Cyber*School

The current account balance is a sub-account of the balance of payments. It summarizes trade balance, services balance, balance of income and balance of the current transfers together. The current account balance shows how a country can fund its exports by imports. A current account deficit causes an increase in the foreign debt of an economy.

A statement that summarizes an economy’s transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country’s residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The balance of payments classifies these transactions in two accounts – the current account and the capital account.

Comparison of all the assets and liabilities parts of a company to a balance sheet date. Serves the purpose of recognizing income and as a balance sheet.

A fund that combines a stock component, a bond component and, sometimes, a money market component, in a single portfolio. Generally, these hybrid funds stick to a relatively fixed mix of stocks and bonds that reflects either a moderate (higher equity component) or conservative (higher fixed-income component) orientation.

A medium or long-term bond issued by banks.

The credit institutions are issuing such form of bonds to provide borrowers money.

Under the Basel II framework, this asset class covers exposures to banks and those securities firms that are subject to supervisory and regulatory arrangements comparable to those under the New Framework.Also included are public-sector entities that are treated like claims on banks under the standardised approach, and multilateral development banks that do not meet the criteria for a 0% risk weight under the standardised approach

an international organisation that fosters co-operation among central banks and other agencies in pursuit of monetary and financial stability

A short-term credit investment created by a nonfinancial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts to face value in the secondary market. These instruments have been a popular instrument in the money market. They are commonly used in international transactions.

abbr. (BWG) Banking act in german

The banking book covers all the business of the Bank that is not used for commercial transactions and serves the overall bank management.

Company groups that engage predominantly in banking activities

Insolvency of the debtor (eg issuers of securities)

The liquidation of assets when a firm cannot meet its financial obligations. This is not synonymous with default and a firm may default on a specific debt obligation without declaring bankruptcy.

The currency in an international portfolio in which profits and losses are calculated.

abbr. Basel Committee on Banking Supervision

Group of central banks and financial institution supervisory authorities from the group of 10 (G-10) countries, which produce common standards aimed at reducing systemic risk in the global financial system.

Basel II refers to the entirety of the capital requirements proposed by the Basel Committee on Banking Supervision in the recent years. The rules must be applied from 1 January 2007 in the Member States of the European Union for all credit and financial services institutions. Although originally inspired and initiated by the United States, Basel II has not been implemented in the United States with the same vigor as in Europe. The scope of Basel II focuses on three areas: minimum capital requirements (Pillar 1), banking supervision process (Pillar 2) and expanded disclosure (Pillar 3).

Banks using the BIA must hold capital for operational risk equal to a fixed percentage of (denoted alpha) of average annual gross income over the previous three years (See also alpha, operational risk)

see strike price