IBSL Diploma in Corporate Banking Exam key terms

A model where a bank assigns dedicated managers who build long-term knowledge of a corporate client's business, so credit and product decisions rest on ongoing dialogue rather than on transaction-by-transaction data alone.

The mandatory process of identifying a corporate client, verifying its legal existence, ownership structure and beneficial owners, and understanding the purpose of the account before and during the relationship.

Identifying the natural persons who ultimately own or control a corporate entity, typically through a threshold percentage of shares or by exercising control, so that the bank sees past nominee or layered structures.

Laws, regulations and internal controls that require banks to detect, monitor and report attempts to disguise the proceeds of crime through the banking system, including suspicious activity reporting.

Automated checking of clients, counterparties and payments against government sanctions lists, with escalation and blocking procedures when a potential match is identified.

A formal internal body with delegated authority to approve, decline or condition credit exposures above defined thresholds, applying the bank's credit policy and risk appetite.

The written submission prepared by a relationship or credit analyst that sets out the borrower's business, financial analysis, structure, risks, mitigants and a recommendation for credit approval.

The amount and type of credit risk a bank is willing to accept across sectors, products and single names, expressed in limits and concentration thresholds set by senior management and the board.

A cap on total exposure to one borrower and its connected group, protecting the bank from concentration losses and often driven by regulatory large-exposure rules.

Contractual undertakings in a loan agreement requiring the borrower to maintain specified financial ratios or levels, such as maximum leverage or minimum interest cover, tested periodically.

A defined circumstance, such as non-payment, covenant breach or insolvency, that entitles the lender to accelerate the loan, demand repayment and enforce security.

The set of collateral, guarantees and other credit support taken by a lender to reduce loss if a borrower defaults, including the perfection and priority of each item.

A promise by a third party, often a parent company or shareholder, to meet a borrower's obligations if the borrower fails to pay, typically documented in a separate legal agreement.

A short-term revolving credit line used to fund day-to-day operating needs such as inventory and receivables, drawn and repaid as the business cycle requires.

A committed line that the borrower may draw, repay and redraw during the availability period, with commitment fees payable on undrawn amounts and a final maturity date.

A loan with a fixed principal amount advanced once and repaid on an agreed schedule, commonly used to finance acquisitions, asset purchases or long-term projects.

A facility allowing a corporate customer to draw its current account below zero up to an approved limit, typically repayable on demand and priced at a margin over a reference rate.

The scheduled reduction of loan principal over time through periodic instalments, as distinct from a bullet structure where the full principal falls due at maturity.

A loan structure in which interest is paid periodically but the entire principal is repaid in one amount at final maturity, often refinanced or repaid from asset sales.

The published benchmark, such as a risk-free overnight rate, to which a lending margin is added to determine the interest payable on a facility.

The spread added to a reference rate to price a loan, reflecting the borrower's credit risk, the tenor, the security taken and prevailing market conditions.

The difference in yield between a corporate bond or loan and a comparable risk-free instrument, reflecting the market's view of the borrower's default risk and liquidity.

An assessment by an agency or the bank's internal models of a borrower's ability and willingness to meet obligations, expressed on an ordinal scale and used in pricing and limits.

A bank's own score or grade for a borrower, derived from financial and qualitative factors, used for approval authority, pricing and regulatory capital calculations.

The estimated likelihood that a borrower will fail to meet its obligations within a defined horizon, usually one year, forming a key input to expected loss and capital models.

The share of exposure a bank expects to lose if a borrower defaults, after taking account of collateral, guarantees and expected recovery costs.

The statistically anticipated credit loss on an exposure, commonly calculated as probability of default multiplied by loss given default multiplied by exposure at default.

The estimated amount outstanding at the moment a borrower defaults, including drawn balances plus a proportion of undrawn commitments that may be drawn before default.

A measure comparing cash available for debt service with scheduled principal and interest payments, used to test whether a borrower generates enough cash to service its debt.

A measure of a borrower's debt relative to earnings or equity, such as net debt to EBITDA, indicating how much financial risk the capital structure carries.

Earnings before interest, tax, depreciation and amortisation, a commonly used proxy for operating cash generation in credit analysis and covenant definitions, though it ignores capital expenditure and working capital.

A financial statement showing cash generated and used across operating, investing and financing activities, central to assessing whether a borrower can repay debt from operations.

Banking products that support the movement of goods, such as letters of credit, guarantees and documentary collections, reducing payment and performance risk between buyer and seller.

A bank's irrevocable undertaking to pay a seller on presentation of complying documents, transferring the buyer's payment risk to the issuing bank.

A bank's undertaking to pay a beneficiary a stated sum if the applicant fails to perform a contractual obligation, commonly used in construction and supply contracts.

Bank services that help corporates collect receipts, make payments and manage liquidity and account structures efficiently across entities and currencies.

A facility provided by a group of lenders under a single loan agreement, arranged and documented by one or more banks, allowing large exposures to be shared.

A promise in a loan agreement by which the borrower undertakes to do, or refrain from doing, specified things, such as providing information or limiting further borrowing.