BANKING TERMS

Lesson 10
● Account History: The payment history of an account over a specific

period, including the number of times the account was past due or over
the limit.

● Account Holder: Any persons designated and authorized to transact

business on behalf of an account. Each account holder's signature needs

to be on file with the bank. The signature authorizes that person to
conduct business on behalf of the account.

● Appraisal: The act of evaluating and setting the value of a specific piece

of personal or real property.

● Authorization: The issuance of approval by a credit card issuer,

merchant, or other affiliate to complete a credit card transaction.

 ● ATM: ATMs are Automatic Teller Machines that do the job of a teller in a

bank through a Computer Network. ATMs are located on or off branch

premises. ATMs are useful for dispensing cash, receiving cash, accepting
cheques, giving account balances, and giving customers mini-statements.

● Arbitrage: Buying a financial instrument in one market to sell the same

instrument at a higher price in another market.

● Af idavit: A written sworn statement before a proper official, such as a

notary public.

● Amortization: The process of reducing debt through regular installment

payments of principal and interest that will result in the payoff of a loan at
its maturity.
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● Anywhere Banking: This refers to banking not only through ATMs,

telebanking, and Internet banking but also through core banking

solutions by banks where customers can deposit their money and
cheques and withdraw money from any branch connected with the
system. All major banks in the Philippines have brought in core banking
to make banking truly anywhere banking.

● Annuity: A life insurance product that pays income over a set period.

Deferred annuities allow assets to grow before the income is received,

and immediate annuities (usually taken from a year after purchase) allow
payments to start about a year after purchase.

● Available Balance: The balance of an account less any hold, uncollected

funds, and restrictions against the account.

● Available Credit: The difference between the credit limit assigned to a

cardholder account and the present balance of the account.

● Banking: Accepting lending or investment of money deposits from the

public, which are repayable on demand or otherwise and withdrawable

by cheques, drafts, orders, etc.

● Bank Ombudsman: The Bank Ombudsman is the authority to look into

complaints against Banks in the main areas of collection of cheques/bills,

issue of demand drafts, non-adherence to prescribed hours of working,
failure to honor guarantee/letter of credit commitments, operations in
deposit accounts and also in the areas of loans and advances where banks
flout directions. This scheme was announced in 1995 and has been
functioning with new guidelines since 2007.
● Basel-II: The Committee on Banking Regulations and Supervisory

Practices, popularly known as Basel Committee, submitted its revised

version of norms in June 2004. Under the revised accord, the capital
requirement for credit, market, and operational risks will be calculated.
The minimum requirement continues to be 8% of the capital fund (Tier I
& II Capital). Tier II shall remain not more than 100% of Tier I Capital.

● Brick & Mortar Banking: Brick and Mortar Banking refers to the

traditional system of banking that is done only on fixed branch premises

made of brick and mortar. There are banking channels like ATMs, Internet
Banking, telebanking, etc.

● Bid Price: The highest price a dealer offers to purchase a given security.
● Business of Banking: Accepting deposits, borrowing money, lending

money, investing, dealing in bills, dealing in Foreign Exchange, Hiring

Lockers, Opening Safe Custody Accounts, Issuing Letters of Credit,
Travelers’ Cheques, doing Mutual Fund business, Insurance Business,
acting as Trustee or doing any other business which Central Government
may notify in the official Gazette.

● Bouncing of a cheque: Where an account does not have a sufficient

balance between honoring the cheque issued by the customer, the

cheque is returned by the bank with the reason "funds insufficient" or
"Exceeds arrangement.” This is known as the 'Bouncing of a cheque.’

● Blue Chips: Blue chips are unsurpassed in quality and have a long and

stable record of earnings and dividends. They are issued by large and
well-established firms that have impeccable financial credentials.
● Bond: Publicly traded long-term debt securities issued by corporations

and governments, whereby the issuer agrees to pay a fixed amount of

interest over a specified period and to repay a fixed amount of principal
at maturity.

● Book Value: The amount of stockholders’ equity in a firm equals the

amount of the firm’s assets minus the firm’s liabilities and preferred stock.

● Broker: Individuals licensed by stock exchanges to enable investors to

buy and sell securities.

● Brokerage Fee: The commission charged by a broker.

● Bull Markets: Favourable markets associated with rising prices and

investor optimism.
● Capital Gain: The amount by which the proceeds from the sale of a

capital asset exceed its original purchase price.

● Capital Markets: The market in which long-term securities such as stocks

and bonds are bought and sold.

● Cheque: A Cheque is a bill of exchange drawn by a specified banker

ordering the banker to pay a certain sum of money to the drawer of the
cheque or another person. Money is generally withdrawn by clients by
cheques. A cheque is always payable on demand.
● Cheque Truncation: Cheque truncation stops the flow of cheques

through the banking system. Generally truncation takes place at the

collecting branch, which sends the electronic image of the cheques to the
paying branch through the clearing house and stores the paper cheques
with it.
● Collateral: A specific asset pledged against possible default on a bond.

Mortgage bonds are backed by claims on property. Collateral trust bonds

are backed by claims on other securities. Equipment obligation bonds are
backed by claims on equipment.

● Commercial Paper: Short-term and unsecured promissory notes issued

by corporations with high credit standings.

● Compound Interest: Interest paid not only on the initial deposit but also

on any interest accumulated from one period to the next.

● Current Account: A current account with a bank can be opened

generally for business purposes. There are no restrictions on withdrawals

in this type of account. No interest is paid in this type of account.
● Convertible Bond: A bond with an option, allowing the bondholder to

exchange the bond for a specified number of shares of common stock in

the firm. A conversion price is the specified value of the shares for which
the bond may be exchanged. The conversion premium is the excess of the
bond’s value over the conversion price.

● Credit Rating: An assessment of the likelihood of an individual or

business meeting its financial obligations. Credit ratings are provided by

credit agencies or rating agencies to verify the financial strength of the
issuer for investors.

● Creditworthiness: A borrower can repay the loan/advance in time along

with interest as per agreed terms.

● Co-operative Bank: An association of persons who collectively own and

operate a bank to benefit consumers/customers, like Cooperative Bank of

Cotabato, Sta. Catalina Cooperative and other such banks.

● 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 a 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.
● Customer: A person who maintains any type of account with a bank is a

bank customer. Consumer Protection Act has a wider definition for a

consumer as one who purchases any service for a fee, such as purchasing
a demand draft or a pay order. The term customer is defined differently
by Laws, software, and countries.
● Debit Card: A plastic card issued by banks to customers to withdraw

money electronically from their accounts. When you purchase things

based on a Debit Card, the amount due is debited immediately to the
account. Many banks issue Debit-Cum-ATM Cards.
● Debtor: A person who takes some money on loan from another person.

● Demand Deposits: Deposits that are withdrawn on demand by

customers. E.g. savings bank and current account deposits.

 ● Dishonour of Cheque: Non-payment of a cheque by the paying banker with

a return memo giving reasons for the non-payment. Default Risk: The
possibility that a bond issuer will default, i.e., fail to repay principal and
interest promptly.

● E Banking: E-banking or electronic banking is a form of banking where funds

are transferred through the exchange of electronic signals between banks

and financial institutions and customers ATMs, Credit Cards, Debit Cards,
International Cards, Internet Banking, and new fund transfer devices like
SWIFT, RTGS belong to this category

● EFT - (Electronic Fund Transfer): EFT is a device that facilitates the

automatic transmission and processing of messages and funds from one bank
branch to another bank branch and even from one branch of a bank to
another bank. EFT allows the transfer of funds electronically with debit and
credit to relative accounts.
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● Either or Survivor: Refers to the operation of the account opened in two
names with a bank. It means that any account holder has the power to
withdraw money from the account, issue cheques, give stop payment
instructions, etc. In the event of the death of one of the account holders,
the surviving account holder gets all the powers of operation.
● Electronic Commerce (E Commerce): E-commerce is paperless
commerce in which business exchange takes place through electronic
means.
● Equity: Ownership of the company in the form of shares of common
stock.
● Face Value/ Nominal Value: The value of a financial instrument as stated
on the instrument. Interest is calculated on face/nominal value.
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● Foreign Banks: Banks incorporated outside the Philippines but
operating in the Philippines and regulated by the Bangko Sentral ng
Pilipinas, e.g., HSBC, Citibank,
● Forfeiting: In International Trade, when an exporter finds it difficult to
realize money from the importer, he sells the right to receive money at a
discount to a forfeiter, who undertakes inherent political and commercial
risks to finance the exporter, of course, with the assumption of a profit in
the venture.
● Forgery: when a material alteration is made on a document or a
Negotiable Instrument, like a cheque, to change the mandate of the
drawer, to defraud.
● Future Value: The amount to which a current deposit will grow over a
time when it is placed in an account paying compound interest.
● International Banking: involves more than two nations or countries. If a
Philippine Bank has branches in different countries, like the BDO
Unibank or Metrobank, it is said to do International Banking.
● Introduction: Banks are careful when opening any account for a
customer as the prospective customer has to be introduced by an existing
account holder, a staff member, or any other person known to the bank
for opening an account. If the bank does not take the introduction, it will
amount to negligence and will not get protection under the law.
● Joint Account: When two or more individuals jointly open an account
with a bank.
● Merchant Banking: When a bank provides a customer with various
types of financial services like accepting bills arising out of trade,
arranging and providing underwriting, new issues, providing advice,
information, or assistance on starting new business, acquisitions,
mergers, and foreign exchange. E.g., AUB, BPI, HSBC, DBP
● Micro inance: In microfinance, very small amounts are credited to the
poor in rural, semi-urban, and urban areas to raise their income levels
and improve living standards.
● Money Laundering: When a customer uses banking channels to cover
up his suspicious and unlawful financial activities, it is called money
laundering.
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● Mobile Banking: With the help of M-Banking or mobile banking,
customers can check their bank balance, order a demand draft, stop
cheque payments, request a checkbook, and have information about the
latest interest rates.

● Mortgage: Transfer of an interest in specific immovable property to offer

a security for taking a loan or advance from another. It may be existing or
future debt or performance of an agreement, which may create a
monetary obligation for the transferor (mortgagor).

● Mutual Fund: A company that invests in and professionally manages a

diversified portfolio of securities and sells portfolio shares to investors.

● Pass Book: A record of all debit and credit entries in a customer's

account. Generally, all banks issue passbooks to Savings Bank/Current
Account Holders.
● Promissory Note: Promissory Note is a promise/undertaking given by
one person in writing to another person to pay that person a certain sum
of money on demand or on a future day.
● Public Sector Bank: A bank wholly or partly owned by the Government.
● Redemption Value: The value of a bond when redeemed.
● Safe Custody: When articles of value like jewelry, boxes, shares,
debentures, Government bonds, Wills, or other documents or articles are
given to a bank for safe keeping in its safe vault, it is called safe custody...
The Bank charges a fee from its clients for such safe custody.
● Savings Bank Account: All banks in the Philippines can open a savings
bank account with a nominal balance. This account is used for personal
purposes and not for business purposes, and there are certain
restrictions on withdrawals from this type of account. The account holder
gets nominal interest in this account.
● Teller: A teller is a staff member of a bank who accepts deposits, cash
cheques, and performs other banking services for the public.

● Technical Analysis: A method of evaluating securities by relying on the

assumption that market data, such as charts of price, volume, and open
interest, can help predict future (usually short-term) market trends. This
is in contrast to fundamental analysis, which involves the study of
financial accounts and other information about the company. (It is an
attempt to predict movements in security prices from their trading
volume history.)

● Trust Deed: A formal document that creates a trust. It states the purpose
and terms of the name of the trustees and beneficiaries.
● Underwriting: an agreement by the underwriter to buy on a fixed date

and at a fixed rate, the unsubscribed portion of shares or debentures or

other issues. The underwriter gets a commission for this agreement.

● Universal Banking: When Banks and Financial Institutions are allowed

to undertake all types of activities related to banking like acceptance of

deposits, granting of advances, investment, issue of credit cards, project
finance, venture capital finance, foreign exchange business, insurance etc.
it is called Universal Banking.

● Valuation: Process by which an investor determines the worth of a

security using risk and return concept.

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