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Prior to 1913, panics were common occurrences, as investors were unsure about the
safety of their deposits. The Federal Reserve Act gave the 12 Federal Reserve banks the
ability to print money in order to ensure economic stability. In addition to this task, the
Fed had the power to adjust the discount rate/the fed funds rate and buy & sell U.S.
treasuries.
3-6-3 Rule
The 3-6-3 rule describes how bankers would give 3% interest on depositors' accounts,
lend the depositors money at 6% interest and then be playing golf at 3pm. This alludes to
how a bank's only form of business is lending out money at a higher rate than what it is
paying out to its depositors.
However, with the loosening of banking regulations and the widespread adoption of
information technology such as the internet, banks now operate in a much more
competitive and complex manner. For example, banks are now providing insurance,
brokerage and other forms of financial services.
The ABA check routing number is usually the first nine digits in the bottom row of
numbers on any check. For example, if the bottom row showed 123456789 0100100120:
0123, the ABA routing number would be 123456789.
A sovereign wealth fund owned by Abu Dhabi, the capital of the United Arab Emirates
(UAE). It is wholly owned and administered by the UAE. The Abu Dhabi Investment
Council is funded by revenue from the country's oil industry, and invests those revenues
in a wide range of asset classes, including equities, debt, real estate, infrastructure and
private equity.
Its sister fund is the Abu Dhabi Investment Authority (ADIA), which is one of the
world's largest sovereign wealth funds.
The Abu Dhabi Investment Council was established in 2007. While the fund does invest
in assets across the globe, the primary focus of the ADIC is to invest in Abu Dhabi's
economy. Domestic assets include banks, investment houses and insurance companies.
Acceptance Market
Accommodation Endorser
Accommodation Paper
An accord and satisfaction may occur in debt negotiations whereby the original credit
agreement between the bank and Company A is revised (by stretching out payments, or
reducing an interest rate) and Company A delivers on the new terms. If for some reason
Company A does not deliver on the new terms, it may be liable for the original contract,
because it did not satisfy the terms of the accord.
Account History
Most checking, savings and brokerage accounts will send a monthly statement to account
holders. This statement should include the account history for that month.
Account Inquiry
ARC speeds the payment to the vendor, who otherwise would have to wait for an actualy
check to be transported and processed.
Acquisition Financing
Acquisition Loan
What Does Acquisition Loan Mean?
A loan given to a company to purchase a specific asset or to be used for purposes that are
laid out before the loan is granted. The acquisition loan is typically only able to be used
for a short window of time, and only for specific purposes.
Once repaid, funds available through an acquisition loan cannot be reborrowed as with a
revolving line of credit at a bank.
Active Asset
Active Money
What Does Active Money Mean?
The total value of coins and paper currency in circulation amongst the public. The
amount of active money fluctuates seasonally, monthly, weekly and daily. In the United
States, the Federal Reserve Banks distribute new currency for the US Treasury
Department. Banks lend money out to customers which becomes classified as active
money once it is actively circulated.
Activity Charge
Add-On Interest
When multiple repayments are used in add-on interest, the effective lending rate becomes
higher than the nominal rate. This is caused the borrower returns a portion of the
principal with each payment, but is still being charged interest on the amount of the
original loan. In short, if you are borrowing under the add-on interest method, you are
paying more.
Adjustment Credit
Advance Rate
Agent Bank
Agreement Corporation
The Agreement Corporation Act produced little activity, so in 1919 Congress passed the
Edge Act that authorized the FRB to charter corporations to engage in international
banking. Both laws have undergone many changes since passage, and many of their
restrictions have been relaxed.
Agricultural Credit
Short-term credit finances operating expenses, intermediate-term credit is used for farm
machinery, and long-term credit is used for real-estate financing.
Algorithm
Increases to the allowance for bad debt are made by periodic loan-loss provisions, which
replenish the allowance and are recorded on the income statement as an expense. The use
of the allowance method tends to smooth bank earnings, which otherwise might undergo
unusual fluctuations when loans that have deteriorated over long periods of time are
charged off together in a single period.
Altered Check
Under the UCC, the liability for an altered check can reside with the various parties
involved - including the customer drawing the check, the bank on which the check is
drawn and the bank that presents the check - depending on the evident negligence.
Ordinarily, a customer needs to examine his or her bank statement and report the loss
within 30 days. Regardless of any negligence by the drawee bank, a customer will be
barred from recovery if he or she does not report the loss within one year.
The nine-digit routing numbers seen on every check originate in a system of bank transit
numbers developed by the ABA in 1910.
American Rule
Amount Financed
Announcement Effect
Annual Clean-Up
Anticipated Balance
Anticipated Interest
Asset Sales
Asset sales are a complex transaction from an accounting perspective. An asset sale is
classified as such if the seller gives the buyer control of the property after payment is
made. There cannot be further recourse to the buyer; this characteristic will cause the
transaction to be regarded as financing.
What Does Asset-Backed Commercial Paper Money Market Fund Liquidity Facility -
AMLF Mean?
A lending program created by the Federal Reserve Board on September 19,
2008, that will provide new funding to U.S. financial institutions until October 30, 2009.
The Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF)
provides funding that allows financial institutions to purchase asset-backed commercial
paper (ABCP) from money market mutual funds (MMMF) to prevent default on
investors' redemptions.
Assignment Of Proceeds
Associate Bank
Authorization Code
An authorization code is commonly attached to credit card transactions, not only to signal
a merchant that the transaction is approved, but also to help identify the transaction in
follow-up examinations, such as disputed transactions.
There are two primary types of automated teller machines, or ATMs. The basic units
allow the customer to only withdraw cash and receive a report of the account's balance.
The more complex machines will accept deposits, facilitate credit card payments and
report account information. To access the advanced features of the complex units, you
will usually need to be a member of the bank that operates the machine.
Automated Underwriting
More frequently, this power is given to the vendor (the electric company, for example) to
charge the checking account for whatever amount is owed that particular month. If the
vendor is not already familiar to the bank, the bank may ask the account holder to have
the vendor pre-approved for this function. In most instances, however, it is the account
holder who ultimately decides whether the automatic bill payment happens each
month; he or she has the power to turn the automatic payment function off or to postpone
the payment.
Automatic transfers may also be used for periodic equal payments, such as for mortgages
or other loan payments.
Given the low rates of interest paid on checking accounts, these arrangements are the
norm rather the exception, particularly for checking accounts at brokerage firms.
Automatic transfer accounts are available to individuals and sole proprietors;
organizations, units of government and other entities are not eligible for these accounts.
Availability
Aval
The process of avalizing is performed mainly in Europe. In the United States, banks have
restrictions as to what instruments may be provided an aval.
We should note that the interest rate on department store credit cards are usually higher
than normal credit cards, so this isn't to say that there is a huge interest savings.
As a trading term, the average daily float is a measure of the liquid market for a
company's stock. If a company is closely held and only a small portion of the stock is
trading in the public markets, it will affect the bid/ask spread and a number of other
aspects of how the stock is valued.