Alphabetical Glossary of Key Terms of BFSCM
Alphabetical Glossary of Key Terms of “Banking & Financial Services Compliance Management
A
AML (Anti-Money Laundering): A set of regulations, laws, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income.
Asset Management: The process of developing, operating, maintaining, and selling assets in a cost-effective manner.
B
Bank Secrecy Act (BSA): US legislation that requires banks to report certain transactions, especially those that may be associated with money laundering.
Blockchain: A decentralized digital ledger of transactions across many computers, ensuring security and transparency.
C
Capital Adequacy: A measure of a bank’s financial strength, usually expressed as a ratio of its capital to its assets.
Compliance: Adherence to laws, regulations, guidelines, and specifications relevant to business processes.
CFT (Combating the Financing of Terrorism): Regulatory actions and programs aimed at preventing financial transactions that fund terrorism.
D
Derivative: A financial security with a value reliant upon or derived from an underlying asset or group of assets.
Due Diligence: A comprehensive investigation into a business or individual before signing a contract, especially to establish its assets and liabilities.
E
Enforcement Action: An official step taken by a regulatory body against an entity that violates regulations.
Equity: Ownership interest in a company, represented by stocks or shares.
F
Fiduciary: A person or entity that has the responsibility to act in another’s best interest in financial matters.
Forex (Foreign Exchange): The conversion of one currency into another, or the global market in which currencies are traded.
G
Governance: The processes, activities, and relationships that determine how an institution is directed, controlled, and held to account.
H
Hedge: An investment made to reduce the risk of price movements in another investment.
I
ICO (Initial Coin Offering): A fundraising mechanism in the cryptocurrency world where new tokens are sold to finance project development.
Interest Rate Risk: The potential for investment losses due to a change in interest rates.
J
Joint Venture: A commercial enterprise undertaken by two or more parties that share risk and profit.
K
KYC (Know Your Customer): Regulatory processes used by financial institutions to verify the identities of their clients.
L
Leverage: The amount of debt used to finance a firm’s assets, often measured as a ratio.
Liquidity: The ease with which an asset can be quickly converted into cash without affecting its price.
M
Money Market: A segment of the financial market where short-term securities are bought and sold.
Mortgage: A legal agreement by which a bank lends money at interest in exchange for taking the title of the debtor’s property.
N
Net Worth: The total assets minus total liabilities of an individual or entity.
Nominee: A person or firm that holds securities as a custodian on behalf of an actual owner.
O
Operational Risk: The potential for loss due to failures in systems, processes, people, or external events.
Overdraft: A deficit in a bank account caused by withdrawing more money than is deposited.
P
Portfolio: A range of investments held by an individual or institution.
Prime Rate: The interest rate that banks charge to their most creditworthy customers.
Q
Quantitative Easing: A type of monetary policy where a central bank purchases government securities or assets to increase the money supply.
R
Regulatory Sandbox: A framework that allows fintech startups to conduct live experiments in a controlled environment.
Risk Management: The forecasting and evaluation of financial risks, and the setting in place of measures to avoid or reduce their impact.
S
Securities: Financial instruments that represent some type of financial value or agreement.
Smart Contract: A self-executing contract with terms of the agreement between parties directly written into lines of code.
T
Tier 1 Capital: The core capital of a bank, which includes equity capital and disclosed reserves.
Treasury Bonds: Long-term securities issued by a government that pays periodic interest to the holder.
U
Underwriting: The process by which banks and lenders evaluate the risks of lending money to a specific person or entity.
V
Volatility: A statistical measure of the dispersion of returns for a given security or market index.
W
Wire Transfer: An electronic transfer of funds from one person or entity to another.
X
X-Inefficiency: A measure of inefficiency in a firm due to organizational slack or lack of competitive pressure.
Y
Yield: The income return on an investment, typically referring to the interest or dividends received.
Z
Zero Coupon Bond: A debt security that doesn’t pay interest but is issued at a discount, rendering profit at maturity when the bond is redeemed for its full face value.
This glossary serves as a brief overview of essential terms used in “Banking & Financial Services Compliance Management.” Always refer to detailed sources or definitions when seeking comprehensive explanations.
