Glossary of key financial concepts.

Position::TOP 100 BANKS - Glossary
 
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Balance sheet mismatch: A balance sheet is a fiscal statement showing a company's assets, liabilities and capital on a specified date. A 'mismatch' in a balance sheet indicates that the maturities of the liabilities differ (are typically shorter) from those of the assets and/or that some liabilities are denominated in a foreign currency whilst the assets are not.

Banking soundness: The financial health of a single bank--measured by annual returns on total assets and equity--or of a country's banking system.

ROE: The return on equity, which equals total amount less preferred dividends divided by total common equity multiplied by 100.

ROA: The return on assets, which equals net income before preferred dividends plus interest expense on debt minus interest capitalised multiplied by i; minus the tax rate and divided by previous year's total assets multiplied by 100.

Asset liability management: Refers to the prudent management of assets to ensure that liabilities are sufficiently covered by productive assets at all times.

Assets under management: Funds managed by an investment company on behalf of investors.

Intermediation: The process of transferring funds from the ultimate source (savers) to the ultimate user (borrowers). A bank 'intermediates' credit when it obtains money from depositors and on-lends it to borrowers.

Collateral: Security pledged for the repayment of a loan.

Liquidity: The ability to convert an asset into cash quickly.

Basel II Accord: A comprehensive revision of the Basel capital adequacy standards issued by the Basel Committee on Banking Supervision.

Total capital: Common equity, preferred stock, minority interests, long-term debt, non-equity reserves and deferred tax liability in untaxed reserves.

Common equity: Shareholders' total funds minus preferred equity.

Risk capital: Money allocated for speculative investment activities.

Tangible assets: Total assets minus intangible assets such as deferred tax assets and goodwill.

Total debt: All interest-bearing and capitalised lease obligations.

Short-term debt: That portion of debt payable within one year.

Time draft: A demand for payment on a specified future date--comprising banker's acceptance, bill and sight draft.

Time bill: A banker's acceptance or bill of exchange that is not payable until some specific future time. This contrasts with a banker's draft or sight bill, which is good for immediate payment at sight.

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