IBSL Higher Diploma in Banking and Finance (HDBF) Exam key terms

An international set of banking rules on capital, leverage and liquidity, created after the 2008 crisis to make banks stronger and less likely to need taxpayer bailouts.

A bank's capital expressed as a percentage of its risk-weighted assets, showing how much cushion it holds against losses compared with the riskiness of its lending.

A bank's loans and other exposures adjusted for how risky each one is, used as the denominator when measuring capital strength.

A rule requiring a bank to hold enough high-quality liquid assets to survive a 30-day stress scenario of cash outflows.

The danger that a bank cannot meet its payment obligations when they fall due, or can only do so by selling assets at a loss.

The situation where a bank borrows short-term (such as customer deposits) but lends long-term, creating exposure if depositors withdraw before loans are repaid.

The risk that a borrower fails to repay interest or principal as agreed, causing the lender to lose money.

A loan on which the borrower has stopped making payments for an extended period, typically 90 days or more, and which is treated as impaired.

An amount a bank sets aside in its accounts to absorb expected losses on loans that may not be fully repaid.

The risk that changes in market interest rates reduce a bank's net interest income or the value of its assets and liabilities.

The difference between the interest a bank earns on loans and the interest it pays on deposits, expressed as a percentage of earning assets.

The gap between two interest rates, such as the rate charged to borrowers and the rate paid to depositors, or between a bond's yield and a benchmark.

The difference between the bid price and ask price of a security, which compensates market makers and reflects how easily the asset trades.

The gap between the highest price a buyer will pay and the lowest price a seller will accept for a security at a given moment.

The ease and speed with which an asset can be converted into cash without significantly moving its price.

The market for short-term debt instruments, typically maturing within one year, where banks and other institutions manage short-term funding and cash.

A bank-issued deposit with a fixed term and fixed interest rate that can often be sold before maturity, used by savers and institutions for short-term funds.

A graph showing the interest rates on bonds of the same credit quality across different maturities, used to judge market expectations for rates and growth.

A tradable debt security through which an issuer borrows money from investors and promises periodic interest payments and repayment of principal at maturity.

The fixed annual interest rate stated on a bond, calculated as a percentage of its face value and paid to the holder.

The total annual return an investor earns from a bond if it is held to maturity, accounting for its price, coupon payments and redemption value.

A measure of how sensitive a bond's price is to changes in interest rates, often expressed as the weighted average time until cash flows are received.

A financial contract whose value depends on an underlying asset, rate or index, used to hedge risk or to speculate on price movements.

A standardised agreement to buy or sell an asset at a set price on a future date, traded on an exchange and settled through a clearing house.

Taking an offsetting position in a related instrument to reduce exposure to an unwanted risk such as a price or rate change.

A contract giving the buyer the right, but not the obligation, to buy or sell an asset at a stated price before or on a set date.

The price a buyer pays for an option contract, or the regular amount paid to an insurer to keep an insurance policy in force.

A national institution that sets monetary policy, issues currency, and supervises parts of the banking system to maintain financial stability.

Actions by a central bank to influence interest rates and the money supply in order to control inflation and support economic growth.

The minimum share of customer deposits a bank must hold as cash or balances with the central bank rather than lending out.

A scheme that protects depositors up to a set limit if their bank fails, reducing the risk of panic withdrawals.

Laws and procedures requiring financial institutions to identify customers, monitor transactions and report suspicious activity that may involve criminal proceeds.

The process by which a bank verifies a customer's identity and understands their business before opening accounts or providing services.

A confidential filing a bank submits to authorities when it detects transactions that may indicate money laundering, fraud or other financial crime.

Net profit divided by shareholders' equity, showing how much profit a bank or company generates for each unit of owners' capital.

Net profit divided by total assets, indicating how efficiently a bank uses its asset base to generate earnings.

The current worth of a future sum of money or stream of payments, calculated by discounting at an appropriate interest rate.

The interest rate used to convert future cash flows into their present value, reflecting the time value of money and risk.