Intermediate Banking Professional key terms

The maximum balance per depositor per insured institution that a deposit protection scheme will reimburse if the bank fails. Amounts above the cap rank as ordinary unsecured claims in liquidation.

A statutory fund or authority that repays insured depositors up to a set limit when a member bank becomes insolvent, funded by levies on member institutions and used to maintain public confidence.

The legal framework allowing authorities to restructure or wind down a failing bank in an orderly way, including write-down of capital instruments, transfer of assets, and use of resolution funds instead of taxpayer bailouts.

A resolution tool that converts or writes down a failing bank's equity and eligible debt so losses fall on shareholders and creditors, recapitalising the bank without public money.

The minimum amount of equity and loss-absorbing debt a resolution authority requires a bank to hold so that it can be recapitalised internally during resolution without drawing on public funds.

A bank's regulatory capital expressed as a percentage of risk-weighted assets. It measures loss absorbency against credit, market and operational risk and must meet minimum and buffer requirements.

The highest-quality regulatory capital, mainly ordinary shares and retained earnings net of prescribed deductions. It absorbs losses first and carries the strictest minimum requirement.

The exposure base for capital ratios, calculated by applying regulatory risk weights to loans, investments and off-balance-sheet items according to counterparty type, collateral and credit quality.

A short-horizon stress metric requiring a bank to hold enough high-quality liquid assets to cover net cash outflows over a 30-day severe stress scenario.

A structural liquidity metric comparing available stable funding, such as retail deposits and long-term debt, with required stable funding from long-dated assets, aiming to limit reliance on short-term wholesale funding.

The gap between the short maturities at which a bank funds itself, such as demand deposits, and the longer maturities of its loans, which creates refinancing and interest-rate exposure.

The exposure of net interest income and economic value to changes in interest rates arising from repricing, yield-curve, basis and option features of non-traded assets and liabilities.

The difference between rate-sensitive assets and rate-sensitive liabilities that reprice within a chosen time bucket, used to estimate how net interest income responds to rate movements.

The difference between the duration of assets and the duration of liabilities scaled by the liability-to-asset ratio, indicating sensitivity of a bank's economic value to rate changes.

Techniques such as taking collateral, guarantees, credit derivatives or netting that reduce loss given default and may lower regulatory risk weights when legally certain and properly managed.

The loan amount divided by the appraised value of the property securing it. A higher ratio signals greater loss severity if the borrower defaults and prices fall.

Cash flow available for debt service divided by scheduled principal and interest payments. It shows how much cushion a borrower has before cash flow fails to cover repayments.

A lending framework assessing character, capacity, capital, collateral and conditions. It structures judgement about willingness and ability to repay alongside the operating environment.

A statistical model that ranks applicants by estimated default probability using weighted characteristics such as repayment history, utilisation and income stability, producing a comparable numeric score.

The likelihood that an obligor will fail to meet a contractual payment within a defined horizon, usually one year, estimated from ratings, models or historical transition data.

The share of an exposure expected to be lost if a default occurs, after recoveries from collateral, guarantees and workout, expressed as a percentage of exposure at default.

The probability-weighted estimate of credit losses over the life of a financial asset, combining probability of default, loss given default and exposure at default, recognised under impairment rules.

An exposure on which the borrower is materially past due, typically more than 90 days, or where full repayment is judged unlikely without realisation of collateral.

A concession granted to a borrower in financial difficulty, such as payment deferral or rate reduction, because of actual or imminent inability to meet original terms. Forborne exposures face stricter classification.

The charge recognised in profit or loss to build the allowance for credit losses, reflecting expected or incurred impairment on the loan book for the period.

A percentage reduction applied to the market or appraised value of collateral when calculating the protected exposure, covering price volatility, forced-sale discount and liquidation costs.

A contractual undertaking in a loan agreement requiring the borrower to maintain specified financial or behavioural conditions, tested periodically, with breach triggering default or remedy rights.

Contractual triggers that allow the lender to demand immediate repayment or enforce security, covering non-payment, covenant breach, cross-default, insolvency and material adverse change.

A provision making the entire outstanding principal immediately due and payable once an event of default occurs, before the scheduled maturity date.

The legal right to combine mutual obligations so that a bank may apply a customer's credit balance against that customer's matured debt, subject to contract terms and insolvency rules.

The point at which a funds transfer becomes irrevocable and unconditional, determined by scheme rules and settlement law, after which the payer cannot unilaterally recall it.

A payment system that settles each transfer individually and immediately in central bank money, used for large-value and time-critical payments and reducing systemic settlement risk.

Funds available during the business day to meet payment obligations as they fall due, including central bank balances, incoming payments and committed credit lines, distinct from overnight liquidity.

A reversal of a card transaction initiated by the issuer on the cardholder's behalf, returning funds and shifting the dispute into a scheme-defined evidence and liability process.

The business of sponsoring merchants into a card scheme, processing their transactions and bearing settlement and fraud liability in exchange for a discount fee.

The due diligence process of identifying customers, verifying identity from reliable documents, understanding expected activity and screening against sanctions and politically exposed person lists.

Additional scrutiny applied to higher-risk relationships such as politically exposed persons, correspondent banks or cash-intensive businesses, including source-of-funds checks and senior sign-off.

A confidential filing to the financial intelligence unit when an institution knows, suspects or has reasonable grounds to suspect funds are linked to criminal conduct, made without tipping off the customer.

The systematic review of balance sheet, income statement and cash flow data using ratios, trends and comparisons to judge profitability, liquidity, leverage and repayment capacity.

The period between paying suppliers and collecting from customers, calculated from inventory and receivable days less payable days, indicating how long cash is tied up in operations.

A forecast of expected receipts and payments over future periods, used to test whether a borrower can service debt from operations rather than from asset sales or new borrowing.

Net interest income divided by average earning assets, showing the spread a bank earns between lending and funding rates before operating costs and credit losses.

Operating expenses divided by operating income, a core efficiency measure. A rising ratio can indicate weakening revenue, cost overruns or investment in technology and distribution.

Profit divided by the economic capital allocated to a business line, showing whether returns compensate for the risk taken and supporting pricing and portfolio decisions.

The tendency for insured depositors, protected creditors or backstopped institutions to take excessive risk because they do not bear the full cost of failure.

Setting loan and deposit terms by reference to the whole customer relationship, including balances, transaction volumes and cross-sold products, rather than a single transaction in isolation.

The proportion of a customer's total spending in a product category that an institution captures, used to gauge relationship depth and cross-sell potential.

The present value of expected future contribution from a customer relationship, net of acquisition and servicing costs, used to guide retention spending and segment prioritisation.