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Principle of Banking

Chapter 8

Accounts receivable An amount owed to and not yet delivered or accepted by a company
Repurchase agreement A sale of securities with a simultaneous agreement to buy back the same securities at a stated price on a stated date.
Indemnification An action taken to compensate or reimburse someone for losses or damages incurred.
Securitization The pooling of debt, such as mortgage loans, and selling the consolidated debt as securities to investors. In the case of loans, the loans are then no longer assets of the lending bank, although the bank may continue to service them.
Investment banking The marketing of new security issues, usually thorough an investment banker or underwriter.
Secondary market a market for the resale of securities (such as the dealer market, a stock exchange, or the mortgage-backed securities market) where ownership is transferred from one owner to another.
Primary market The market in which an issuer sells new securities to investors.
Underwrite. To assume a risk for a fee, such as for insurance or investments. Insurance underwriting guarantees cash payments if there is a loss of casualty
Employee benefit program a program established or maintained by an employer, employee organization, or both to provide employees with a certain benefit or set of benefits, such as pensions, profit-sharing, stock bonuses, and life, health, accident, and disability insurance.
Book entry a method for electronically registering and keeping a record of securities ownership without issuing physical certificates to owners
Indenture a contract underlying a bond issue, signed by the issuing corporation and the trustee, who acts for the bondholders, it sets forth the rights and responsibilities of the corporation, trustee, and bondholders and the terms of the issue.
Agent a person or company that acts for another person or company (the principal) by the latter’s authority.
Call the right of a corporation to repurchase a bond obligation or stock.
Proxy statement a document intended to give shareholders the information they need to vote knowledgeably on matters brought up at shareholder meetings.
Deferred compensation the contractual postponement of payment for serves rendered until a future date; commonly used with respect to retirement benefits (qualified or non qualified) to be paid in the future.
Actuarial calculation the mathematical determination of rates and premiums for life insurance, disability insurance, and pension benefits based on tables detailing the frequencies of mortality (death) and morbidity (disability)
Eurodollars deposits denominated in U.S. dollars at banks and other financial institutions outside the United States. Although the name originated because large amounts of such deposits were held at banks in western Europe, similarly deposits in other parts of the wo
Draft a signed order by one party (the drawer) addressed to another (the drawee) directing the drawee to pay, at sight or at a definable time in the future, a specified sum of money to the order of a third person, the payee.
Bill of lading a document given by the shipper of goods to the recipient acknowledging receipt of shipment and the terms of delivery.
Sight draft a draft payable on demand when presented to the drawee.
Time draft a draft payable at a fixable or determinable future time.
Revocable letter of credit a letter of credit that may be withdrawn by the issuer at any time without prior notice to the beneficiary.
Irrevocable letter or credit a letter of credit that, once issued, cannot be cancelled and can be modified only with the consent of all parties to the credit, including the beneficiary (often an exporter)
Foreign exchange the trading in or exchange of foreign currencies for other foreign currencies.
Trust a legal structure created to hold property or other assets
Trustor person who creates the trust
Trustee person who administers the trust
Beneficiary person who benefits from the trust.
Created by: Sharon.Spence



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