The terms used in banking business such as Current Exposure Method,Currency Board,Cumulative Dividends etc.
This post explains about terms used in banking such as Credit History,Credit Limit,Credit Rationing,Credit risk mitigation,Credit Risk,credit union,Credit-Worthiness,CRISIL,Cash Reserve Ratio,Currency Code,Current Exposure Method,Currency Board,Cumulative Dividends etc.These terms used in international business are arranged in alphabetical order and you may add more information about terms used in export business at the end of this article, if you wish.
The terms used in banking business
Credit History: Is a track record of your debt payments and whether they were paid by the due date. Your credit history helps lenders determine your ability to repay debts on time and may affect what your interest rate will be if you apply for a loan.
Credit History:A record of how a person or company has borrowed and repaid debts.
credit insurance -- A coverage that pays credit card debt in the event of death, disability or loss of employment.
Credit Limit: The maximum amount of money you can spend using a line of credit without paying the full or part of the balance owed. For example, if your maximum credit card limit is $2,500, you cannot spend more than $2,500 without paying off the balance in full or part.
Credit Rating - This is the rating which an individual (or company) gets from the credit industry. This is obtained by the individual's credit history, the details of which are available from specialist organisations like CRISIL in India.
Credit Rationing: Credit rationing takes place when the banks discriminates between the borrowers. Credit rationing empowers the bank to lend to some and to refuse to lend to others. In this way credit rationing restricts lending on the part of bank.
credit report -- A summary of the credit usage of a consumer, including payment histories and current status of all credit accounts. This plays a very large part in the decision to grant credit to a consumer.
Credit risk mitigation: Techniques used to mitigate the credit risks through exposure being collateralised in whole or in part with cash or securities or guaranteed by a third party.
Credit Risk: The risk that a party to a contractual agreement or transaction will be unable to meet its obligations or will default on commitments. Credit risk can be associated with almost any financial transaction. BASEL-II provides two options for measurement of capital charge for credit risk 1.standardised approach (SA) - Under the SA, the banks use a risk-weighting schedule for measuring the credit risk of its assets by assigning risk weights based on the rating assigned by the external credit rating agencies.2. Internal rating based approach (IRB) - The IRB approach, on the other hand, allows banks to use their own internal ratings of counterparties and exposures, which permit a finer differentiation of risk for various exposures and hence delivers capital requirements that are better aligned to the degree of risks. The IRB approaches are of two types:a) Foundation IRB (FIRB):The bank estimates the Probability of Default (PD) associated with each borrower, and the supervisor supplies other inputs such as Loss Given Default (LGD) and Exposure At Default (EAD). b) Advanced IRB (AIRB):In addition to Probability of Default (PD), the bank estimates other inputs such as EAD and LGD. The requirements for this approach are more exacting. The adoption of advanced approaches would require the banks to meet minimum requirements relating to internal ratings at the outset and on an ongoing basis such as those relating to the design of the rating system, operations, controls, corporate governance, and estimation and validation of credit risk components, viz., PD for both FIRB and AIRB and LGD and EAD for AIRB. The banks should have, at the minimum, PD data for five years and LGD and EAD data for seven years. In India, banks have been advised to compute capital requirements for credit risk adopting the SA.
Credit Scoring System: A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics relating to creditworthiness.
Credit Squeeze: Monetary authorities restrict credit as and when required. This credit restriction is called credit squeeze. Monetary authorities adopt the policy of credit squeeze to control inflationary pressure in the economy.
credit union -- A member-owned financial institution, either state or federally chartered. Credit unions are often more competitive than banks and savings and loan associations because its nonprofit status makes its operating costs lower.
Credit: Money loaned to an individual or organization. Credit can come in many forms including loans, mortgages, and credit cards.
Credit: The increase in a deposit account balance that occurs when a deposit is made to the account. See also “debit.”
Credit-Worthiness - This is the judgement of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another. Much depends on whether an organization is involved with high risk customers or not.
Creditworthiness: A creditor’s measure of a consumer’s or company’s past and future ability and willingness to repay debts.
Creditworthiness: It is the capacity of a borrower to repay the loan / advance in time along with interest as per agreed terms.
CRISIL: Credit Rating and Investment Services of India Limited
Cross default: Two loan agreements connected by a clause that allows one lender to recall the loan if the borrower defaults with another, and vice versa.
Crossing of Cheques: Crossing refers to drawing two parallel lines across the face of the cheque. A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing. A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.
CRR - CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their deposits in the form of cash with Reserve Bank of India (RBI). This minimum ratio is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. Thus, When a bank’s deposits increase by Rs100, and if the cash reserve ratio is 9%, the banks will have to hold additional Rs 9 with RBI and Bank will be able to use only Rs 91 for investments and lending / credit purpose. Therefore, higher the ratio (i.e. CRR), the lower is the amount that banks will be able to use for lending and investment. This power of RBI to reduce the lendable amount by increasing the CRR makes it an instrument in the hands of a central bank through which it can control the amount that banks lend. Thus, it is a tool used by RBI to control liquidity in the banking system.
CTA: Check Truncation Act, now known as the Check 21 Act.]
Cumulative Dividends: A feature of preferred stock that requires all past dividends on preferred stock to be paid before any equity dividends are paid.
currency -- Money -- anything used as a common medium of exchange. In practice, currency means cash, particularly paper money. Bankers often use the phrase "coin and currency" to refer to cents and dollars.
Currency basket: Arrangements whereby two or more currencies are clubbed together with defined weights, and whose exchange rate/ interest rate is determined by computing weighted average market rates.
Currency Board: A monetary system in which the monetary base is fully backed by foreign reserves. Any changes in the size of the monetary base have to be fully matched by corresponding changes in the foreign reserves.
Currency Code:A three letter code representing the currency of a particular country.
Currency Market Risk:The risk of loss from having positions in any of the currency markets. The risk can be from outright positions. It can also reside in the balance sheet or in the income flows of a company.
Current Account: Current account with a bank can be opened generally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account.
Current assets:Short-term assets, constantly changing in value, such as stocks, debtors and bank balances.
Current Exposure Method: The credit equivalent amount of a market related off-balance sheet transaction is calculated using the current exposure method by adding the current credit exposure to the potential future credit exposure of these contracts. Current credit exposure is defined as the sum of the positive mark to market value of a contract. The Current Exposure Method requires periodical calculation of the current credit exposure by marking the contracts to market, thus capturing the current credit exposure. Potential future credit exposure is determined by multiplying the notional principal amount of each of these contracts irrespective of whether the contract has a zero, positive or negative mark-to-market value by the relevant add-on factor prescribed by RBI, according to the nature and residual maturity of the instrument.
The above details describes about terms called in banking such asCredit History,Credit Limit,Credit Rationing,Credit risk mitigation,Credit Risk,credit union,Credit-Worthiness, CRISIL,Cash Reserve Ratio,Currency Code,Current Exposure Method,Currency Board,Cumulative Dividends etc.These phrases may help importers and exporters on their day to day business activities. The readers can also add more information about terms used in overseas trade below this post.Terms used in banking business such as Coverage Ratio,credit ,Credit Analysis,Credit Card,Credit default swap,Credit enhancement etc
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