• Banking Terms – F

    Term

    Meaning

    Face amount Principal Value of a security mentioned on the face of the document.
    Face Value Face value is the value of a coin, stamp or paper money, as printed on the coin, stamp or bill itself by the minting authority. Face value is the original value of any security or negotiable instrument.
    Factoring Factoring is a financial transaction where a company sells its account receivables to a third party or a bank at a discount for some immediate money to finance its urgent cash requirements. Normally every company has a credit policy which provides the byers some credit period to pay back all the pending dues; these are called account receivables and termed as asset for the company.
    Fair Credit Reporting Act This Act is enforced by the Federal Trade Commission and is designed to promote accuracy and ensure privacy of the information used in consumer reports.
    Fannie Mae Federal National Mortgage Association (FNMA). An entity that purchases first mortgages from commercial banks, savings and loans, and mortgage bankers.
    Farm Credit System A cooperative nationwide system of banks providing money to farmers and related businesses.
    FASB Financial Accounting Standard Board. It’s the independent US Agency which establishes standards for Financial Accounting. These standards are called as generally accepted accounting principles which popularly called as GAAP.
    FCNR Accounts Foreign Currency Non-Resident (FCNR) accounts are the ones that are maintained by the NRIs in foreign currencies. The account is a term deposit with interest rates linked to the international rates of interest of the respective currencies.
    FDIC Federal Deposit Insurance Corporation. It’s the independent US Agency which deposits up to USD 250,000 per institution as long as the bank is a member. It’s the organization formed against bank failure.
    Federal Credit Union This is a member owned, democratically governed, no profit cooperative providing financial services such as deposit taking and disbursing loans to the members. The profits are share with members.
    Federal Economy It refers to a federation which is an association of two and more states. A federal state is a union of state in which authority is divided between the federal (or central) government and the state governments. In a federal economy both the centre and the states are independent in the exercise of this authority.
    Federal Funds Rate (funds Rate) The interest rate at which banks borrow surplus reserves and other immediately available funds is known as federal Funds Rate. The federal funds rate is the shortest short-term interest rate, with maturities on federal funds concentrated in overnight or one-day transactions. In the United States the federal funds rate is the interest rate at which private depository institutions lend balances (federal funds) at the Federal Reserve to other depository institutions overnight.
    Federal Reserve Federal Reserve is the banking regulator in USA. It has twelve offices spread out in various states and implements monetary policy of the Federal Government. It also regulates the interest rates in the US markets.
    FHA loan FHA loan is a federal assistance mortgage loan in the United States insured by the Federal Housing Administration. The loan may be issued by federally qualified lenders.FHA loans have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. The program originated during the Great Depression of the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance. Some FHA programs were subsidized by government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers.
    Fiduciary Issue Generally bank-note are backed by gold. But when they are not backed by gold and government securities replace gold, it is called fiduciary issue. Such fiduciary issue results in inflation.
    Final Maturity A final maturity is the date of maturity when a last, single loan matures from a pool of loans. The final maturity indicates the total and final payment of the pool of mortgage loans.
    Financial institution It is the institution that collects money and invests them in financial assets. Bank comes under financial institution.
    Financial Institution Identifier (FIID) A unique four-digit number assigned by U.S. Bank Network Services to find the institution.
    Financial Instrument Financial Instrument is a legal Document representing the agreement which involves monetary value.
    Financial Intermediary A financial intermediary is basically a party or person who acts as a link between a security provider and securities buyer. Share broker and banks are the best examples of financial intermediaries.
    Firm Commitment Contract This is a type of underwriting contract wherein the underwriter assures the sale of issued stock at a predetermined price. The undertaker takes the risk involved in the sale so for the issuer, this is the safest underwriting contract; however the downside is that this contract is most expensive among the Underwriting contracts. This is the most common type of underwriting contract. Any loss that occurs in the trading or due to unsold shares will be shared between the participating underwriting firms according to their proportional participation.
    First Mortgage A mortgage that creates a lien against real property with the lien having first priority against other claims in the event of foreclosure is known as First Mortgage.
    Fiscal Policy Fiscal Policy refers to the Government spending and income to run a country and support the growth. It mainly deals with the Budget allocation, Government spending, Government income, taxation, fiscal deficit, Government borrowings, current account deficit and surplus and trade deficit and surplus.
    Fixed Assets Anything a corporation owns is considered an asset. These are listed in a company’s Balance Sheet in increasing order of liquidity, i.e. beginning with those that are not easily converted into cash. It can also be referred as assets and property which cannot easily be converted into cash. This can be compared with current assets such as cash or bank accounts, which are described as liquid assets.
    Fixed deposit It’s called as FD, one time investment and is not operational if used the expected interest will not be got.
    Fixed Rate This refers to the rate of interest, which remains fixed for the entire duration of a loan. Thus, a consumer loan may carry a rate of interest, which is fixed at a specific percentage for the entire duration of the loan.
    Fixed Rate (Loan) A loan in which the interest rate does not change during the entire term of the loan. For an individual taking out a loan when rates are low, the fixed rate loan would allow him or her to “lock in” the low rates and not be concerned with fluctuations.
    Fixed Rate Bonds Bonds bearing fixed interest payments until maturity date.
    Fixed Rate Mortgage A mortgage in which the interest rate and the amount of each payment remain constant throughout the life of the loan is known as Fixed Rate Mortgage. Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.
    Fixtures The term ‘fixture’ is used in the context of a real estate property, when assets like furniture are attached to the real estate and are also included in its book value. Banks, in many a cases, are known to include fixtures in the value, if the real estate property has been pledged as a collateral.
    Float It is either called for the floating rates for gold and share markets where the fluctuations happen.
    Floating Rate This refers to the rate of interest, which changes regularly, generally at monthly or quarterly intervals, during the duration of a loan. The bank, while lending at a floating rate of interest makes it clear to the borrower at what interval the interest rate will be adjusted. The interest rate may float with respect to the prime rate, which means that as and when the prime rate changes, the loan interest rate will change. The interest rate may be expressed as “floating 2% above the prime rate”.
    Floating Rate Bonds Bonds with interest payments proportional to current interest rates.
    Floating Rate Notes (FRNs) Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e. they pay out interest every three months, though counter examples do exist. At the beginning of each coupon period, the coupon is calculated by taking the fixing of the reference rate for that day and adding the spread. A typical coupon would look like 3 months USD LIBOR +0.20%
    Floor Brokers Floor Brokers are the brokers i.e. intermediaries who receive orders from the public to buy or sell shares.
    Follow-on Public Offering (FPO) Through which an already listed company can issue fresh shares in the market to raise more equity capital. Here the issue price is decided based on the current trading price which is normally kept a bit lower than the current market price to make people subscribe for it.
    Forbearance Agreement A forbearance agreement is an authenticated agreement between a debtor and a creditor, and is utilized by the creditor, when the debtor initiates a debt settlement or the loan is defaulted, or the former becomes bankrupt.
    Foreclosure Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner’s failure to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that “the lender has foreclosed its mortgage or lien.”
    Foreign Banks Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI), e.g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.
    Foreign Currency Lending When the loan is in a currency of a country other than that of the borrower, it is a foreign currency lending.
    Foreign Exchange market The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions.
    Forfaiting The term refers to purchase of a trade debt or receivable at a discount. The instrument used in forfaiting is generally a bill of exchange. It is a method of providing medium and long-term finance to the seller/exporter, usually at a fixed rate of interest, to facilitate global trade.
    Forfaiting Factoring essentially involves purchase of inland receivables. In international trade transactions, forfeiting is much a more common form of financing export-related receivables.
    Forfaiting is purchasing of export bills where payment is expected to be received over a longer period in installments (deferred payment exports). It is done without recourse to the exporter if the bills are accepted by the importer’s bank – also known as Avalling Bank. An Aval is an endorsement on the importer’s promissory note by the importer bank, guaranteeing the payment.
    Forgery  When a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.
    Freddie Mac-Federal Home Loan Mortgage Corporation (FHMLC) An entity that purchases first mortgages, both conventional and federally insured, from members of the Federal Reserve System and the Federal Home Loan Bank System.
    Free Cash Flow A free cash flow is basically is a total of financially liquid assets that does not include capital expenditures and dividends.
    Fully Assumable Mortgage A mortgage that can be transferred from one owner to another qualified borrower without an increase in interest rate.
    Future Value of an Annuity  The amount to which a stream of equal cash flows that occur in equal intervals will grow over a period of time when it is placed in an account paying compound interest.
    Futures Contract  A commitment to deliver a certain amount of some specified item at some specified date in the future.

     

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