique number to associate the bank with the account.
    Account statement It is the transaction details happened for that particular account either for a month or week accordingly. A financial record that indicates the transaction and its effect on an account (usually bank account), in terms of debit and credit.
    Account Value An account value is the total value of any account, applicable when a person has many accounts and transactions in the same bank or financial institution.
    Accounts Payable Accounts payable is a list of liabilities of an organization or an individual that are due but not paid to creditors. Account payable is termed as current liability in the balance sheet.
    Accreting Swap Accreting swap is a swap of interest which has an increasing notional amount.
    Accretion Bond An accretion bond is basically a bond that has been purchased at a discount and whose book value is incremented to the par value or the face value.
    Accrual If bank is accumulating amount from customer, then it is called accrual. Accrual is the process of accumulation of interest or money.
    Accrual bond Long term bond which pays no interest until all prior bonds retire. The interest is accrued and then added later on at the time of maturity.
    Accrual rate It is the annual rate which is stated and the interest is calculated using that.
    Accrued Interest Accrued Interest is the interest, accumulated on an investment but is not yet paid. Often, accrued interest is also termed as interest receivable. Some banking books prefer to call it as the interest that is earned, but not yet paid. It is the interest from the issued date or the last payment date to the settlement date.
    Accumulated Depreciation Accumulated depreciation is the total all the periodic reductions from the book value of fixed assets.
    ACH ACH stands for Automated Clearing House. It is a secure payment transfer method in US which connects all financial institutions and banks. It is the central network for electronic funds transfer transaction. ACH follows the rules and regulations of NACHA and Federal Reserve System. ACH transactions are faster, easy and immediate than paper checks or cash transactions.
    Acquiring bank The bank accepts the payments for the products or services of the merchants on behalf of them. Mainly this is done using credit cards.
    Active Market  This is a term used by stock exchange which specifies the particular stock or share which deals in frequent and regular transactions. It helps the buyers to obtain reasonably large amounts at any time.
    Active Tranche Active tranche basically stands for REMIC or Real Estate Mortgage Investment Conduit. The REMIC tranche is basically a bond that is backed up by a large set of mortgages. The principal and interest that are paid by the borrowers, are transferred to the people who hold tranche (tranche refers to a portion or money) in REMIC.
    Actual Delay Days Actual delay days are also simply known as ‘delay days’. The actual delay days are the actual days of the lag times. The lag time is the time period that starts after the expiry of the last date of repayment.
    Additional Security This is a security that has been offered by the borrower to the lender and is not financed by the lender.
    Adjustable Rate This is also a floating rate, but with certain difference. A floating rate generally relates to short-term loans and the interest rate is adjusted at frequent intervals whereas an adjustable rate is adjusted at the end of a fixed period such as 3 years or 5 years and is thus quoted for long-term loans.
    Adjustable Rate Mortgage (ARM) Adjustable Rate Mortgage (ARM) is the loan in which the rate of interest is adjusted periodically. The rate of interest can move higher or lower in the same ratio as per the selected index. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan. As the name suggests the payments made by the borrower will change with the changing rate of interest. It is also known as variable-rate mortgage” or a “floating-rate mortgage”.
    Adjusted balance The balance remains due to the payments made during current billing cycle which are subtracted from the previous billing cycle.
    Administrative Float Administrative float is the frame of elapsed time that is required in order to complete the paper work, in order to administratively sort the checks, or for that matter, any type of currency and negotiable instruments in the bank itself or in the clearing house.
    Adverse Action Notice The Adverse Action Notice informs the applicant of denial of credit based on information in the credit report. The notice should indicate which credit reporting agency was used and how it may be contacted.
    Affidavit A written statement made before notary public or an authorized person.
    Affiliate A bank controls an organization through stock ownership.
    Affinity Marketing Affinity marketing is a highly focused, cause-related marketing in which a ready-made relationship is taken by a party and adapted for own use.
    Affluent Market This comprises customers and prospects with high net worth individuals belonging to professional or business background.
    Aftermarket Also known as Secondary Market. Refers to the market wherein an investor purchases and sells previously issued Securities, Stocks, and Bonds etc. from another investor instead of the issuer. The major stock exchanges are the obvious examples of liquid secondary markets where the stocks of publicly traded companies are available for trading. Example of stock exchanges – New York Stock Exchange(NYSE), NASDAQ, BSE etc.
    All-or-none Contract In this contract, the undertaker agrees to sell all the offering, but the securities issuer has the right to cancel the entire deal if the undertaker couldn’t manage to sell all the offering. The undertaker cannot dupe the investors by stating that all of the securities in the undertaking cannot be sold if it’s not true.
    Alternative Minimum Tax Alternative minimum tax, also known as the AMT, is a type of tax that is levied by the United States government and is a type of Federal income tax. The alternative minimum tax (AMT) is basically levied on the individuals and organizations that misuse and take advantage of tax benefit schemes that are in monetary terms exorbitant, if rationally compared to their annual incomes.
    Amalgamation It means ‘merger’. As and when necessity arises two or more companies are merged into a large organization. This merger takes place in order to effect economies, reduce competition and capture market. The old firms completely lose their identity when the merger takes place.
    American Depository Receipts American Depository Receipts (ADR) is a negotiable instrument that represents an ownership interest in securities of a non-US company.  American depository receipts are traded only on US based stock exchanges
    Amortization The paying off of debt in regular installments over a period of time is known as Amortization. Unlike other repayment models, each repayment installment consists of both principal and interest. Amortization is chiefly used in loan repayments (a common example being a mortgage loan). Payments are divided into equal amounts for the duration of the loan, making it the simplest repayment model. A greater amount of the payment is applied to interest at the beginning of the amortization schedule, while more money is applied to principal at the end.
    Amortization Period Amortization period is the time period that is considered from the inception of the credit, investment or negotiable instrument and ends upon the maturity or expiry of the instrument.
    Analytical VAR An analytical VAR is also known as the correlation VAR. An analytical VAR is basically the measurement of a financial instrument, portfolio of the financial instruments or an entity’s exposure to the reductions in its value resulting from changes in the prevailing interest rates.
    Annual Percentage Rate (APR) Annual Percentage Rate (APR) is an expression of the effective interest rate that the borrower will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed. In other words the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options. It is actually is a measure of the cost of credit on a yearly basis. The APR allows you to compare various kinds of mortgages based on the yearly cost of each loan.
    Annual Percentage Yield (APY) The annual percentage yield or APY is basically a very accurate and calculated measure of yield that is paid on a standard bank deposit account.
    Annuities Annuities are contracts that guarantee income or return, in exchange of a huge sum of money that is deposited, either at the same time or is paid with the help of periodic payments. Some of the common types of annuities include the deferred, fixed, immediate or variable variants.
    Annuity Contract sold by insurance companies which gets the premium on monthly basis for the benefit of the life of a person.
    Anti Money Laundering AML stands for Anti Money Laundering. A set of procedures, standards, rules or regulations designed to stop generating money through illegal actions.  Money laundering is hiding illegal money, that is got through illegal activity like bribe, theft, cheating or through other criminal activity. This term is mostly used in banks, financial institutions or any legal industry. AML laws are induced in all legal industry to prevent money laundering.
    Anticipated interest Predicted interest a savings account will earn on a particular future date.
    Anywhere Banking Refers to banking not only by ATMs, Tele-Banking and internet banking, but also to core banking solutions brought in by banks where customer can deposit his money, cheques and also withdraw money from any branch connected with the system. All major banks in India have brought in core banking in their operations to make banking truly anywhere banking.
    Appraisal A professional opinion, usually written, of the market value of a property, such as a home, business, or other asset whose market price is not easily determined. It is usually required when a property is sold, taxed, insured, or financed.
    Appraisal Fee This fee related to an independent appraisal of the home the borrower intends to purchase.
    Appraisal Surplus An appraisal surplus is the difference between the historical cost and the appraised cost of the real estate.
    Appreciation Appreciation is an estimate of the market value of a piece of property by a qualified appraiser. It can also be considered as increase in value of an item, specifically the increase in market value of real estate.
    Arbitrage Buying the financial instrument in one place or market and selling the same with increase in price in another market or place.
    Arbitrage Free Arbitrage free is a type of financial model that generates market structures that exclude scenarios generated by the arbitrage transactions and dealings.
    Arbitration Arbitration is an alternative dispute resolution mechanism provided by a stock exchange for resolving disputes between the trading members and their clients in respect of trades done on the exchange.
    ARM Loans It is an Adjustable Rate Mortgage Loans or Variable Rate Mortgage Loans in which interest rate is changed periodically.
    Arrears Due payments or loans.
    Ascending Rate Bond Bonds for which the coupon rate increases with time as per earlier defined rate. The coupon rate increases after certain intervals.
    Ask price The security is sold at a price which is lowest and been asked.
    Asset Any item of economic value owned by an individual or a company, especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, real estate, a car, and other property. On a balance sheet, assets are equal to the sum of liabilities, common stock, preferred stock, and retained earnings.
    Asset and Liability Management Asset and liability management is the coordinated management of all the financial risks inherent in the business conducted by financial institutions. In real practice, asset and liability management aims at minimization of loss and maximization of profit.
    Asset Backed Security (ABS) A security that is backed with the help of some kind of valuable assets, is known as an asset backed security. Sometimes, ABS is also referred to as the monthly rate of repayment of a secured loan.
    Asset-Backed Securities (ABS) Type of security that is backed by a pool of bank loans, leases, and other assets. Most ABS are backed by auto loans and credit cards – these issues are very similar to mortgage-backed securities.
    Assignment An assignment is the transfer of any contractual agreement between two or more parties. The party that assigns the contract is the assignor and the party who receives the assignment is the assignee.
    At par The same price as the nominal amount of a security.
    ATM It is called as automated teller machine which dispenses money when a valid card is used. These do the job of a teller in a bank through Computer Network. ATMs are useful to dispense cash, receive cash, accept cheques, give balances in the accounts and also give mini-statements to the customers.
    ATM usage fee The fee charged by the banks for their ATM usage to the customers.
    At-the-money The exercise price of a derivative that is closest to the market price of the underlying instrument.
    Auction It is a process of selling a commodity through bidding process. Whose ever makes the highest bid, gets the commodity which is being sold. The buyers make the bid taking into consideration the quality and quantity of the commodity.
    Audit trail A flow of transaction from initiation to finalization or vice versa.
    Authorized Capital Authorized capital is the maximum number of shares that a company is allowed to issue for raising capital as per the Memorandum of Association (charter) of that company.
    Automated Clearing House (ACH) Automated Clearing House is a computer-based clearing and settlement facility established to process the exchange of electronic transactions between participating depository institutions. Such electronic transactions have taken the place of paper cheues. ACH processes large volumes of both credit and debit transactions which are originated in batches. Rules and regulations governing the ACH network are established by NACHA-The Electronic Payments Association, formerly the National Automated Clearing House Association, and the Federal Reserve (Fed).
    Automatic Transfer Service Account (ATS) A depositors savings account from which funds may be transferred automatically to the same depositors checking account to cover a check written or to maintain a minimum balance.


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