Glossary of Currency Terms

A

Account or (Bank account) — you have an account created by the deposit of money at a bank and can use it when you need it. You are became a customer of the bank.

Accrued interest — Interest owed but not yet paid.

Adjustable rate mortgage (ARM) — A mortgage plan with an interest rate tied to some economic index.

Amortization — The process of paying or reducing a debt by periodic payments sufficient to cover current interest and to extinguish part of the principal.

Annuity — A contract to make periodic payments in the future.

Appraisal — An estimate of the value of property, especially real estate, to be used as collateral for a loan.

Arbitrage — The process of simultaneously buying and selling identical or similar securities in related markets, thus providing a profit to the investor.

Automated clearinghouse (ACH) — A clearinghouse in which the information enters the system in an electronically readable form, such as magnetic tape.

Automated teller machine (ATM) — Equipment that can provide certain banking services without the involvement of bank personnel. Customers access an ATM by using a plastic card (a "debit" card) issued by their bank.

Available funds — Funds that may be withdrawn or used immediately or on demand.

B

Bearer — a person who presents a note or bill for payment.

Bank account see Account

Bank capital — The difference between the value of a bank's assets and its liabilities. The total of the capital accounts of the bank sometimes includes, for regulatory purposes, loan loss reserves and subordinated debt. Many banking regulations are tied to the amount of the bank's capital.

Bank check — A check drawn by a bank on itself and signed by an authorized officer; also called officer's check or cashier's check.

Banker's acceptance — A short-term marketable security guaranteed by a bank, generally resulting from trade in staple commodities. A "trade acceptance" is a draft drawn by the seller of goods on the buyer and "accepted" by the buyer. In a bank acceptance the bank substitutes its credit for that of its customer. The customer is to provide funds to pay acceptances at maturity.

Bank examination — An on-site investigation of the bank's financial condition, management, and policies by representatives (bank examiners) of the regulatory agencies.

Bank holding company — Any corporation that controls one or more banks. The corporation is subject to the Bank Holding Company Act, administered by the Federal Reserve Board.

Bank Insurance Fund (BIF) — Insurance fund for depositors in failed commercial banks, created in 1989 to assume the responsibilities of the FDIC insurance fund.

Bank notes — Instruments issued by banks evidencing a promise to pay bearer on demand, intended to be used as money. Currently, only Federal Reserve bank notes are in circulation. During the 19th century, bank notes constituted the bulk of the money supply of the United States.

Bank statement — A statement of a customer's account, showing all deposits recorded, checks paid, and charges made during a period, as well as the balance at the end of the period. The statement is usually accompanied by the customer's canceled checks.

Basis point — One one-hundredth of a percentage point. A unit commonly used to express differences in or changes in interest rates.

Bearer — Holder or person in possession of money or of a check, note, or other instrument.

Beneficiary — (1) The person specified by a depositor in connection with an account in trust for another; (2) the person in whose favor a letter of credit is issued; (3) the person designated to receive the income or principal of an estate; (4) the person who is to receive the proceeds of an insurance policy or annuity.

Bond — An interest-bearing certificate of debt that promises that the issuer (a government or corporation) will pay a certain sum of money to the holder of the bond at a specified date. In effect, it is a long-term loan by the bondholder to the issuer.

C

Currency — this is the kind of money used in a particular country. In modern finance, is considered to be synonymous with paper money or the term to include all forms of money that circulate (coins, banknotes). Generally, currency - a metal or paper medium of exchange that is in current use in a particular country.

Convertible Government Currency or Representative Money — paper money, that are provided for gold or silver completely.

D

Debit card — A plastic card issued by a bank to a depositor, encoded so that it may be used in ATMs or in POS systems.

Demand deposit — Funds in a checking account subject to withdrawal on demand or by check.

Depository institution — A financial institution that accepts deposit accounts; a commercial bank, savings bank, savings and loan association, or credit union.

Discount — Interest paid at the beginning of a loan. So-called bank discount is calculated on the sum to be repaid at maturity rather than on the proceeds of the amount borrowed.

Discount rate — The rate charged by the Federal Reserve banks for loans to banks.

Discount window — The Federal Reserve facility for lending to depository institutions.

Disintermediation — The process of removing deposits from financial institutions ("intermediaries") for investment directly in market instruments. This has occurred when financial institutions are unable, because of regulation or for other reasons, to pay interest rates as high as those available in the open market.

Draft — A written order signed by the drawer directing the drawee to pay a specified sum to the payee - that is, a check.

Dual banking system — Regulatory framework of the banking system, composed of federal and state regulators.

E

Electronic fund transfer system (EFTS) — A system that provides for payments electronically, rather than by use of paper checks or currency. These systems include such devices as wire transfers, automated teller machines (ATMs), and point-of-sale (POS) systems.

Endorsement — The signature plus any other writing by which the endorser transfers rights in an item (that ia, a check) to someone else. It is generally written on the back of the item.

Escrow — A written agreement, such as a deed or bond, entered into by three parties and deposited for safekeeping with the third party as custodian, to be delivered by the latter only upon the performance or fulfillment of some condition.

Eurodollar — Deposits denominated in dollars in a bank outside the United States (including banks not in Europe).

Excess reserves — The amount of reserves held by a bank in excess of what is needed to meet legal requirements.

Exchange rate — The price of the monetary unit of one country in terms of the monetary unit of another.

F

Fiat money = Fiat currency — money declared by a government to be legal tender though it is not convertible into standard specie.

Federal funds — Overnight loans between banks that are needed in immediately available funds.

Federal funds transactions — Overnight or short-term loans from one bank to another of excess reserves as deposit at the Federal Reserve Bank. These transactions are frequently referred to as purchases, and sales, of funds.

Federal Reserve note — Paper money issued by the Federal Reserve Bank. Also use as the prevailing paper currency in the USA. Such money is legal trades.

Federal Reserve System — The central bank of the United States, consisting of 12 Federal Reserve Disctrics (Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco). Each of this districs are including member banks regulated and served by a Federal Reserve Bank. Its principal responsibility in the management of monetary policy.

Fedwire — The Federal Reserve funds transfer system used to transfer reserves and other balances of financial institutions and to transfer book-entry U.S. government securities.

Fiduciary services — Services provided by an individual or a corporation acting in a trust capacity. A bank authorized to do a trust business may act as executor or administrator of estates, guardian of minors, and trustee under wills.

Float — Items for which the recipient institution has given credit but which it has not yet collected.

Futures — Standardized contracts traded on exchanges that call for delivery of commodities, securities, or foreign currency in the future.

Futures contract — Standardized contract to purchase or sell a specified amount of a specified instrument (such as a security or currency) for a specified price at a specified future date.

G

Gold certificate ("yellowback") — a currency note issued exclusively to the Federal Reserve Banks by the US Treasury. It forms a claim on gold reserves deposited by the Federal Reserve Banks at the Treasury and is used to transfer interbank balances within the Federal Reserve System.
2) Also called: Gold note (formerly) a banknote issued by the US Treasury to the public and redeemable in gold.

I

Installment loan — A loan with several scheduled repayments at specified intervals.

Interest — The amount paid for use of money or credit.

Interest rate — The price of borrowing, expressed as a percent of the amount borrowed. See Discount.

Investment banker — An intermediary who acquires new issues of securities from the corporate issuer and resells them to the public.

J

Joint account — An account in the names of two or more persons. Generally the funds may be withdrawn by only one of the depositors.

L

Legal tender — Money that legally satisfies financial obligations.

Letter of credit — An instrument issued by a bank by which the bank substitutes its own credit for that of the individual or corporation that purchases the letter.

Line of credit — An arrangement whereby a bank commits to lend up to a specified amount at the borrower's option.

Loan participation — Credit extended to a borrower in which a group of lenders each provide a fraction of the total financing, typically arising because individual banks are limited in the amount of credit they can extend to a single customer.

London Interbank Offer Rate (LIBOR)— Interest rate charged on interbank loans.

M

Maker — The person who signs and executes a note or other promise to pay. The drawer of a check is sometimes referred to as a maker.

Market — a place, where are meeting people for buying and selling goods, usually outside. Market may be financial - bear market, bond market, commodities market, bull market, stock market, capital market, currency market, eurobond market, eurocredit market, eurocurrency market, euromarket, export market, external market, foreign exchange market, foreign market, grey market, internal market, world market and etc.; may be: food market, energy market, gas market, residential market, market an invention, black market, domestic market and others.

Maturity — The due date of a financial instrument.

Money order — A draft sold to a customer with a payee designated by the purchaser. The issuer is usually a bank or other party of high credit standing, so the money order is widely accepted as payment.

Mortgage — A method of pledging real property as security for debt so that the lender may foreclose if the borrower defaults.

Mutual institution — A thrift institution or insurance company that has no stockholders and is owned by its depositors or policyholders.

N

Noninterest-bearing notes — notes without interests.

P

Par value — Of a bond, note, or other obligation, the amount agreed to be repaid, exclusive of interest.

Paper money — paper currency issued by the government or the central bank as legal tender and which circulates as a substitute for specie.

R

Representative money — paper money, that are provided for gold or silver completely.

S

Silver certificate — a banknote issued by the US Treasury to the public and redeemable in silver.

Specie — coin money, as distinguished from bullion or paper money.

T

Treasury bill — a short-term noninterest-bearing obligation issued by the Treasury, payable to bearer and maturing usually in three months, within which it is tradable on a discount basis on the open market.