General terminology
Here you can find a list of definitions for general treasury terms. These terms are listed alphabetically, alternatively you can use the find facility within your internet browser (by pressing control + F simultaneously) to search for terms within this page.
ACT (Association of Corporate Treasurers)
Organisation composed of corporate finance, risk management and cash management professionals working in the international market, which is responsible for the provision of both professional treasury information and treasury qualifications.
Autorité des Marchés Financiers (AMF)
- The independent regulatory body supervising financial markets in France and the principality of Monaco. Its remit is to
i. safeguard investments in financial instruments and in all other savings and investment vehicles,
ii. ensure that investors receive material information and
iii. maintain orderly financial markets. - The independent regulatory body supervising the financial sector in Québec. Together with its counterparts in the other provinces, it supervises the Canadian financial markets.
BAFin (Bundesanstalt für Finanzdienstleistungaufsicht)
Created in 2002, the German Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungaufsicht – BAFin) acts as the single regulator for the bank, insurance and securities sectors. As part of its role, it also supervises all capital markets in Germany.
Banca d'Italia
Italy's central bank and one of the G7 central banks. It is charged with supervising the banking and financial sector in Italy. Since the adoption of the EUR, the Banca d'Italia participates fully in the Eurosystem and implements the Eurosystem's monetary policy and other decisions in Italy.
Bank of Canada/Banque du Canada
The Canadian central bank. One of the G7 central banks.
Bank of England
The UK's central bank. One of the G7 central banks.
Bank of Japan
The Japanese central bank. One of the G7 central banks.
Banque de France
France's central bank and one of the G7 central banks. Since the adoption of the EUR, the Banque de France has participated fully in the Eurosystem and implements the Eurosystem's monetary policy and other decisions in France.
Basel Committee
Part of the Bank of International Settlements, the Basel Committee on Banking Supervision regroups the central banks of the world's ten largest economies (G-10) and formulates broad supervisory standards and guidelines and recommends statements of best practice. See capital adequacy ratios.
Basis Point
One-hundredth of one percent, i.e. 1% equals 100 basis points or bps. While bond coupons may be expressed in fractions (i.e. in quarters, eighths or sixteenths), yields and prices of most money market instruments, such as commercial paper or treasury bills, are quoted in basis points.
BIS (Bank of International Settlements)
Based in Basel, Switzerland, BIS is an international organisation which fosters co-operation among central banks and other agencies in pursuit of monetary and financial stability.
Blended Cost of Capital
Refers to the combined opportunity cost of debt and equity capital invested i.e. the combined return on invested funds that could be received if another investment with equivalent risk was chosen. See cost of capital.
Bundesbank
Germany's central bank and one of the G7 central banks. Since the adoption of the EUR, the Bundesbank has participated fully in the Eurosystem and implements the Eurosystem's monetary policy and other decisions in Germany.
CECEI (Comité des Etablissements de Crédit et des Entreprises d'Investissement)
Body responsible for granting licences to banks and investment firms in France.
CEFACT
See United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT).
Central Bank
The principal monetary authority in a country, whose tasks include issuing currency, regulating monetary policy, maintaining the accounts of its member banks (i.e. all other banks operating in the country), and promoting the development and augmentation of the country's banking sector.
Commissione Nazionale per le Società e la Borsa (CONSOB)
The public authority responsible for regulating the Italian securities market.
Commodity
- A generic term for any item/product (including indices) that can be traded by investors on a marketplace.
- More specifically, it refers to natural materials and their derived products such as metals (sometimes referred to as hard commodities), agricultural products (commonly referred to as soft commodities, or ‘softs') and energy products.
Compounding
The process of accumulating the time value of money forward in time. When money is invested at compound interest, each interest payment is reinvested to earn additional interest in subsequent periods. See time value of money.
Cost of Capital
The average of the cost of capital invested by a company i.e. the return on invested funds that could be received if another investment with equivalent risk was chosen. See blended cost of capital.
Discounted Cash Flow (DCF)
A method for the evaluation of investments. This is calculated by discounting the future cash flows at an appropriate discount rate of interest in order to arrive at a single net present value (NPV) figure, which can be compared with other investments. See internal rate of return, discount rate.
Discount Rate
The generic name for the rate of interest at which the future cash flows of an investment are discounted in order to obtain the net present value of the cash flows. The choice of discount rate should appropriately reflect the risks of the investment/project.
EACT (Euro Associations of Corporate Treasurers)
Organisation composed of ten Associations of Corporate Treasurers in the euro-zone.
EASD (European Association of Securities Dealers)
A pan-European association, composed of around 150 or so securities dealers (investment bankers and market professionals) from 17 countries, whose primary objective is to promote the development of EASDAQ (a pan-European stock market) in addition to Europe's regional and national securities markets.
ECBS
See European Committee for Banking Standards.
EC Directive
A regulation emanating from the European Commission, the executive arm of the European Union, which has to be transposed into the different national legislations of the Member States.
ECSAs (European Credit Sector Associations)
The European Banking Federation, the European Association of Co-operative Banks and the European Savings Banks Group, which together established the ECBS (European Committee for Banking Standards) in 1992. The ECSAs promote the interests of different types of banks belonging to EU and EFTA countries.
EEA (European Economic Area)
The European trading zone encompassing the EU and EFTA Member States (excluding Switzerland) which permits free trade.
EFTA
European Free Trade Association composed of Iceland, Liechtenstein, Norway and Switzerland.
EONIA
See Euro Overnight Index Average.
ERM II (Exchange Rate Mechanism)
The Exchange Rate Mechanism (ERM II) aims to ensure exchange rate stability between the euro area and the EU Member States which have not introduced the single currency. Participation in ERM II is voluntary and Denmark is currently the only participant in ERM II. ERM II is a fixed exchange rate system in which each participating country's currency is fixed at a central rate vis-à-vis the euro within a fluctuation band. Should a participating country's exchange rate exceed the margins of the fluctuation band, the ECB and the ERM II member's central bank are obliged to hold the exchange rate within the fluctuation band through foreign exchange market intervention. However, the intervention obligation may be suspended should this be in conflict with the ECB's or the relevant central bank's primary objective of price stability.
EU (European Union)
The political and economic union between 25 European countries. Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom were joined by the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia in May 2004.
EURIBOR
See Euro Interbank Offered Rate.
Euro Interbank Offered Rate (EURIBOR)
Sponsored by the European Banking Federation, EURIBOR is the benchmark rate at which EUR interbank term deposits within the euro-zone are offered by one prime bank to another prime bank at 11:00CET. EURIBOR is calculated daily and covers periods ranging from one day to one year.
Euro Overnight Index Average (EONIA)
An effective overnight rate computed as a weighted average of all overnight unsecured lending transactions in the interbank market, initiated within the euro-zone by the contributing panel banks. EONIA is widely used as the underlying rate for derivatives transactions within the euro-zone.
European Central Bank (ECB)
Based in Frankfurt, the European Central Bank is responsible for implementing the EU's monetary policy framework as defined by the European System of Central Banks (ESCB). All national central banks (NCBs) of the European Union are represented in the ECB, however, the non-euro members do not take part in decisions affecting the euro-zone and conduct their own monetary policies.
European Committee for Banking Standards (ECBS)
Founded in 1992 by the European Credit Sector Associations (ECSAs), the ECBS represents the EU and EFTA banking sector. Its mission is to assist the development of the European technical banking infrastructure through the development of standards. The ESCB works closely with the European Payments Council.
European System of Central Banks (ESCB)
The European Central Bank and the national central banks: together they are responsible for the overall monetary policy framework within the European Union. See European Central Bank and Eurosystem.
Eurosystem
The Eurosystem has exclusive responsibility for the monetary policy within the euro-zone. It is composed of the European Central Bank and the national central banks of the countries which have adopted the euro.
Euro-zone
The 12 EU countries that participate in the euro, i.e. Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.
FATF (Financial Action Task Force)
The FATF is an inter-governmental body which sets standards, and develops and promotes policies to combat money laundering and terrorist financing. To achieve this aim, the FATF has issued forty recommendations. See money laundering.
Federal Funds Rate (USA)
The rate of interest charged on overnight loans from banks' deposit accounts held at the Federal Reserve (the USA's central monetary authority) to other banks.
Federal Reserve (Fed)
The United States' central bank and one of the G7 central banks. The Board of Governors of the Federal Reserve System licenses and regulates state chartered banks (i.e. approximately 75% of banks) operating in the United States. It is also statutorily responsible for the supervision of most financial institutions.
Financial Intelligence Unit (FIU)
Defined by the FATF as a national agency responsible for analysing and forwarding financial information with regard to suspected crime proceeds to the relevant authorities in order to combat money laundering. See money laundering, FATF.
Financial Services Agency (FSA)
The Financial Services Agency acts as a single regulatory and supervisory authority for the whole Japanese financial system.
Financial Services Authority (FSA)
The independent non-governmental body that supervises all aspects of the financial sector (including the securities markets) within the UK.
G5 (Group of Five)
A group which is composed of the world's five most advanced industrial countries (France, Germany, Japan, the UK and the USA), which meet on an annual basis with the objective of improving the international economic trading environment through co-operation.
G7 (Group of Seven)
A group composed of the G5 countries in addition to Canada and Italy, which meet on an annual basis with the objective of improving the international economic trading environment through co-operation.
G10 (Group of Ten)
A group, based at the BIS, which is composed of the heads of central banks of the ten most advanced industrial countries (i.e. Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the UK, and the USA), and Switzerland which is an additional informal member of the Group. The principal objective of the G10 is to establish a more secure global trading environment through the consolidation of monetary and fiscal policy.
IBRD (International Bank for Reconstruction and Development)/World Bank
A UN specialised agency, composed of 184 member countries which are responsible for the agency's actions. The IBRD's objective is to promote economic growth and social and structural improvements in developing countries through financial provisions.
ICC (International Chamber of Commerce)
International business organisation whose principal objective is to promote economic growth and development via the international economic trading environment.
IDA (International Development Association)
Section of the World Bank which is responsible for providing credit to the poorest countries.
IFRS (International Financial Reporting Standards)
Global financial reporting and accounting standards developed by the UK-based International Accounting Standards Board (IASB) which has members from nine different countries.
IGTA (International Group of Treasury Associations)
An international organisation, composed of approximately 27 Treasury Associations, whose objective is to promote treasury best practice and to encourage its members to co-operate and exchange information in order improve their treasury operations.
IMF (International Monetary Fund)
An international institution, composed of 184 member countries, whose primary objective is to encourage monetary co-operation and stability, to promote economic growth among its members and, in certain instances, to extend financial credit to its members if necessary.
Interest
The price paid by the borrower or issuer of debt securities to the lender or investor for providing funds. It is usually expressed as a percentage rate over a period of time (usually one year) and is paid out once or twice a year. See coupon.
Internal Rate of Return (IRR)
An accounting method for calculating the return achieved on a (potential) investment by equating the net present value (NPV) of cash inflow over time to zero.
ISO (International Organization for Standardization)
An international standardisation body affiliated to the United Nations, the ISO regroups 148 national standard bodies, including the American National Standards Institute (ANSI), the Association Française de Normalisation (AFNOR), the British Standards Institution (BSI and the Deutsche Institut für Normung (DIN). Based in Geneva, the ISO's remit is to develop internationally accepted technical standards (ISO standards).
LIBID (London Interbank Bid Rate)
An interest rate at which banks borrow from each other for maturity periods ranging from overnight to five years.
LIBOR
See London Interbank Offered Rate.
London Interbank Offered Rate (LIBOR)
LIBOR is a daily published rate reflecting the average rate at which a number of banks in the London market offer to lend on the interbank market at 11:00 GMT. The daily rate is published for different periods and for different currencies.
Net Present Value (NPV)
Refers to the present value of an investment based on the calculation of its future cash flows minus the costs. See internal rate of return (IRR).
OECD (Organisation for Economic Cooperation and Development)
An intergovernmental organisation, composed of 30 industrialised member countries, whose objective is to support governments in addressing economic, social and governance issues arising from a global economy.
Present Value
The current equivalent value of cash available immediately for a future payment or a stream of payments to be received at various times in the future. The present value will vary with the discount (interest) factor applied to the future payments.
Real Cost of Capital
The average of the cost of capital after allowing for inflation.
SDR (Special Drawing Right)
An artificial currency unit, established by the International Monetary Fund in 1969. The SDR's value is calculated on a daily basis via a basket of national currencies (i.e. the EUR, GBP, JPY and USD) in which each is assigned a weight.
Securities and Exchange Commission (SEC)
The US federal agency responsible for regulating and supervising US securities markets and its market participants as well as protecting investors. The SEC also regulates mutual funds.
Securities and Exchange Surveillance Commission (SESC)
The Japanese public body responsible for regulating and supervising Japanese securities markets. The SESC is part of the Financial Services Agency.
Service Level Agreement (SLA)
A contract specifying the quality of service to be provided.
SWIFT (Society For Worldwide Interbank Financial Telecommunications)
A co-operative organisation, created and owned by banks, that operates a network which facilitates the exchange of payments and other financial messages, both structured and unstructured, between financial institutions (including broker-dealers and securities companies) throughout the world. It is a major international financial telecommunications network that transmits international payment instructions as well as other international financial instruments or messages in a secure and standardised manner.
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT)
A United Nations agency whose mission is to improve the ability of business, trade and administrative organisations, to exchange products and relevant services effectively and by doing so contribute to the growth of global commerce. In practice, UN/CEFACT focuses on facilitating international transactions on a worldwide scale, through the simplification and harmonisation of procedures and information flows. UN/CEFACT works closely with international trade organisations, the international banking community's national administrations, central banks and bodies such as the Bank for International Settlements or the International Monetary Fund. It also ensures that it co-ordinates its activities with other relevant international organisations such as the World Trade Organization (WTO), the World Customs Organization (WCO), the United Nations Conference on International Trade Law (UNCITRAL) and the United Nations Conference on Trade and Development (UNCTAD). In addition, it has signed a memorandum of understanding with the International Organization for Standardization (ISO). UN/CEFACT focuses in particular on the development of the UN/EDIFACT and, in conjunction with the Organization for the Advancement of Structured Information Standards (OASIS), ebXML standards.
Weighted Average Cost of Capital (WACC)
The average cost of the funds provided by company internal and external stakeholders. It is composed of the interest rates to be paid on debt capital as well as of the capitalisation rate of equity capital. The WACC is mainly used to evaluate various possible capital structures and for other corporate finance planning purposes.
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