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LC Econ Banking Syst
LC Econ Banking Systems
| Term | Definition |
|---|---|
| Money | Is anything that is generally accepted by the majority of people in exchange for goods and services. |
| Commodity Money | These were objects which were useful for their own intrinsic value as well as acting as a means of exchange. |
| Legal Tender | Is any money form which must be legally accepted in settlement for debt. All Euro notes are legal tender. Cheques are not legal tender. |
| Near Money | Those assets which fulfil some, but not all, of the functions of money. |
| M1 – The Narrow Money Supply | Are the notes and coins in circulation plus all balances in current accounts in all licensed banks in the state. |
| M2 – The Intermediate Money Supply | This is made up of currency in circulation plus current account balances (M1) and deposits, with a maturity of less than two years or a notice period of less than three months. |
| M3 – The Broad Money Supply | This is M1 plus all the balances in deposit accounts in all licensed banks plus borrowing from other credit institutions minus inter-bank balances. |
| Sale and Repurchase Agreements | These are the agreements under which one person sells securities to another for cash and agrees to repurchase the securities from the cash provider for a greater sum of money at a later date. |
| Primary Liquidity Rate(PLR) | Is the ratio of cash which the banks must hold to claims on the banks. |
| Secondary Liquidity Rate(SLR) | Is the ratio of liquid assets held by the banks to claims on the banks. |
| Liquidity Requirement | Is when banks must make sure that they have sufficient cash to meet their customers demands. |
| Exchequer Bills | These are 91 day loans given by the banks to the government at a fixed rate of interest. |
| Overdrafts | This is when bank current account holders are allowed to withdraw more money than they actually have in their account. This must be repaid within a given amount of time and interest is charged. |
| Monetary Policy | Is the policy regarding the amount of money in circulation, interest rates and credit creation. It is determined by the ECB and implemented by the central bank. |
| The Irish Central Bank | Is a member of the European system of central banks (ESCB), which is made up of the ECB and the national central banks of EU member states. |
| The Purchasing Power Parity Theory | States that in a free market, the rate of exchange of a currency will settle at the point where its internal purchasing power will be equal to its external purchasing power. |
| Protectionism | Countries impose tariffs and duties on imports to protect domestic industries. |
| Rates of Exchange | Is the price of one currency in terms of another. |
| Fixed Rates of Exchange | Where the values of currencies are agreed on and each country undertakes to exchange its currency at an agreed value. The governments agree to undertake whatever action is necessary to maintain these rates of exchange. |
| Floating Rates of Exchange | Under the floating rates of exchange system, currencies are allowed to find their own value on the international market through the interaction of supply and demand for the currencies. |
| Exchange Rate Risk | This is the element of uncertainty in importing on credit as the rate of exchange may shift and could result in a reduction of international trade. |
| Open Economy | Is one which trades with other economies. |
| Closed Economy | Is one which does not trade with other economies. |
| Commercial/Associated Banks | These are essentially clearing banks which provide a broad range of retail and wholesale banking services. They were traditionally responsible for the money transmission system. |
| Merchant/Wholesaler Banks | Are banks that deal with the business sector of the community. These banks offer a variety of services to the business sector of the community. |
| Industrial Banks | Are the main provider of instalment loans for the purchase of cars, furniture and expensive consumer durable goods. They tend to carry very high rates of interest. |
| Sub-Prime Lending | Is the practice of granting loans, mortgages, car loans, credit cards etc. to borrowers with poor or no credit rating. |
| The Inter-Bank Market | Is where a bank with a temporary surplus of cash can lend this surplus to another bank which is experiencing a temporary shortage of cash. The loans are usually for very short periods of time. |
| The International Monetary Fund (IMF) | Is the worlds central organisation for international monetary cooperation. |
| The World Bank | Is a viral source of financial and technical assistance to developing countries. It is not a bank in the common sense. |
| Re-Discount Rate | This is the interest rate charged by the central bank to the commercial banks for acting as a lender of last resort. |
| Fiscal Policy | Any action taken by the government which affects the size or composition of the government revenue and expenditure. Fiscal Policy is carried out by the central government and the responsibility for the implementation rests with the Minister for Finance. |
| Debt Securities | These cover bonds, debentures and notes that usually give the holder the unconditional right to a fixed money income or contractually determined variable money income. |
Created by:
MrFromholz
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