Competitive Exams: International Banking Terminology A to D

  • ABA Routing Number: A series of numbers located at the bottom of an account holder's checks or deposit slips. These numbers identify a particular address for a specific banking institution, ABA routing address, which the Federal Reserve Banking system uses when funds transactions move within the banking system.
  • Amortization: The repayment of a loan or process of reducing debt by installments with regular payments to cover principle and interest, usually in a term expressed in months.
  • Assignment: The transfer of a loan from one party to another.
  • ACH: Stands for Automated Clearing House, which is an electronic transfer (secure & efficient) of funds between financial institutions.
  • Balloon Payment: The final lump-sum payment that is made at the maturity date of a loan.
  • Bankruptcy: A proceeding in a federal court in which a debtor who owes more than his assets can cover is granted relief from debt by transferring all assets to a court appointed trustee.
  • Basis Points: A basis point is 1/100th of a percentage point. For example, 50 basis points of a $10, 000 loan would be 0.50% X 10, 000 or $50.00.
  • Breach: A violation of a loan covenant or promise.
  • Bridge Loan: A temporary or secondary loan collateralized by a subordinated lien or hold on a particular asset (which is usually for sale) in a manner that allows the proceeds to be used for purchase of a new or different asset before the present asset is sold.
  • Cap: A provision in a loan agreement that sets a limit on the interest rate which can be charged during the term of the loan.
  • Capital Asset or Improvement: Any structure or component considered as a permanent addition to real property that adds to its value and useful life.
  • Cashier's Check: A check drawn on the funds of the bank, not against the funds in a depositor's account. However, the depositor paid for the cashier's check with funds from their account. The primary benefit of a cashier's check is that the recipient of the check is assured the funds are available.
  • Certified Check: A personal check drawn by an individual that is certified (guaranteed) to be good. The face of the check bears the words “certified” or “accepted,” and is signed by an official of the bank issuing the check. It signifies that sufficient funds are on deposit and earmarked for payment of the check.
  • Chain of Title: The history of all documents that transfer title of real property, starting with the original or earliest existing document and ending with the most recent.
  • Charge-Off: The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt.
  • Check 21 Act: Check 21 is a Federal law that is designed to enable banks to handle more checks electronically, which is intended to make check processing faster and more efficient. Check 21 is the short name for the Check Clearing for the 21st Century Act, which went into effect on October 28, 2004.
  • Collected Funds: Cash deposits or checks that have been presented for payment and for which payment has been received; funds are readily available. Ledger funds are deposits made to an account but for which funds have not actually been received as in the deposit of a check.
  • Co-Maker: A person who signs a note to guarantee a loan made to another person and is jointly liable with the maker for repayment of the loan.
  • Convertibility Clause: A provision in some loans that allows the borrower to change the interest rate from fixed to variable or vice-versa.
  • Cost of Funds Index (COFI): An index that is used to determine interest rates & changes of interest rates for certain types of loans. It represents the weighted average cost of funds from all sources, which a bank has access to: Internal funds, other bank borrowings, the Federal Government or Federal Reserve Board.
  • Covenant: A clause in loan agreements that promises or obligates & restricts the borrower. If violated, a breach has occurred, which may cause the loan to become immediately due.
  • Deed: The legal document that conveys or transfers title of property.
  • Deed of Trust: The legal document (in some states) that conveys title of real property to a trustee on behalf of the owner.
  • Default: Failure to make loan payments on a timely basis or to comply with other terms/requirements as stipulated in the loan agreement.
  • Deferred: An action that has been postponed until a future date.