GLOSSARY

List of Financial Terms in alphabetical order:

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Back End Load A charge to investors when they sell shares in a mutual fund. The charge is to discourage withdrawals. In the U.K., the practice is known as an exit charge.

Back Office In the financial services industry, the term is used to describe departments in a bank or brokerage house that are not directly involved in selling or trading with customers. These departments handle areas such as transaction processing, accounting, record keeping and compliance.

Balance Sheet A financial report that shows the status of a company's assets, liabilities and equity capital at a particular point in time, usually at the close of the calendar month or year. It is also sometimes referred to as a Statement of Condition.

Bancassurance A term used to describe the selling of insurance products through a bank's established distribution channels. The term describes a bank that integrates the selling of banking, insurance, lending and investment products to its customers.

Bank Holding Company A corporation established for the specific purpose of owning one or more banks and other types of financial services companies. This structure is primarily found in the United States. Corporations that hold more than 25% of the voting stock in a bank are required to register with the Federal Reserve Bank Board of Governors, thereby coming under special scrutiny and supervision by that regulatory authority.

Banker's Acceptance Time drafts drawn on and accepted by banks for payment on their maturity date. They are widely accepted as money market instruments. In trade financing, drafts that are authorized under a letter of credit in effect become a banker's acceptance when the bank places its acceptance on the draft, (i.e., acceptance is called aval).

Bankwire A private computer network owned by an association of U.S. banks that provides communication and clearing services for their member banks.

Basis The price you originally paid for something. If you purchase stock in Company B for $100 and you sell it for $125, your basis in that stock is $100. Additionally, your gain on the sale of the stock is $25, calculated as your sales price less your basis in the stock.

Basis Point The smallest measurement of yield. 100 basis points equal 1%. A bond whose yield increases from 6.0% to 6.25% is said to increase by 25 basis points. When the prime rate of interest increases from 7.5% to 8.0%, it has increased by 50 basis points.

Basis Points See Basis Point.

Basis risk Exposure of a transaction or portfolio to the differences in the price performance of the instruments in the portfolio. Also referred to as correlation risk, basis risk may also be used to specifically describe the risk that the rate or basis relationship between a transaction in one market, and a hedge of that transaction in another market in the same currency will change.

Basket A vehicle for program trading by institutional investors that allows the purchase of all the stocks in a certain category. For instance purchasing a "basket" of stocks that comprises the Standard & Poor's 500 Composite Index in a single trade.

Basle Committee on Banking Supervision An international committee that sets standards for banking supervisors and regulators. The committee is chartered by the Group of 10 (G10) and meets at the Bank for International Settlements in Basle, Switzerland.

Bear market A period of generally falling prices and pessimistic attitudes.

Bearer bond Bonds on which the coupon and principal are payable to whoever has possession of the bond certificates; an unregistered bond. The only evidence of ownership is possession.

Beneficiary Named party who will receive the proceeds upon a specific event. For example, the named beneficiary of a life insurance policy will receive the life insurance proceeds upon the death of the insured.

Bid Price The price level at which buyers offer to acquire securities from sellers.

Bill Often called a bill of exchange or draft, a bill is an unconditional demand for payment made by one party to another party. In the investment industry, it commonly refers to a U.S. Treasury bill or T-bill, a short-term discounted government security sold at weekly and monthly auctions.

Binder A temporary insurance contract that provides coverage for a customer while their application is investigated for underwriting purposes.

Block of Insureds A group of insurance customers who all fall into the same risk category based on factors such as age, sex and lifestyle. Each customer in the “block” pays the same premium rate.

Bond A negotiable certificate evidencing indebtedness. A legal contract sold by an issuer promising to pay the holder its face value plus amounts of interest at future dates. Bonds are also referred to as fixed income securities.

Book Value The value of a financial instrument or portfolio carried on a balance sheet at the purchase price (in other words the original recorded value when purchased). This is in contrast to market value, which is an indication of how the market values the instrument or portfolio today.

Borrowed Funds Also called borrowings or purchased funds, these are funds (other than deposits) that are loaned to an institution for which it pays interest. These may include short-term borrowings and repurchase agreements.

Borrowed Reserves Money borrowed by a US financial institution from the Federal Reserve Bank in order to maintain the required reserve ratios.

Borrowing Securities (more commonly referred to as Securities Borrowed) Borrowing of securities by a financial institution from another institution to enable the payment of obligations and prevent failure.

Broker In the securities industry, the term refers to an individual or firm who introduces the two parties in a transaction to each other for a commission or fee. Since brokers, unlike market makers, do not buy and sell for their firm's own account, they do not risk the firm's capital to stand behind a price quote. The broker must be registered with the exchange where the securities are traded and therefore is called a registered representative. In the insurance industry, the term refers to someone who solicits insurance business from a client, but does not represent any particular insurance company.

Brokerage Services Transactions that involve the purchase and sale of bonds, stocks and other securities for a customer.

Brokered CD Certificates of Deposit issued by banks, but offered through brokerage firms rather than directly by the issuing banks. These firms can select from a variety of bank-issued CDs with different maturities and interest rates. CDs are negotiable instruments that pay a stated amount of interest on the maturity date, but can be bought and sold daily in the secondary market.

Brokers' Loan Money borrowed by brokers from banks to fund the underwriting of new issues, finance customer margin accounts and purchase stock (shares).

Building Societies Term used to describe the equivalent of a savings and loan bank in the United Kingdom. These institutions are mutual societies, owned by their depositors and borrowers. There are relatively few building societies as the majority have now converted to full banking institutions through the process of demutualization.

Bull Market A period of generally rising prices and optimistic attitudes.

Business Liability Insurance Insurance coverage for a business that protects it in the event of product liability, accidents on the premises and negligence.

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