CRB key terms

A framework that requires supervisors to take progressively stronger mandatory action as an institution's capital ratios fall through defined categories, from well capitalized down to critically undercapitalized.

An additional layer of common equity above minimum requirements that restricts dividend payments, share buybacks, and discretionary bonuses when an institution's capital falls into the buffer range.

A jurisdiction-set add-on to the conservation buffer, raised during credit booms and released during downturns, intended to absorb cyclical losses and limit procyclical lending behavior.

The denominator of most capital ratios, calculated by assigning regulatory risk weights to exposures so that capital is measured against the relative riskiness of a bank's assets and off-balance-sheet items.

A non-risk-based measure dividing Tier 1 capital by total exposure, including off-balance-sheet items, designed to constrain the build-up of excessive balance-sheet leverage.

A capital calculation method using supervisory-prescribed risk weights and external credit ratings or fixed categories, rather than a bank's own internal models, to size credit and market risk.

A capital method permitting approved institutions to use their own estimates of probability of default, loss given default, and exposure at default, subject to supervisory validation and minimum data standards.

The estimated likelihood that a borrower will fail to meet a contractual obligation within a defined horizon, typically twelve months, used in credit risk capital and provisioning calculations.

The estimated share of an exposure that will not be recovered after a borrower defaults, reflecting collateral, seniority, and workout costs, expressed as a percentage of exposure at default.

The projected gross exposure outstanding at the moment a borrower defaults, including drawn balances and an estimate of further drawings on committed facilities.

The percentage applied to an undrawn commitment or off-balance-sheet item to estimate how much of it would be drawn if the counterparty defaulted.

A forward-looking provisioning measure combining probability of default, loss given default, and exposure at default, recognized over the life of an exposure even before a loss event occurs.

An exposure that is materially past due, typically more than ninety days, or where the lender doubts full repayment will occur without realizing collateral.

A concession granted to a borrower in financial difficulty, such as reduced payments or extended maturity, which may itself be a sign of impairment and triggers specific classification and reporting rules.

A regulatory ceiling on the aggregate exposure a bank may hold to one borrower or connected group, expressed as a percentage of the bank's capital base.

The requirement to identify and report exposures to counterparties or connected groups that exceed a specified threshold, enabling supervisors to monitor concentration risk.

The principle that anti-money-laundering controls should be proportionate to the assessed money-laundering and terrorist-financing risk of customers, products, channels, and geographies.

The process of identifying customers and beneficial owners, verifying identity, and understanding the purpose and expected nature of the business relationship before and during onboarding.

Identification of the natural persons who ultimately own or control a legal entity or the proceeds of an account, typically through ownership thresholds or control tests.

Additional scrutiny applied to higher-risk relationships, such as politically exposed persons or correspondent accounts, including source-of-funds checks and senior management approval.

An individual entrusted with a prominent public function, or a close associate or family member, whose accounts warrant enhanced scrutiny because of elevated corruption risk.

A confidential filing to the national financial intelligence unit describing transactions or behavior that may indicate money laundering, terrorist financing, or other criminal conduct.

The prohibited act of disclosing to a customer or third party that a suspicious activity report has been or may be filed, or that an investigation is underway.

The principle that credit decisions and terms must not be based on prohibited characteristics such as race, sex, or national origin, and that lending practices must be consistently applied.

A discriminatory effect arising from a facially neutral policy or practice that disproportionately excludes or disadvantages members of a protected group without a legitimate business justification.

The practice of denying or limiting credit to residents of particular geographic areas, often minority neighborhoods, regardless of individual applicants' creditworthiness.

A written communication to an applicant explaining the specific reasons for a denial or unfavorable change in credit terms, enabling the applicant to understand and challenge the decision.

A short-horizon metric requiring a bank to hold high-quality liquid assets sufficient to cover net cash outflows under a thirty-day stress scenario.

A structural metric requiring available stable funding to exceed required stable funding over a one-year horizon, limiting overreliance on short-term wholesale funding.

Assets that are readily convertible into cash with little or no loss of value in stressed markets, categorized by liquidity tiers and subject to haircuts in the liquidity coverage ratio.

The risk that changes in interest rates reduce net interest income or economic value of equity from non-trading positions, managed through gap, duration, and earnings-sensitivity analysis.

A statistical estimate of the maximum loss on a portfolio expected over a defined holding period at a given confidence level, widely used for market risk limits and capital.

Forward-looking analysis of how a portfolio, institution, or system performs under severe but plausible adverse scenarios, used to size capital needs and inform supervisory judgments.

The process by which a bank projects capital supply and demand under baseline and stressed scenarios, demonstrating to supervisors its ability to maintain adequate capital through a downturn.

A governance structure in which operational management owns risk, an independent risk and compliance function monitors it, and internal audit provides independent assurance to the board.

A board-approved articulation of the types and levels of risk the institution is willing to accept in pursuit of its strategy, expressed through qualitative principles and quantitative limits.

The organizational and reporting arrangements, including a direct line to the audit committee, that allow auditors to assess controls objectively without management influence.

A supervisory finding of significant weakness or unsafe practice that demands prompt remediation, typically escalated to the board and followed by formal enforcement if unresolved.

A formal, legally binding agreement between a regulator and an institution requiring specified corrective actions, often without admission of wrongdoing, enforceable in court.

A supervisory directive compelling an institution or individual to stop identified unsafe or unlawful practices and take affirmative corrective steps, enforceable through penalties.