IBSL Diploma in Corporate Banking Exam flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- DSCR
- Debt Service Coverage Ratio: cash available for debt service divided by interest plus scheduled principal in the period; a common covenant floor is 1.20x to 1.50x.
- Total Debt/EBITDA
- Leverage ratio measuring outstanding debt against annual EBITDA; lenders set a ceiling covenant and test it quarterly on the borrower's audited or management accounts.
- Negative pledge
- A covenant in which the borrower agrees not to grant security over its assets to other lenders without consent; it protects ranking but is not itself a security interest.
- Cross-default clause
- A provision making a default under one facility an event of default under another, typically triggered when overdue debt exceeds a stated threshold amount.
- Pari passu clause
- An undertaking that the lender's claims rank equally with other unsecured creditors; it prevents subordination and often accompanies a negative pledge.
- Floating charge
- Security over a shifting pool of assets such as inventory and receivables; the charge crystallizes on default, fixing the charged assets at that moment.
- Joint and several guarantee
- Each guarantor is liable for the entire guaranteed amount, and the lender may claim the full sum from any one of them without first pursuing others.
- Conditions precedent
- Requirements that must be satisfied before the first drawdown, such as executed security, legal opinions, insurance assignment and completed customer due diligence.
- Commitment fee
- A fee charged on the undrawn portion of a committed facility, compensating the bank for holding capital and liquidity available to the borrower.
- Working capital cycle
- Inventory days plus receivable days minus payable days; a lengthening cycle absorbs cash and typically increases the required revolving credit facility size.
- Documentary credit
- An independent undertaking by the issuing bank to pay against compliant documents; payment depends on document compliance, not on the condition of the goods.
- UCP 600 examination period
- Under UCP 600, the issuing bank has a maximum of five banking days after presentation to examine documents and determine whether they comply.
- CIF Incoterm
- Cost, Insurance and Freight: the seller pays carriage and insurance to the named destination port, while risk passes to the buyer when goods are on board.
- Reverse factoring
- Supply chain finance in which the buyer's credit standing lets suppliers receive early payment on approved invoices, discounted by the financing bank.
- Notional pooling
- A cash management structure that offsets debit and credit balances across accounts for interest calculation without physically transferring funds between them.
- Zero-balance account
- An account swept daily so its closing balance is nil, with surplus funds transferred to a master account and deficits covered by a header account.
- Syndicated loan roles
- The arranger structures and underwrites the facility, the agent bank administers it, and the security trustee holds collateral for all participating lenders.
- Expected loss formula
- Expected loss equals probability of default multiplied by loss given default multiplied by exposure at default; it is priced into the credit spread.
- Liquidity Coverage Ratio
- High-quality liquid assets divided by net cash outflows over a 30-day stress period; Basel III requires a minimum of 100 percent.
- Net Stable Funding Ratio
- Available stable funding divided by required stable funding; it requires at least 100 percent and limits reliance on short-term wholesale funding for long assets.
- CET1 ratio
- Common equity tier 1 capital divided by risk-weighted assets; it is the core measure of a bank's capital strength under the Basel framework.
- Leverage ratio
- Tier 1 capital divided by the total exposure measure, including off-balance-sheet items; the Basel minimum is 3 percent, independent of risk weights.
- Large exposure limit
- A regulatory cap on exposure to a single counterparty or connected group, expressed as a percentage of the bank's eligible capital base.
- Non-performing loan
- An exposure typically classified as non-performing when principal or interest is more than 90 days past due, triggering higher provisioning.
- IFRS 9 staging
- Stage 1 covers performing loans with 12-month expected credit loss; stage 2 covers significant credit deterioration with lifetime ECL; stage 3 covers credit-impaired assets.
- Reverse stress test
- A test that identifies the combination of losses or events that would breach the bank's risk appetite or capital plan, rather than testing a predefined scenario.
- Interest rate cap
- An option that pays the borrower when the reference rate exceeds the strike; it limits floating-rate cost in exchange for an upfront premium.
- Interest rate swap
- An agreement exchanging floating-rate interest for fixed-rate interest on a notional amount, used to convert floating-rate debt into fixed-rate exposure.
- Project finance recourse
- Non-recourse or limited-recourse lending repaid from project cash flow, secured by project assets, with lenders relying on completion support and reserve accounts.
- Cash waterfall
- A contractual order of priority for distributing project cash: typically operating costs, debt service, reserve accounts, then equity distributions.
- Term sheet
- A summary of proposed deal terms including amount, tenor, pricing, security and covenants; most provisions are non-binding until long-form documents are signed.
- Share of wallet
- The proportion of a client's total banking spend captured by one bank, tracked through product penetration and fee income versus net interest income.