Week 2 Financial Markets, Institutions & Instruments – Vocabulary Review

A comprehensive set of vocabulary flashcards covering financial markets, institutions, deposit products, insurance types, and key financial intermediaries introduced in the lecture notes.

Financial Market

An organized forum that bridges suppliers of funds with users of funds, enabling the creation, sale and transfer of financial assets.

Money Market

Segment of the financial market that trades short-term debt instruments (maturity < 1 year); securities are highly liquid and carry low interest-rate risk.

Capital Market

Market for long-term securities such as stocks, bonds, mortgages and long-term Treasury notes; offers higher return with greater default and market risk.

Primary Market

Market in which new securities are issued and sold for the first time; involves underwriters, issuers and instruments to raise cash for the issuing firm.

Secondary Market

Market for trading previously issued securities, providing liquidity by allowing investors to buy or sell outstanding instruments.

Public Offering

Sale of new securities to the general public through the primary market.

Initial Public Offering (IPO)

A corporation’s first public sale of stock in the primary market.

Private Placement

Sale of new securities directly to one investor or a small group of investors, rather than to the public.

Underwriter

Financial specialist (usually an investment bank) that assists an issuer in selling new securities to investors, often buying the issue and reselling it.

Issuer

Entity (corporation or government) that creates and sells new securities to raise funds.

Marketability

Ease with which a security can be bought or sold in the market without affecting its price.

Depository Institution

Financial institution that accepts deposits from surplus units and channels them into loans or investments; examples include commercial, universal and thrift banks.

Non-Depository Institution

Financial intermediary that performs financial intermediation without taking deposits; examples include insurance companies, pension funds and mutual funds.

Universal Bank

Largest type of Philippine bank in terms of assets, loans and revenue; offers a wide array of commercial and investment services (e.g., Banco de Oro).

Commercial Bank

Bank that traditionally focuses on short-term loans to businesses, traders and governments; now offers diverse financial services.

Thrift Bank

Banking category that accumulates savings from depositors and invests them; includes savings & mortgage banks, private development banks, savings & loan associations and microfinance banks.

Rural Bank

Privately owned bank focused on providing basic financial services to rural communities to promote local economic growth.

Savings & Mortgage Bank

Thrift bank specializing in accepting deposits and granting mortgage loans, often investing in highly liquid bonds and debt securities.

Private Development Bank

Thrift bank that offers medium- to long-term loans at reasonable rates to agricultural and industrial firms.

Savings & Loan Association

Institution that pools deposits from members and uses the funds for loans and investments in government or private securities.

Microfinance Thrift Bank

Small thrift bank granting micro-loans to very small businesses such as sari-sari stores and cottage industries.

Credit Union

Cooperative organized by individuals with a common bond (e.g., teachers, farmers) to accept deposits and grant loans to members.

Trust Company / Trust Department

Division of a universal or commercial bank that acts as fiduciary, trustee, executor or guardian, and can serve as fiscal agent for the government.

Current (Checking) Account

Bank account withdrawable by writing a check; usually non-interest-bearing unless structured as a NOW account.

NOW Account

Negotiable Order of Withdrawal account that functions like a checking account but earns interest.

Savings Account

Deposit account withdrawable using a passbook; earns interest, with all transactions recorded in the passbook.

Time Deposit

Deposit with a fixed maturity period (e.g., 30-360 days), evidenced by a certificate of deposit; earns higher interest but has withdrawal penalties before maturity.

Financial Institution

Intermediary that channels savings of individuals, businesses and governments into loans or investments; assets and liabilities are predominantly financial.

Financial Intermediary

Any institution—depository or non-depository—that stands between savers and borrowers, issuing its own secondary instruments while holding primary claims.

Insurance Company

Non-depository institution that sells policies transferring risk from policyholders to the insurer in exchange for premiums.

Life Insurance

Policy that pays beneficiaries an agreed sum (face value) if the insured dies during the contract term.

Loan Value (Insurance)

Amount that can be borrowed against a life-insurance policy during its term.

Cash Surrender Value

Amount returned to the policyholder if a life-insurance policy is voluntarily terminated before maturity.

Property/Casualty Insurance

Coverage protecting against loss of property or liability for accidents; includes reimbursement of medical bills, legal fees, pain and suffering, and lost wages.

Casualty (Disability) Insurance

Insurance that provides income replacement if the insured becomes disabled and unable to work.

Health Insurance

Insurance that pays medical expenses in exchange for premiums, often through a network of contracted healthcare providers.

Professional Liability Insurance

‘Errors and omissions’ or malpractice policy protecting professionals (e.g., doctors, lawyers) against client lawsuits for negligence.

Credit Insurance

Optional protection linked to loans or credit cards that covers debt repayment in case of death, disability or involuntary unemployment of the borrower.

Homeowners Insurance

Policy covering a house and its contents against damage or loss.

Auto (Vehicle) Insurance

Package policy covering bodily injury, property damage liability and physical damage to the insured vehicle.

Pension Fund Company

Firm that collects contributions during a worker’s employment years and disburses income during retirement; contributions are often tax-deductible to employers.

Mutual Fund Company

Investment company that pools investor money to buy diversified portfolios of securities such as stocks, bonds or money-market instruments.

Finance Company

Profit-oriented firm that borrows funds in the market or from banks and lends them to households and businesses.

Sales Finance Company

Finance company providing installment credit for big-ticket consumer items (e.g., cars, appliances) often in partnership with manufacturers.

Consumer Finance Company

Finance company granting personal loans or installment credit directly to individual consumers.

Commercial Finance Company

Finance company extending loans to businesses, often for equipment or working capital.

Security Broker

Agent who acts as intermediary between buyers and sellers of securities, earning commissions on executed trades.

Security Dealer

Firm or individual who buys securities for their own account and resells them, profiting from the spread between purchase and sale price.

Pawnshop

Business that lends cash against pledged personal assets (collateral) valued lower than the asset’s worth; popular for quick, small loans.

Lending Investor

Individual or small company offering loans—often high-interest, informal credit such as the ‘5/6’ system—outside the formal banking sector.

Financial System

Set of institutions, markets and instruments at global, regional or firm level that facilitate the exchange and flow of funds.

Flow of Funds

Movement of money from surplus units to deficit units via financial intermediaries; represented by solid lines for cash and broken lines for financial instruments.