eng for finance and banking

Basel III

The 2011 version of the Basel Accord on the regulation of internationally active banks.

European Central Bank (ECB)

The central authority, located in Frankfurt, Germany, which oversees monetary policy in the common currency area.

financial institutions

Firms, such as banks and insurance companies, that provide access to the financial markets, both to savers who wish to purchase financial instruments directly and to borrowers who want to issue them; also known as financial intermediaries.

financial instrument

The written legal obligation of one party to transfer something of value (usually money) to another party at some future date, under certain conditions.

financial market

The part of the financial system that allows people to buy and sell financial instruments quickly and cheaply.

financial system

The system that allows people to engage in economic transactions. It is composed of six parts: money, financial instruments, financial markets, financial institutions, regulatory agencies, and central banks.

information

A collection of facts. The basis for the third core principle of money and banking: Information iis the basis for decisions.

money

An asset that is generally accepted as payment for goods and services or repayment of debt, acts as a unit of account, and serves as a store of value.

regulatory agencies

Entities responsible for making sure that the elements of the financial system operate in a safe and reliable manner.

regulation (financial)

A set of specific rules imposed by the government that the managers of financial institutions and participants in financial markets must follow.

risk

A measure of uncertainty about the future payoff to an investment, measured over some time horizon and relative to a benchmark. The basis for the second core principle of money and banking: Risk requires compensation.

stability

Steady and lacking in variation. The basis for the fifth core principle of money and banking: Stability improves welfare.

supervision (financial)

General government oversight of financial institution.

automated clearinghouse (ACH) transaction

The most common form of electronic funds transfers.

check

An instruction to the bank to take funds from one account and transfer them to another.

commercial banks

Financial intermediaries that provide banking services to businesses and households, allowing them to deposit funds safely and borrow them when necessary.

commodity money

Precious metals or other items with intrinsic value that are used as money.

credit card

A promise by a bank to lend the cardholder money in order to make purchases.

currency in the hands of the public

The quantity of dollar bills held by the nonbank public; part of M1.

debit card

A card that provides instructions to the bank to transfer funds from the cardholder’s account directly to a merchant’s account.

debt

A loan obligating the borrower to make payments to the lender.

demand deposits

Standard checking accounts that pay no interest, part of M1.

electronic funds transfer (EFT)

Movements of funds directly from one account to another over an electronic network.

flat money

Currency with no intrinsic value, it has value as a consequence of government decree.

funding liquidity

The ability to borrow money.

M1

The narrowest monetary aggregate, which measures the most liquid means of payment available: currency, traveler’s checks, demand deposits, and other checkable deposits.

M2

The monetary aggregate most commonly used in the United States, it includes M1 plus somewhat less liquid financial instruments: small-denomination time deposits, saving deposits, money-market deposit accounts, and retail money-market mutual fund shares.

means of payment

Something that can be used to purchase goods and services; one of the functions of money.

monetary aggregates

Measures of the quantity of money; M1 and M2.

money-market deposit accounts

Accounts that pay interest and offer limited check-writing privileges; part of M2.

money-market mutual fund shares

Shares in funds that collect relatively small sums from individuals, pool them together, and invest them in short-term marketable debt issued by large corporations; retail shares are part of M2.

savings deposits

The general term used to describe interest-bearing deposits that may have limited withdrawal privileges, but have no expiration date.

store of value

Allows movement of purchasing power into the future; one of the functions of money.

time consistency

The condition in which there is no future incentive to renege on a promise or policy commitment made today.

time deposits

Deposits that cannot be withdrawn before a specified date. Small-denomination time deposits are part of M2.

unit of account

The units (like dollars) used to quote prices and other financial quantities; one of the functions of money.