IBP JAIBP Stage II key terms

A proportion of a bank's total demand and time liabilities that must be maintained as cash with the central bank, earning no return, and used by the regulator to control liquidity and credit expansion.

The minimum share of a bank's liabilities that must be held in approved liquid assets such as government securities, cash, or gold, ensuring the bank can meet unexpected withdrawals without distress.

The combined total of deposits and other funds a bank owes customers, split into payable-on-demand balances and term balances, and used as the base for computing reserve and liquidity requirements.

The mandatory process of identifying a customer, verifying identity documents, and understanding the nature of expected transactions before and during a banking relationship, forming the foundation of anti-money-laundering controls.

Ongoing procedures to establish the true identity of a customer, the beneficial owner behind an account, and the purpose of the relationship, with intensity increasing for higher-risk customers.

A confidential report a bank files with the financial intelligence unit when it suspects funds are linked to crime, terrorism financing, or other unlawful activity, without informing the customer.

The difference between cash inflows and outflows over a defined period; a positive gap means inflows exceed outflows, while a negative gap signals a funding shortfall that must be covered.

The practice of coordinating a bank's assets and liabilities by maturity, interest rate, and currency so that earnings and capital remain stable under changing market conditions.

The possibility that a borrower fails to repay principal or interest on time, causing the bank to lose expected cash flows and incur recovery costs.

A loan on which principal or interest has remained overdue beyond the period set by the regulator, typically triggering income reversal and higher loan-loss provisioning.

An amount charged against profit to build a reserve for loans expected to become unrecoverable, reflecting either regulatory classification rules or the bank's own expected-credit-loss estimates.

A statistical method that converts applicant characteristics such as income, repayment history, and debt burden into a numeric score used to rank creditworthiness and speed up lending decisions.

A borrower's net operating income divided by total debt service obligations for the same period; a ratio below one indicates insufficient cash to service debt comfortably.

An asset pledged by a borrower that the lender may seize and sell if repayment fails, reducing the lender's loss and often improving the loan's pricing and terms.

The loan amount expressed as a percentage of the pledged asset's appraised value; a higher ratio means less borrower equity and greater lender exposure to price falls.

Short-term funding for day-to-day business needs such as purchasing inventory or paying suppliers, usually repaid from the conversion of current assets into cash.

A recording system in which every transaction affects at least two accounts, with total debits always equalling total credits, keeping the accounting equation in balance.

The fundamental relationship stating that assets equal liabilities plus equity, which must hold true after every recorded transaction and underpins the balance sheet.

A listing of all ledger account balances at a given date, used to check that total debits equal total credits before financial statements are prepared.

A statement showing what a business owns, what it owes, and the owners' residual interest at a specific date, revealing financial position rather than period performance.

A report classifying cash movements into operating, investing, and financing activities, showing how profit converts into cash and whether the business can meet obligations.

An accounting approach that records income when earned and expenses when incurred, regardless of when cash changes hands, giving a more faithful view of performance.

A bank's eligible capital expressed as a percentage of risk-weighted assets, indicating how much loss-absorbing cushion exists relative to the riskiness of its exposures.

On-balance-sheet and off-balance-sheet exposures multiplied by risk weights set by the regulator, so that safer assets require less capital backing than riskier ones.

Dividing a customer market into groups with similar needs, behaviour, or value, so that products, pricing, and communication can be tailored to each group efficiently.

The estimated total profit a customer generates over the whole relationship, discounted to present value, used to justify acquisition spending and retention effort.

Offering additional products to an existing customer, such as a savings account holder taking a debit card or personal loan, which raises revenue per relationship.

A model where a bank builds long-term knowledge of a customer through repeated interaction, using that information to tailor credit and service rather than relying only on transactions.

The distance between what customers expect from a service and what they actually perceive they received, often caused by unclear standards or poor communication.

The structured process of receiving, logging, investigating, and resolving customer grievances within set timelines, with root-cause analysis to prevent recurrence.

Concentrating fully on a speaker, noting both content and feeling, and confirming understanding through paraphrasing and questions before responding.

Restating another person's message in your own words to confirm accuracy and show engagement, reducing misunderstanding in negotiations, complaints, and credit interviews.

A situation where a personal interest, relationship, or outside role could improperly influence professional judgement, requiring disclosure and often withdrawal from the decision.

An internal information barrier preventing staff in one department from sharing confidential client or price-sensitive information with colleagues in another, such as between lending and trading.

A written set of behavioural standards covering integrity, confidentiality, fair treatment of customers, and acceptable gifts, which employees must follow and be held to.

Centralised software that processes deposits, loans, payments, and customer records in real time across all branches, replacing separate branch-level ledgers with one shared database.

Handling a transaction end to end electronically without manual re-keying or intervention, which reduces errors, cost, and processing time.

A payment system that settles each transfer individually and immediately in central bank money, used mainly for large-value and time-critical interbank payments.

Documented procedures, backup sites, and data restoration steps that let a bank resume critical operations within an agreed time after system failure or a physical disaster.

The capability of an organisation to keep delivering essential services at acceptable levels during and after disruption, through redundancy, tested plans, and clear roles.

Actions by the central bank to influence money supply, credit, and interest rates, aiming at price stability while supporting sustainable growth.

The benchmark interest rate set by the central bank, which anchors short-term market rates and transmits to deposit and lending rates across the banking system.

Buying or selling government securities in the market by the central bank to inject or absorb liquidity and steer short-term interest rates toward the policy target.

A sustained rise in the general price level, eroding purchasing power and real returns on deposits, and usually prompting tighter monetary policy.

The nominal interest rate minus inflation, showing the true change in purchasing power a saver gains or a borrower pays over the period.

A systematic record of all economic transactions between residents of a country and the rest of the world, covering trade in goods and services plus financial flows.

The part of the balance of payments recording trade in goods and services, income flows, and unilateral transfers, excluding long-term capital and reserve movements.

The price of one currency expressed in another, influencing import costs, export competitiveness, and the domestic currency value of foreign debt.