CIR flashcards
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33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Nostro account
- A bank's account held with a correspondent bank in the correspondent's country and currency, used to settle cross-border payments and hold foreign currency balances.
- Vostro account
- The mirror of a nostro: an account a correspondent bank holds for a respondent bank, denominated in the correspondent's home currency.
- UCP 600 preclusion
- If an issuing bank fails to examine and refuse a presentation within five banking days, it is precluded from claiming the documents do not comply and must honour.
- Complying presentation
- A presentation of documents that meets the terms of the credit, UCP 600, and international standard banking practice; the issuing bank must honour it.
- Standby letter of credit
- A bank undertaking, often governed by ISP98, to pay on presentation of a demand and specified documents, typically evidencing a default by the applicant.
- Transferable credit
- A credit expressly designated as transferable, allowing the first beneficiary to make it available to one or more second beneficiaries, subject to UCP 600 Article 38.
- Herstatt risk
- Cross-currency settlement risk when one leg of an FX transaction settles before the other and the counterparty fails in between, leaving the other leg unpaid.
- PVP settlement
- Payment-versus-payment links the two legs of an FX transaction so that one leg settles only if the other settles, eliminating principal settlement risk.
- RTGS
- Real-time gross settlement: each payment is settled individually and immediately in central bank money, giving finality without netting.
- ISO 20022
- An open messaging standard using XML schemas; pacs.008 replaces SWIFT MT103 for cross-border customer credit transfers.
- Forward rate formula
- F = S × (1 + i_quote × t) / (1 + i_base × t); the currency with the higher interest rate trades at a forward discount.
- Transaction exposure
- FX risk arising from known future cash flows denominated in foreign currency, hedged with forwards, futures, or options.
- Economic exposure
- The change in the present value of a firm's future cash flows caused by FX movements; it affects competitiveness and is not removed by hedging booked transactions.
- FX swap
- A simultaneous spot purchase and forward sale (or vice versa) of the same currency pair, used for funding and rolling forward positions.
- Currency carry trade
- Borrowing in a low-yield currency to invest in a higher-yield currency; profit equals the interest differential minus any depreciation.
- FATF 40 Recommendations
- The global AML/CFT standard covering risk-based approach, CDD, record-keeping, suspicious reporting, and targeted financial sanctions.
- Beneficial ownership threshold
- FATF recommends identifying natural persons who own or control 25% or more of a legal entity; some jurisdictions apply a lower percentage.
- OFAC 50% rule
- An entity owned 50% or more, directly or indirectly, by one or more blocked persons is itself blocked, even if not named on the SDN list.
- Strict liability sanctions
- OFAC civil penalties do not require knowledge or intent; a US nexus such as USD clearing or a US person triggers jurisdiction.
- Suspicious activity report
- A report filed with the national financial intelligence unit when there are reasonable grounds to suspect money laundering or terrorist financing; tipping off is prohibited.
- Nested correspondent banking
- A respondent bank provides correspondent services to downstream banks, giving them indirect access to the correspondent; this raises AML/CFT risk.
- De-risking
- Correspondent banks terminating or restricting relationships with higher-risk respondents, reducing access to USD or EUR clearing for affected institutions.
- CLS settlement
- A multicurrency settlement system that uses payment-versus-payment to eliminate principal risk on eligible FX transactions.
- Transfer risk
- The risk that a borrower cannot obtain foreign currency to service cross-border debt, even if solvent in local currency.
- Country ceiling
- A sovereign rating cap that may limit the rating of domestic borrowers, because their ability to pay foreign currency debt depends on the sovereign's access.
- IFRS 9 stages
- Stage 1 uses 12-month expected credit loss; Stage 2 uses lifetime ECL after a significant increase in credit risk; Stage 3 applies to credit-impaired assets.
- Basel III leverage ratio
- Tier 1 capital divided by the total exposure measure, including on- and off-balance-sheet items, must be at least 3%.
- LCR
- Liquidity coverage ratio: high-quality liquid assets divided by net cash outflows over 30 days; must be at least 100%.
- NSFR
- Net stable funding ratio: available stable funding divided by required stable funding; must be at least 100% to limit maturity mismatch.
- MiFID II best execution
- Investment firms must take all sufficient steps to obtain the best possible result for clients, considering price, cost, speed, and likelihood of execution.
- EMIR clearing obligation
- In-scope OTC derivative counterparties must centrally clear eligible contracts and report trades to a registered trade repository.
- Incoterms 2020 CIF
- Seller delivers goods on board, pays freight to destination, and provides minimum (Institute Cargo Clauses C) insurance cover; risk passes at loading.
- Documentary collection D/P
- Documents are released to the importer only against payment; banks handle documents under URC 522 and assume no payment obligation.