LOG IN

SUBSCRIBE




Menu

Show Search

 Leaders Forum
 Events
 Research
 Podcasts
 Webinars and Whitepapers
 Magazine
 Jobs

A
Banker's Glossary

ABCDEFGHIJKLMNOPQRSTUVWXYZ

ABO
See accumulated benefit obligation.

ABS
(1) Initials for asset-backed security. See asset-backed security.

(2) The name for a convention used to express the rate of prepayments for an asset-backed
security. ABS expresses principal prepayments as a percentage of the original number of loans or
contracts in the pool of securitized loans that created the security. ABS is always expressed as a
monthly rate.

Absorption
A term used by real estate lenders and developers to describe the process of renting up newly
built or renovated office space or apartments. The term "absorption period" is often used to
describe the period of time necessary for absorption.
Abstract of title
A written report summarizing the history of title transactions and conditions of title that affect a
given piece of land covering the period from the present back to a date in the past. A
comprehensive, but cumbersome, and somewhat obsolete, method of verifying the ownership
and encumbrances of a parcel, or parcels, of real estate.

Accelerated depreciation
A group of methods for achieving periodic reductions in the book value of fixed assets that make
larger reductions in the early periods and progressively smaller reductions in later periods. The
offsetting entry is the depreciation expense.

Acceleration
Making demand for payment in full for a debt that has not yet matured. Usually a remedy
provided in a loan document for the lender to use in the event of default by the borrower.

Acceleration clause
A provision in a loan document stating that the entire amount of unpaid indebtedness owed to the
lender may become immediately due and payable if the borrower defaults.

Acceptance
A time draft that has been accepted for payment. See banker's acceptance.

Accessions
Goods that are physically united with other goods in such a manner that the identity of the
original goods is not lost. An example is a new motor in a piece of equipment.

Accommodation maker
Name used to refer to a co-maker who agrees to sign a note to induce the lender to make a loan,
but who receives no direct benefit from the loan.

Account analysis
An analysis performed to determine the profitability of each demand account to the bank. The
analysis may also be used to determine the profitability of a group of demand accounts with the
same owner. Account analysis is normally performed by the bank, but can be done by anyone in
the depositor's organization provided sufficient information is available. The analysis identifies
the net earnings based on the average daily ledger balance less reserved requirements and float.
The net earnings can then be compared with the various activity service charges based on the
volume of transactions and the per item price of the services.

Account control agreement

An agreement perfecting a creditor's interest in a securities account while allowing the securities
to remain registered in the name of the owner. An account control agreement is used to establish
a security interest conforming to the requirements set forth in the UCC.

Account debtor
An individual or business that is obligated to pay on an account, chattel paper, contract right, or
general intangible.

Account reconciliation services

A cash management service. One or more of a series of bank services designed to aid a deposit
customer in the reconciliation of its bank account balance. A basic account reconciliation service
may simply be a listing of paid checks in serial number order. More advanced account
reconciliation services combine electronic data provided by the customer with the bank's records
to reconcile completely the account and list all outstanding items. Many variations exist. Also
called account recs, ARPs, or recons.

Accounts
A category of personal property defined by Article 9 of the UCC. Under the pre-2000 version of
Article 9, an account is a right to receive payment for goods sold or leased, or for services
rendered, where these rights are not evidenced by an instrument or by chattel paper. Under the
revised Article 9, the definition of accounts is much broader. The revised definition covers a
much wider variety of payment obligations, whether or not earned by performance, including
license fees payable for the use of software, credit card receivables, and healthcare insurance
receivables.

Accounts payable
A category of liabilities that represents funds due to creditors. Usually, accounts payable is due
to trade creditors who have supplied goods or services without requiring immediate payment.
Accounts payable is sometimes simply called payables. Accounts payable to trade creditors are
sometimes called accounts payable trade, due to trade, or trade payables.

Accounts receivable
An asset account that reflects amounts due from private persons or organizations for goods and
services furnished. For corporations, accounts receivable excludes funds due from departments,
but may include funds due from affiliates. For governments and nonprofit organizations using
fund accounting, it does not include funds due from other funds owned by the same entity. A
category of personal property defined by Article 9 of the UCC. Accounts receivable is the right
to receive payment for goods sold or leased or for services rendered where those rights are not
evidenced by an instrument or by chattel paper.

Accounts receivable - trade

Also called trade receivables. Amounts due from the credit sales of goods or services that are not
evidenced by promissory notes.
Accreting swap
An interest rate swap with an increasing notional amount.

Accretion
The process of making incremental, periodic increases in the book or carrying value of an asset.
For example, when a bond is purchased at a price below 100, the difference between the
purchase price and the par value, the discount, is accreted. Discounts are usually accreted in
roughly equal amounts that completely eliminate the discount by the time that the bond has
matured, or by the call date, if applicable.

Accretion bond
See Z tranche.

Accrual basis
See accrual convention.

Accrual bond
(1) Bonds that pay the investor an above-market coupon rate as long as a reference rate is
between preset levels established at the time the security is issued. A type of structured note.
Also called range bonds.

(2) A type of CMO security that does not pay holders periodic interest in cash. Instead, periodic
interest for these bonds is accrued. It is added to the principal amount due to the holder at a later
date. See Z tranche.

Accrual convention
Method used by investors for counting the number of days in each month and in the year. Also
called accrual basis or day basis. The accrual convention is expressed in different ways. An
accrual basis of 30/360 indicates that every month is treated as if it was 30 days long and a year
is assumed to have 360 days. Accrual basis of actual/360 indicates that each month is treated
using its actual number of days while a year is assumed to have 360 days. Day basis of
actual/actual indicates that the true number of days for each month and year are used. The
accrual convention is used in the calculation of the amount of interest payable on bonds, loans,
deposits, and other financial instruments on the interest payment dates. This convention is also
used for the purpose of calculating accrued interest due from a buyer to a seller of a security sold
between interest payment dates.

Accrued interest
Interest that has been earned but not yet paid. For example, the interest earned by a bondholder
between semiannual coupon payments or the interest earned by a lender since the last monthly
interest payment was collected from the borrower. Accrued interest for investment securities is
calculated from the issue date or the last payment date up to but not including the settlement
date. When a buyer purchases a bond, the buyer owes the seller the accrued interest in addition to
the market price of the security purchased.

Accumulated benefit obligation (ABO)

The actuarial present value of the pension benefits earned to date. Measurement of the
accumulated benefit obligation uses the historical compensation rates for pay-related benefit
plans. The ABO must be disclosed in a footnote to the financial statements.

Accumulated depreciation
The total of the periodic reductions for depreciation in fixed assets. Also called allowance for
depreciation.

Accumulator
See capital appreciation bond.

ACH
See automated clearinghouse.

Acid test ratio

Another name for the quick ratio.

Active tranche
A REMIC tranche that is currently paying principal payments to its owners.

Actual delay days

See delay days.

Adjustable-rate mortgage (ARM)

A loan for which the interest rate (coupon rate) is adjusted periodically to reflect changes in a
previously selected index rate. ARMs may have caps and floors that limit the annual and/or the
lifetime change in the coupon rate.

Adjusted duration
See option-adjusted duration.

Adjusted trading
A practice used to sell securities without recognizing any or all of the true loss from that sale. To
hide the loss, the investor agrees to overpay for a newly purchased security in exchange for the
broker/dealer's agreement to overpay for the security that the investor wants to sell. The
broker/dealer incurs a loss by purchasing the investor's underwater bond at an above-market
price. At the same time, the broker/dealer offsets that loss by selling the investor a new bond at
an above-market price. Thus the transactions are completely neutral from the broker/dealer's
perspective. However, from the investor's perspective, the transactions effectively defer the
recognition of losses on the security sold by establishing an excessively high book value for the
security purchased. These transactions are specifically prohibited for federally insured financial
institutions. They may also be illegal. Sometimes called fee trading.

Administered rates
Interest rates that the bank or other payer is contractually permitted to change at any time and by
any amount. For example, the rates paid on savings accounts. All interest rates can be
categorized as either fixed, administered, or floating. Rates that may change at the payer's
discretion are sometimes called variable rates, easily confused with floating rates, which change
at contractually specified times by contractually specified amounts - a very different
arrangement.

Administrative float
Float resulting from the time it takes to administratively process checks or other related
paperwork. Total elapsed time for processing checks can range from less than a day to more than
a week. Note that its basic elements are present whether the work is done by the owner of the
funds or the work is done by a bank or other lockbox vendor. Sometimes referred to as payment
processing float or internal float, but since some of the sources of the float delay are not
necessarily internal, the term internal float is not a completely accurate synonym.

Administrative review
One of two types of real estate appraisal reviews. Administrative reviews focus primarily on the
underwriting issues addressed in the appraisal. These reviews, usually performed by the loan
officer, approach the appraisal from a loan underwriting point of view. Typical issues addressed
in an administrative review include: How comparable are the comparable properties used in the
appraisal? How reasonable are income and expense projections? Is the capitalization rate
appropriate? See technical review.

ADR
See American depository receipt.

Advance formula
A provision sometimes used in lines of credit as a sublimit on the maximum amount that can be
borrowed. Typically, an advance formula limits the amount that can be borrowed under a line of
credit to the lesser of the amount of the line or some percent of accounts receivable collateral.

Advanced Measurement Approaches (AMA)

One of three methods for quantifying capital required for operational risk under proposed Basel
II capital rules. Banks using the Advanced Measurement Approaches must hold capital for
operational risk based on a risk quantity generated by the bank's internal measurement
procedures. The most common internal methods are self-assessments. See also self-assessment,
Standardized Approach, basic indicator approach and operations risk.

Advances
Funds received for goods or services prior to the delivery of the goods or services. Typically, the
funds must be returned if the transaction is canceled or if the recipient of the advance fails to
provide the goods or services. See progress payments.

Adverse opinion
An opinion letter accompanying audited financial statements in which the CPA reports that the
financial statements do not fairly present the financial position or the results of operations in
conformity with GAAP.

Affiliate
A business organization that shares some aspect of common ownership or control with another
business organization.

Affinity card
A card that is offered jointly by two organizations. One is a credit card issuer and the other is a
professional association, special interest group or other non-bank company. For example,
Citibank and American Airlines sponsor the Citibank AAdvantage card.

Affirmative covenant
A provision in the lender's documents that requires the borrower to do something in the future.
For example, a requirement for the borrower to provide annual audited financial statements to
the bank during the term of the loan.

Affordable growth rate

The maximum rate at which a firm's sales can grow without straining the capacity of the firm's
capital or other financial resources. This term is closely associated with a formula of the same
name.

AFMLS
Asset Forfeiture and Money Laundering Section, U.S. Department of Justice.

AFS
See available-for-sale.

After-acquired property clause

A provision in a bank's documents, the purpose of which is to extend the bank's interest in the
debtor's property to property not owned by the debtor at the time of the transaction but
subsequently acquired by the debtor.

Agencies
Informal name used to refer to securities issued by agencies of the United States government and
by U.S. government sponsored enterprises.

Agency fund
A fund normally used to account for assets held by a government as an agent for individuals,
private organizations or other governments, and/or other funds. The agency fund also is used to
report the assets and liabilities of Internal Revenue Code, Section 457, deferred compensation
plans.

Aging
A report or schedule of all outstanding accounts payable or accounts receivable that lists all
account debtors or creditors by name, shows the total amount due to each debtor, and shows how
much of the amount due to each debtor is due within specific time periods.

AHP
An acronym for affordable housing program.

AICPA
See American Institute of Certified Public Accountants.
a.k.a.
Initials for "also known as". A designation used to denote an alternative name for a person,
business or organization.

ALCO
See asset/liability management committee.

ALLL
An acronym for allowance for loan and lease losses.

Allonge
A paper attached to negotiable instruments for signatures when there isn't enough room on the
instruments themselves for the signatures.

Allowance for depreciation

See accumulated depreciation.
Allowance for doubtful accounts
A reserve for accounts receivable that may not be collectable. The allowance is always shown as
a reduction from gross receivables used to calculate net receivables. An example of a contra-
asset account.

Allowances
Reductions to gross sales that occur when customers are given partial credit for sold goods that
the buyer is not satisfied with. An accounting term usually used together with returns.

ALM
See asset/liability management.

ALT-A
A classification used to describe residential mortgage loans that are considered to be slightly less
risky than "subprime" loans. The loan structure and/or the borrower's credit score are typically
better than the very worst loans but are still high risk. Common in parts of the USA during the
2000-2007 boom.

Alternative minimum tax (AMT)

A federal income tax applied to individuals and corporations that take advantage of tax benefits
in amounts that are large relative to their incomes. Investors subject to AMT lose the benefits of
the tax exemption for interest paid on otherwise tax-exempt securities.

AMA
See Advanced Measurement Approaches.

Amendment
A revision to a document. A UCC financing statement can be amended by filing a designated
amendment form, usually UCC-3.

American depository receipt (ADR)

Trust receipts equal to a specific number of shares of corporate stock issued in a foreign country.
ADRs are sold and traded in the United States.

American Institute of Certified Public Accountants (AICPA)

The national association that represents certified public accountants in business and industry,
public practice, government, and education.

American option or American-style option

An option that the holder can exercise any time prior to and including the expiration date. See
European option, Bermuda option and Asian option.
Amortization
(1) The process of making regular, periodic decreases in the book or carrying value of an asset.
For example, when a bond is purchased at a price above 100, the difference between the
purchase price and the par value, the premium, is amortized. Premiums are usually amortized in
roughly equal amounts that completely eliminate the premium by the time that the bond has
matured or by the call date, if applicable.

(2) Liquidation of a loan or security by means of periodic reductions. The principal amount of
loans is amortized by the periodic, usually monthly, payment of a fraction of the principal
calculated to repay the entire amount of principal due by the date of the last scheduled periodic
payment. Amortization methods differ based upon the type of loan. Mortgage loans and
securities usually have level payments of principal and interest. For such amortizations, the
interest consumes most of the early payments and, therefore, principal amortization increases as
the loan ages. Many business loans use a level amortization with roughly equal principal
reductions from each periodic payment.

Amortization period
For financial instruments, the time from the inception of a loan or investment instrument with
scheduled principal repayments to the due date of the final contractually obligated principal
repayment. For fixed assets, the period from the acquisition of a fixed asset to the date of the last
periodic reduction (made to reflect depreciation) of the book value of that asset. (Assets may be
depreciated until the book value is zero, but sometimes are only depreciated until the book value
is reduced to an assumed salvage value.)

Amortizing swap
An interest rate swap with a declining notional principal.

AMT
See alternative minimum tax.

Analytical solution
See closed form solution.

Analytical VAR
See correlation VAR.

Annual percentage rate (APR)

The total financing costs associated with a loan on an annualized basis, divided by the amount
borrowed. As defined by Federal Reserve Regulation Z and the Truth-in-Lending Act, this is a
precisely calculated measure of the cost of a loan. The Truth-in-Lending Act and Regulation Z
have specific requirements covering both how to calculate and how to disclose APRs.
Annual percentage yield (APY)
A precisely calculated measure of yield paid on a bank deposit account.

Annuities
Contracts that guarantee income, often for an individual's lifetime, in exchange for a lump sum
or periodic payment. Annuity contracts have a number of standard variants, including deferred,
fixed, immediate, or variable.

Anticipated income doctrine of liquidity

An explanation of bank liquidity developed by Herbert Prochnow, in which the net cash flow of
bank borrowers, rather than subsequent new borrowings, is seen as the true source of loan
repayments. Accordingly, to the extent that loans are written with payment terms and maturities
that reflect the borrower's cash flow stream, the cash flow to the bank from loan principal
payments is the source of bank liquidity. See commercial loan theory of liquidity and shiftability
theory of liquidity.

Anticipatory hedge
A hedge of a yet-to-be-acquired asset or liability.

Appraisal
A statement or estimate of the market value of tangible personal property or real estate. Under
the federal appraisal regulations for real estate pledged to secure loans, the term "appraisal"
refers to a statement of market value that meets the five specific standards. See complete
appraisal, evaluation, and limited appraisal.

Appraisal surplus
The difference between the historical cost and the appraised value of fixed assets.

APR
See annual percentage rate.

APY
See annual percentage yield.

Arbitrage
(1) In theory, arbitrage is the simultaneous purchase and sale of two identical commodities or
instruments to take advantage of price variations in different markets. For example, the purchase
of gold in London and the simultaneous sale of gold in New York.
(2) In practice, the term is used to refer to the simultaneous purchase and sale of any two
contracts or commodities with largely offsetting risks. For example, the purchase of two-year
Treasuries and the sale of futures contracts for an equivalent amount.

(3) In municipal finance, the specific practice of investing funds obtained at a tax-preferred low
rate of interest in higher-yielding investments until the funds are needed for the purpose
intended.

Arbitrage CDO
A CDO whose purpose is to allow a money manager to expand assets under management and
equity investors to achieve non-recourse leverage to CDO assets. There is no "arbitrage" in the
classic sense of the word. Rather, equity holders hope to capture the difference between the after-
default yield on the assets and the financing cost due debt tranches. See collateralized debt
obligation (CDO).

Arbitrage free
A type of financial model that generates market scenarios excluding scenarios that provide
arbitrage opportunities.

Arbitrageur
An individual or broker who engages in arbitrage.

ARM
See adjustable-rate mortgage.

ARP
See account reconciliation services

Arrears
Unpaid dividends or bond interest that a corporation owes its stockholders or bond holders after
the payable or due date on which the dividends or interest should have been paid.

Article 2A
Portion of the UCC covering leases. See Uniform Commercial Code.

Article 8
Portion of the UCC covering collateral interests in both physical (certificated) and book-entry
(uncertificated) securities. See Uniform Commercial Code.
Article 9
Portion of the UCC covering security interest in most personal property other than securities. See
Uniform Commercial Code.

Article of agreement
Contractual arrangement used in some states under which a buyer purchases real estate from a
seller over a period of time, usually by making periodic installment payments. Title is not
conveyed to the buyer until the final payment is made. Also called land contract.

Asian option
An option whose payoff is based upon the average value of an underlying over a specified period
of time. See underlying. Also see American option, European option and Bermuda option.

As-extracted collateral
Oil, gas, or other minerals that are subject to a security interest that is created by a debtor having
an interest in the minerals either before or after extraction. A security interest can also include
accounts arising out of the sale at the wellhead or minehead of oil, gas, or other minerals in
which the debtor had an interest before extraction. A category of personal property collateral
defined by the 2000 revisions to Article 9 of the UCC.

Ascending rate bonds

Securities with a coupon rate that increases in previously defined increments at scheduled
intervals.

Asked or asking price

The trading price proposed by the prospective seller of securities. Also called the offer or offered
price.

Asset-backed security (ABS)

A debt security collateralized by assets. Created from the securitization of any loans.
(1) The phrase may describe the broad category that includes named subcategories such as
securitized residential mortgage loans (RMBS) and securitized commercial mortgage loans
(CMBS).

(2) The phrase directly names, asset backed securities created from consumer installment or
credit card loans.

(3) Securitized commercial (non-consumer) obligations not secured by real estate are typically
called collateralized debt obligations or CDOs. CDOs are sometimes defined to be a subset of
ABSs.
ABSs may be structured in a variety of ways including simple "pass through" structures and
complex, "multi-tranche" structures. The value that ABSs provide to investors is comprised of
the cash flows due to the ABS holders from the underlying loans. ABS issues are typically
structured so that the bankruptcy or insolvency of an underlying borrower does not impact the
cash flow received by the security owner. See special purpose vehicle and waterfall.

Asset sensitive
Describes an entity's position when an increase in interest rates will help the entity and a
decrease in interest rates will hurt the entity. An entity is asset sensitive when the impact of the
change in its assets is larger than the impact of the change in its liabilities after a change in
prevailing interest rates. This occurs when either the timing or the amount of the rate changes for
liabilities causes interest expense to change by more than the change in interest income. The
impact of a change in prevailing interest rates may be measured in terms of the change in the
value of assets and liabilities. In that case, an asset-sensitive entity's economic value of equity
increases when prevailing rates rise or declines when prevailing rates fall. Alternatively, the
impact of a change in prevailing rates may be measured in terms of the change in the interest
income and expense for assets and liabilities. In that case, an asset-sensitive entity's earnings or
net income increases when prevailing rates rise and declines when prevailing rates fall.

Asset/liability management committee (ALCO)

A committee, usually comprising senior managers, responsible for managing assets and
liabilities to maximize income and safety over the long run. In a financial institution, the ALCO
is usually responsible for asset and liability distribution, asset and liability pricing, balance sheet
size, funding, spread management, and interest rate sensitivity management. Usually used
somewhat redundantly, as in ALCO committee.

Asset/liability management (ALM)

Coordinated management of all of the financial risks inherent in the business conducted by a
financial institution. The process of balancing the management of separate types of financial risk
to achieve desired objectives while operating within predetermined, prudent risk limits.
Accomplishing that task requires coordinated management of assets, liabilities, capital, and off-
balance sheet positions. Therefore, in the broadest sense of the term, ALM is simply the
harmonious management of cash, loans, investments, fixed assets, deposits, short-term
borrowings, long-term borrowings, capital, and off-balance sheet commitments. However, in
practice, the term is often used to refer to segments of that broader definition such as only
interest rate risk management or only interest rate and liquidity risk management. See earnings at
risk, market value at risk and market value of portfolio equity.

Assets repriced before liabilities

A measure of the gap between the quantity of assets repricing and the quantity of liabilities
repricing within a given period of time. A simple measure of a financial institution's exposure to
beneficial or adverse consequences from changes in prevailing interest rates.
Assignee
The party to whom an assignment is made.

Assignment
Transfer of any contractual agreement between two parties. One of the parties, the assignor,
transfers its rights or obligations to another party, the assignee. If interests in assets of the
assignor are assigned, the assignment transfers all or some of the rights of ownership to the
assignee. If interests in obligations of the assignor are assigned, the assignor is totally or partially
absolved from further performance. Lenders sometimes see leased property assigned from the
original lessor to another party who then pledges them to the bank as collateral for a loan. For
personal property collateral, a secured party may enter an assignment of its security interest into
the public record by using a standard form called UCC-3.

Assignment of buyer's interest in land contract

A document used when a borrower is purchasing real estate over time under an article of
agreement or land contract. The document assigns the lender all of the borrower's personal
property, real property, and contractual rights under the land contract.

Assignment of lease and rentals

A document used in real estate loans when the mortgaged property is leased to third-party
tenants. If the borrower defaults, the assignment of lease and rentals gives the lender the right to
receive rents from the tenants and to transfer the leases to a subsequent purchaser of the property.

Assignment of seller's interest in land contract

A document used in real estate loans when the mortgaged property is subject to a land contract or
article of agreement under which it is being sold over time to a third party. If the borrower
defaults, the assignment of the land contract gives the lender the right to receive payments from
the buyer and to transfer the land contract to another buyer.

Association of Financial Professionals

A national organization for finance professionals that provides educational, and certifications
programs, research programs, standards development, and government relations activities.

Assumable
As applied to mortgage loans, assumable means that a borrower who sells his or her home may
transfer the outstanding mortgage loan secured by that dwelling to the new buyers. The new
buyers are said to assume the loan.

Assumed name
Name used by a proprietorship, partnership, or corporation to conduct business that is different
from the legal name of the proprietorship, partnership or corporation. Sometimes an assumed
name is prefaced by the initials "t/a" for "trading as" or "d.b.a." for "doing business as ".
Asymmetric behavior
Unbalanced behavior exhibited by financial instruments, the rates or values of which do not
change in proportion to changes in market rates. For example, increases in the prime rate quickly
reflect most or all of increases in prevailing interest rates, while decreases in the prime rate are
slow to reflect decreases in prevailing interest rates.

ATM
See Automated Teller Machine.

At the money
The situation in which the current market price, the spot price, of an underlying instrument is
equal to the strike or exercise price of an option to buy or sell that instrument.

Attachment
A procedure established by Article 9 of the UCC. Creditors must comply with this procedure in
order to obtain a security interest in property owned by a debtor. Alternatively or in addition, the
process may be used to give the creditor a security interest in property owned by a guarantor or
by another third party. Often, attachment alone is not sufficient to establish the priority of the
creditor's interest relative to the interests of other creditors. See financing statements and
perfection.

Attorney's certificate of title

See title opinion.

Attrition analysis
Evaluation of the reduction in the amount of an asset or liability held. For example, an analysis
of the reduction in savings account balances caused by withdrawals over time.

Audited statements
The most reliable type of financial statements. The audit is based on information submitted by
the client, and the CPA does not verify all of the information. Limits on the scope of the audit
and on the CPA's responsibility are described in the opinion letter that accompanies the audited
statements. However, the value of an audited statement is that the independent CPA is
responsible for testing and verifying any numbers that seem questionable or unusual as well as
the most material financial information. For example, if a firm has a material amount of accounts
receivable, the auditor will typically confirm at least a sample of those accounts. If a firm has a
material amount of inventory, the auditor will typically perform a physical verification of that
inventory.

Authenticated security agreement

A electronic security agreement between the debtor and the bank that is accepted by the
borrower either by downloading the agreement into a personal database or by printing a copy. As
an alternative to a security agreement physically signed by the debtor, the 2000 amendments to
the UCC provide for an authenticated security agreement.

Authority
A government or public agency created to perform a single function or a restricted group of
related activities. Usually, such units are financed from service charges, fees, and tolls, but in
some instances they also have taxing powers. An authority may be completely independent of or
partially dependent upon other governments for its financing or the exercise of certain powers.

Automated clearinghouse (ACH)

The ACH network is a nationwide electronic funds transfer system for participating depository
financial institutions. The American Clearing House Association, Electronic Payments Network,
Federal Reserve and Visa act as ACH Operators, central clearing facilities through which
financial institutions transmit or receive ACH debits and credits. The ACH network serves
20,000 financial institutions, 3 million businesses, and 100 million individuals. The ACH
Network is commonly used for direct deposit of payroll and government benefits such as Social
Security, direct payment of consumer bills, business-to-business payments, federal tax payments,
and, increasingly, e-commerce payments. In 2000 there were 6.9 billion ACH payments made
worth more than $20 trillion.

Automated Teller Machine (ATM)

A computer terminal for user initiated banking transactions.

Automatic stay
An injunction that automatically becomes effective upon the filing of any bankruptcy
proceeding. The stay precludes creditors from taking action against the debtor or the debtor's
property. In Chapter 12 or 13 bankruptcy proceedings, the automatic stay also applies to co-
obligors and guarantors.

Availability
The condition in which deposited funds are available for use by the depositor. The time lag
between the date of a deposit and the date it is credited to the collected balance.

Availability schedule
A schedule that determines when each bank in the check-clearing process will receive credit and
when the depositor of checks will be able to withdraw or invest the funds. The schedule sets a
standard time period since each check cannot be individually traced through the check-clearing
process. Every major bank publishes its availability schedule based on its location and on the
location of the bank on which the check is drawn.

Available balance
The balance in an account that can be invested or withdrawn. Available balance refers to the
bank ledger balances less checks in the process of collection. Also called collected balances,
good funds, or usable funds.

Available-for-sale (AFS)
One of three defined categories established in FAS 115 for the classification of financial
instruments held as assets on the books of an investor. Available-for-sale, or AFS, securities are
securities that the investor is unable or unwilling to commit to hold to maturity. Designation of a
security as AFS does not mean that the investor plans to sell it prior to maturity. FAS 115
requires investors to report unrealized gains or losses in AFS securities as changes in reported
equity. See FAS 115, held-to-maturity, and trading.

Aval
A guaranty.

Average life
The time-weighed for a stream of principal cash flows. See weighted average life.

Average daily balance

The average daily balance is a method used to calculate finance charges. It is calculated by
adding the outstanding balance on each day in the billing period, and dividing that total by the
number of days in the billing period. The calculation includes new purchases and payments.
20th Annual Most Powerful Women in Banking

Find out who lands where in the rankings for banking, watch and finance, and see the
categories for our standouts, a special recognition meant to spotlight roles with heightened
visibility and the exemplary female leaders who are rethinking the way forward at a
critical time.

SUBSCRIBE
FOLLOW US IN REAL TIME
 googlenews
 twitter
 applenews
 facebook
 linkedin


o About Us
o Contact Us
o The Magazine
o Banker's Glossary

o RSS Feed
o Privacy Policy
o Subscription Agreement
o Content Licensing/Reprints
o Advertising/Marketing Services

© 2022 Arizent. All rights reserved.