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federal Re ser ve Ba n k DALLAS, TEXAS of Dallas 75222 Circular No, 80-36 February 2 6 , 1980 FEDERAL RESERVE GLOS'SA-RY TO THE CHIEF EXECUTIVE OFFICER OF THE MEMBER BANK ADDRESSED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The enclosed booklet, "Federal Reserve Glos'sa-ry", is pro vided in an effo rt to improve the general understanding o f the Federal Reserve System 's operations and responsibilities. This booklet will help in the translation o f various term inology and statem en ts relating to the Federal Reserve. Additional copies may be obtained from the Bank and Public Information Departm ent, Ext. 6261. Sincerely yours, Robert H. Boykin First Vice President Enclosure Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE introduction Public understanding o f the respon sibilities o f the Federal Reserve System is sometimes made difficult by the terms used in discussing the financial system. Some o f the terminology relates to general econom ic concepts; some originates in banking; and some relates uniquely to the Federal Reserve. These days, it would be quite reasonable for an expert in “ EFTS” to inform a co-worker that she used a “debit card” at a “POS” to pur chase a tennis racket. This glossary will help in the translation o f this and other statements about our financial system. Board o f Governors o f the Federal Reserve System Washington, D.C. 20551 December 1979 fable of contents Monetary P o l i c y ................................ 1 Payments M e c h a n is m ........................ 9 Financial Regulators and In stitu tio n s.......................................... 12 F o r e ig n .................................................. 17 Consumer C red it............................... 20 Index....................................................... 23 Money Anything that s erves a a generally s accepted medium of exchange, a standard of value, and a means to save or s o e tr purchasing power. In the U.S., paper currency (nearly al of which cons t of l is s Federal Reserve notes), coin and checking account balances a banks ar examples t e of money. 1 Monetary Policy Federal Reserve actions to influence the cost and a a l b l t of money and viaiiy c e i , a a means of helping to promote rdt s high employment, economic growth, p rice s a i i y and a satisf to y pattern tblt, ac r of international transactions. Tools of monetary policy include open market operations, the discount r t , and r s r e ae eev requirements. Money Stock M l ,the basic money supply, i defined s to include checking accounts and cur rency and coin i circulation outside n the Treasury, the Federal Reserve Banks, and commercial bank v u t ; M2 als includes M 1 plus savings and time deposits a commercial banks other than t l r e negotiable c r i i a e of deposit ag, etfcts (CD’) M3 includes M2 plus time and s; savings deposits a mutual savings banks t and savings and loan as c ti ns and so ia o , shares a c e i unions; silbroader t rdt tl definitions of money include other 1 li u d a s t such a l r e negotiable qi ses s ag CD’, U.S. Savings Bonds, and short-term s marketable U.S. government s c r t e . euiis! Federal Open Market Committee (FOMC) Consists of the seven members of the Federal Reserve Board and f v of the ie twelve Federal Reserve Bank Presid ts en . The President of the Federal Reserve Bank of New York i a permanent mem s ber while the other Federal Reserve Presidents s erve on a rotating b s s The ai. Committee generally meets once every 4 to 6 weeks to s t Federal Reserve e guidelines regarding purchases and s l s ae of Government s c r t e in the open euiis market a a means of influencing the s volume of bank c e i and money. The rdt FOMC a s estab is s policy r l t n to lo l he eaig System operations i the foreignexchange n markets. 1 Recent financial innovations have compli cated th e definition o f “ m oney.” For example, NOW accounts, share drafts at credit unions, and the autom atic transfer o f savings to check ing accounts (ATS) all perm it deposit-type accounts other than demand deposits (checking accounts) to serve the paym ents function o f “ m oney.” For this reason, the B oard’s staff has proposed a set o f revised definitions of money supply measures which does away with bank/non-bank distinctions, includes w ithin the banking system all depositary institutions, and groups the m onetary aggregates by type o f deposit. (See the January 1979 Federal Reserve Bulletin .) 2 Open Market Operations Purchases and s l s of government and ae certain other s c r t e i the open mar euiis n ket by the New York Federal Reserve Bank a directed by the FOMC in order s to influence the volume of money and c di i the economy. Purchases i j c re t n net r eserves into the banking system and stimulate growth of money and c e i ; rdt s l s have the opposite e f c . Open ae fet market operations are the Federal Reserve’ most important and most f e s lx i l monetary policy t o . be ol The Desk The trading desk a the New York Fed t e a Reserve Bank, through which open rl market purchases and s l s of govern ae ment s c r t e are made. The desk euiis maintains d re telephone communica i ct tion with major government s c r t e euiis d a e s A “foreign desk” a the New elr. t York Federal Reserve Bank conducts transactions in the foreign exchange market. Discount Figurative expression for Federal Reserve f c l t for extending c di aiiy re t d r tl to member banks. In early years i ec y of the System bankers came to a Reserve Bank t l e window to obtain elr cei. rdt Window Discount Rate 3 The i t r s r t a which member neet ae t banks may borrow funds for short p eri ods dir t from the Federal Reserve ec ly Banks. The law requires the board of d irectors of each Reserve Bank to estab l s the discount r t every 14 days sub ih ae j c to the approval of the Board of et Governors i Washington. n Lender of Last Resort As the nation’ c ntralbank, the Federal s e Reserve has the authority to act a s “lender of l s resort” by extending at c redit to non-member banks or to other e t t e i unusual circumstances involv niis n ing a national or regional emergency, where f i u e to obtain c d would alr re it have a severely adverse impact on the economy. Reserve Percentage of customer deposits t hat banks must s t a e side i the form of n r s r e . The reserve requirement r t o eevs ai determines the expansion of deposits that can be supported by each additional d la of r s r e . The Board of Gover ol r eevs nors can r i e or lower r as eserve require ments for member banks within l m t iis specified by law. Reserve requirements a t a lending controls (lowering re r c s se ve requirements allows more bank lending; r i i g requirements, l s le asn e s nding). Requirements Bank Reserves The balances s t aside by banks to meet e r eserve requirements. For member banks balances ar held i the form of e n vault cash and deposits a the Federal t Reserve Banks. 4 Federal Funds H trcly r is o i a l , eserve balances that mem ber banks lend each other, usually on an overnight b s s Federal funds now ai. include certain other kinds of borrowing by commercial banks from other types of depositary in it ti s and Federal st u on agen e ci s. Demand Deposit A checking account. Demand deposits are transferred by check and may be withdrawn without advance no ce ti . Negotiable Order An i t r s earning account on which neet checks may be drawn, currently offered by commercial banks, mutual s avings banks and savings and loan associations in Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode I l n , and Vermont. sad of Withdrawal ( N O W Account) Velocity The r t a which money i spent on ae t s goods and s r i e within a given period evcs (usually measured a the r t o of GNP s ai to the money stock). Greater velocity means that a given quantity of money i s used for a greater d llar volume of o t nsactions. ra Certificate A form of time deposit a a bank or t savings i s i u i n a time deposit can nttto; not be withdrawn before a s pecified maturity date without being subject to an i t r s penalty for early withdrawal. neet Small-denomination CDs a e often pur r chased by in i i u l . Large CDs of dvdas of Deposit (CD) s $100,000 or more are often in nego t a l form, meaning they can be sold ibe or transferred among holders before maturity. Deposit Ceiling Rates of Interest Federal Reserve Notes Treasury Securities Maximum i t r s r t s that can be paid neet ae on savings and time deposits a f d ra ly t ee l insured commercial banks, mutual sav i banks, savings and loan associations ngs and c e i unions. Ce in a e estab rdt il gs r l ished by the Federal Reserve Board, the Federal Deposit Insurance Corpora t o , the Federal Home Loan Bank in Board, and the National Credit Union Administration. Nearly a lof the nation’ c cu at g l s ir l in paper currency co nsists of Federal Reserve notes printed by the Treasury Department and issued to the Federal Reserve Banks which put them into c irculation through the commercial banking system. Federal Reserve notes a e obligations of the U.S. government. r Interest-bearing obligations of the U.S. government issued by the Treasury a a s means of borrowing money to meet government expenditures not covered by tax revenues. Marketable Treasury secu r t e f l into threecategories—b l s notes, i i s al il, and bonds. The Federal Reserve System holds more than $100 b l i n of these ilo obligat ns acquired through open mar io , ket operations. 6 Treasury Bills Short-term U.S. Treasury s c r t e issued ■ euiis i minimum denominations of $10,000 n and usually having i i i lmaturities of 3 nta , 6 or 12 months. Investors purchase b l s , il a prices lower than the face value of the t b l s the return to the investor i the il; s difference between the price paid for the b l s and the amount received when the il b l sare sold or when they mature. Treas il ury b l s are issued in book entry form il only;that i,the purchaser r ceives a s e r c i t rather than an engraved cer eep, t f c t . Treasury b l s ar the type of iiae il e security used most frequently in open market operations. Treasury Notes Treasury Bonds 7 Intermediate-term coupon-bearing U.S. Treasury s c r t e having i i i lmatu euiis nta r t e of from 1 to 10 years and issued i iis n denominations of $1,000 or more, depending on the maturity of the i s e su. Notes pay i t r s semi-annually, and the neet principal i payable a maturity. Notes a s t re issued in r gi e d or bearer form. e st re Long-term U.S. Treasury s c r t e having euiis i i i l maturities of more than 10 years nta and issued i denominations of $1,000 or n more, depending on the s e i i i s e p c f c su. Bonds pay i t r s semi-annually, with neet principal payable a maturity. As i the t s case with notes, bonds a e issued in r g s r ei tered or bearer form. Repurchase Agreements When the Federal Reserve makes a repur chase agreement with a government security dea r i buys a security f r le , t o immediate delivery with an agreement to s l the security back a the same price by el t a s e i i date (usually within IS days) pcfc and rece ve i t r s a a s e i i r t . i s n e e t t p c f c ae This arrangement allows the Federal Reserve to i j c res rv on a temporary n e t e es b i to meet a temporary need and to as s withdraw these re r s a soon as the se ve s need has passed. Matched Sale-Purchase Agreements When the Federal Reserve makes a matched s l purchase agreement, i s l s ae t el a security outright for immediate delivery to a dealer or foreign central bank, with an agreement to buy the security back on a s e i i date (usually within 7 days) a pcfc t the same p i e The r rc. everse of repurchase agreements, matched sale-purchase agreements allow the Federal Reserve to absorb re serves on a temporary b s s ai. Fiscal Agency Services Services performed by the Federal Reserve Banks for the U.S. government. These include maintaining accounts for the Treasury Department, paying checks drawn on the Treasury, and s l i g and eln redeeming Savings Bonds and other gov ernment s c r t e . euiis Fiscal Policy Government policy regarding taxation and spending. Fi c l policy i made by sa s Congress and the Administration. 8 payments mechanism Payments Mechanism Systems designed for the movement of funds, payments and money between f n n i l i ti t ns throughout the i a c a ns tu io nation. The Federal Reserve plays a major r l in the nation’ payments mechanism oe s through distribution of currency and coin, check processing, wire t a s e s and rnfr, automated clearinghouses. Various p i r vate associations a s perform many pay lo ments mechanism operations. Check Clearing The movement of checks from the banks where they are deposited back to those on which they are written, and funds movement i the opposite dire i . This n ct on process r s l s i c e i s to the accounts eut n rdt of the banks of deposit and correspond ing debits to the accounts of the paying bank. The Federal Reserve operates a nationwide check c learing system, though many checks a e cleared by private sector r arrangements. Regional Check Processing A Federal Reserve check processing operation that c e r checks drawn on las banks located within a specified a e . ra RCPCs expedite collection and settlement of checks within the area on an overnight bss ai. Center (RCPC) 9 Float Checkbook money that for a period of time appears on the books of both the check writer and the check r eceiver due to the normal la i the check collection g n process. Federal Reserve Float often a i e during the Federal Reserve’ check rss s collection process. In order to promote an e f c e t payments mechanism with fiin certainty a to the date funds become s a a l b e the Federal Reserve c e i s vial, rdt the re r accounts of banks depositing se ve checks within two business days of the deposit; however, more time may be needed to process certain checks and col l c funds from the banks on which these et checks a e drawn. This policy r s l s r eut i c d being given to some banks n re it before the Federal Reserve i able to s obtain payment from other banks. Electronic Fund Transfer Systems (EFTS) A variety of systems and technologies f r o t nsferring funds e ec onically rather ra l tr than by check. Includes Fedwire, Bankwire, automated clearinghouses, and point of s l systems. ae Fedwire The Federal Reserve Communications System. An electronic communications network interconnecting Federal Reserve o f c s the Board, member banks, the fie, Treasury, and other government agen es ci . Fedwire i used for trans rr ng member s fe i bank re serve account balances and govern ment s c r t e , a well a fortransmission euiis s s 10 of Federal Reserve administrative, super v o y and monetary policy information. is r , Culpeper Switch Bankwire Automated Clearinghouse (ACH) A computerized Federal Reserve f c l t aiiy located in Culpeper, V r in , which i g ia s erves a a central relay point for messages s transmitted el ectronically between Fed e a Reserve d s r c s on the Fedwire. rl itit Messages moving b l i n of d l a s of ilos olr funds and s c r t e d e u i i s aily a e processed r by Culpeper i electron al y coded form. n ic l They originate i commercial banks, a e n r sent to Reserve Banks, and then a trans re mitted to Culpeper, where they ar e switched to other Reserve Banks and, i n turn, to other commercial banks. An electronic communications network s il to the Fedwire but owned by an im ar association of banks and used to tr ansfer messages between subscribing banks. A computer based clearing and settlement operation, often operated by a Federal Reserve Bank, established for the ex change of e e t on , paperless transac l c r ic t ions among participating banks. Such electronic transactions are substitutes f or paper checks normally used to make recurring payments such a payroll or s mortgage payments. Point of Sale Point of Sale systems allow for tr ns r a fe (POS) of funds between accounts, authorization for c e i , v i i a i n of checks and pror d t er f c t o n vision of related s r i e a the time of evcs t purchase. POS terminals ar located i e n some shopping areas and allow customers of participating f a c a i ti ut ns to in n i l ns t io e ec transactions through the use of ff t machine-readable debit c r s ad. Automated Teller Machines (ATM) Computer-controlled terminals located on bank premises or elsewhere, through which customers of f n n i l i s it ti s i a c a n t u on may make deposits, withdrawals, or other transactions a they would through a s bank t l e . elr financial regulators and institutions Federal Reserve System The central bank of the United States created by Congress and consisting of a seven member Board of Governors i n Washington, 12 regional Reserve Banks, and about 5,600 commercial banks that are members of the System. All national banks a e members; state-chartered banks r may e e t to become members, and s a e lc tt members are supervised by the Board of Governors and the Reserve Banks. Approximately 39 percent of a lbanks l are member banks. However, most l r e ag banks belong to the System so that mem12 ber banks account for approximately 72 percent of albank de o i s l pst. Comptroller of the Currency An o f c r of the Treasury Department, fie the Comptroller of the Currency i respon s s b e f chartering national banks and i l or has primary supervisory authority over them. All national banks a e required t r o be members of the Federal Reserve Sys tem and are insured by the Federal Deposit Insurance Corporation. Federal Deposit Agency of the federal government that insures accounts a most commercial t banks and mutual s avings banks. The FDIC a so has primary fe l deral supervisory authority over insured s a e banks that tt a e not members of the Federal Reserve r System. Insurance Corporation (FDIC) Federal H o m e Loan Bank Board 13 The agency of the fe er government d al that supervises a l fe r savings and loan l de al associations and f ederally insured s a e ttchartered savings and loan as oc a i n . s itos The FHLBB a s operates the Federal lo Savings and Loan Insurance Corporation, which insures accounts a f er sa n t ed al vi gs and loan associations and those s a e ttchartered associations that apply and a e r accepted. In addition, the FHLBB d r c s iet the Federal Home Loan Bank System, which provides a f e i l c e i f c l t l x b e r d t aiiy for member savings in t t t o s to pro siuin mote the a a l b l t of home finan n viaiiy ci g. The FHL Banks a s own the Federal lo Home Loan Mortgage Corporation, estab lished i 1970 to promote secondary mar n kets fo mortgages. r National Credit Union Administration Financial Institution The fe deralgovernment agency that super v s s c a er , and insures federal c e i i e , h rt s rdt unions. N CU A a s insures state-chartered lo c di unions that apply and qualify f r re t o insurance. As of October 1979, the NC UA w l a operate a cr i f c l t i l lso ed t a i i y for member cr i unions. ed t An insti t n that uses i s funds chiefly tu io t to purchase f n n i l a s t (d i a c a s e s eposits, l oans, bonds) a opposed to tangible s property. Financial i s i ti s can be n t tu on c a s f e according to the nature of the lsiid principal claims they i s e nondeposit su: intermediaries include, among others, l f ie and property/casualty insurance com panies and pension funds, whose claims are the p l c e they s l ,or the promise oiis el to provide income a t r retirement; fe depositary intermediaries obtain funds mainly by accepting deposits from the p ublic. Here i a ls of the major deposi s it tary i s i u i n . ntttos Commercial Banks are allowed to engage i more varied lending a t v t e and to n ciiis offer more f a c a s r i e than are the in n i l e v c s other depositary i s i u i n . For exam ntttos p e i many s a e only commercial l, n tts banks are permitted to offer checking 14 accounts. Commercial banks a owned re by stockholders and operated for p o i . rft Savings and Loan Associations, a s some lo times c l d building and loan associ al e a o s cooperative banks, or homestead ti n , associa on , accept deposits of indi ti s viduals’s v n s and channel t e r funds aig, hi primarily into r s d n i l mortgage l a s eieta on. Most s avings and loan associations a e r technically owned by the depositors who re i shares i the association for t e r ce ve n hi depo ts si . Mutual Savings Banks a s accept indi lo viduals’savings deposits, and place most of t e r funds into mortgage l ns These hi oa . i s i ut on are prominent in many of ntt i s the northeastern s a e . A savings bank i tts s i between a commercial bank and a sav n ings and loan association i terms of the n d v r i y of i sa s t and l a i i i s Most iest t ses iblte. savings banks are authorized to o fe f r checking-type accounts. Credit Unions a e f n nc l cooperative r i a ia organizations of i dividuals with a com n mon a f l a i n (such a employment, fiito s labor union membership, or residence i n the same neighborhood). Credit unions accept deposits of members’savings i n the form of share purchases, pay i t r s neet (dividends) on them out of earnings, and primarily provide consumer c redit to members. Thrift Institution i the general term for s mutual savings banks, savings and loan as c ti ns and c e i unions. so ia o , rdt Correspondent Bank A bank that accepts deposits of and per forms banking s r i e for other banks, evcs which usually are located i c t e or n iis towns other than that of the correspond ent bank. Bank Holding Company A company that owns or controls one or more banks. The Board has res ns i ty po ib li for regulating and supervising bank hold ing companies, such a approving acqui s s t o s and mergers and examining such iin companies. This authority applies even though the banks under the holding com pany may be under the primary super v ision of the Comptroller of the Currency or the FDIC. Permissible Nonbank Atvte ciiis Financial a t v t e c c i i i s losely related to banking that may be engaged i by bank n holding companies, e th dire tl or i er c y through nonbank s b i i r e . Examples usdais are owning finance companies and engag ing i mortgage banking. The Board n determines which a t v t e are closely ciiis r elated to banking. Before making such a t v t e permissible, the Board must a s ciiis lo determine that performance of the activ i i s by bank holding companies i i te sn the public i t r s . neet 16 Grandfathered Activities Nonbank a t v t e , some of which would ciiis normally be impermissible for bank holding companies, but which were acquired or engaged i before a p r cu ar n a ti l d ate. Such a t v t e may be continued ciiis under the “grandfather” clause of the Bank Holding Company Act-some u t l ni 1981 and some i d f n t l . neiiey Edge A corporation formed by a U.S. bank f r o the purpose of engaging i foreign bank n ing and financing. The Board a upon cts applications by member banks to estab l s Edge corporations. I a s examines ih t lo Edge corporations and t e r s b i i r e . hi usdais The Edge corporation g t i sname from es t Senator Walter Edge of New Jersey, the sponsor of the o i i a l g s a i n to rgnl eilto permit formation of such organizations. Corporation Cease-and-Desist Order An order issued a t r notice and oppor fe tunity f hearing, requiring a bank, a or holding company, or a bank o f c a to fiil terminate unlawful, unsafe or unsound banking p a t c s Cease-and-desist orders rcie. a issued by the f er l bank regulatory re ed a agencies under the Financial Institu o ti ns Supervisory Act and can be enforced dire l by the cou ts ct y r . foreign Current Account Balance 17 The difference between the nation’ s t t l exports of goods, s r i e , and t a s oa evcs rn- f r and i st t l imports of them. I es t oa t excludes transactions i f n n i l a s t n iaca ses and l a i i i s iblte. Trade Deficit Foreign Exchange Transactions Foreign Exchange Desk International Monetary Fund (IMF) Refers to the amount by which merchan d s imports exceed merchandise exports. ie Purchase or s l of one currency with ae another. Foreign exchange r t s r f r ae ee to the number of units of one currency needed to purchase one unit of another, or the value of one currency i terms of n another. The foreign exchange trading desk a t the New York Federal Reserve Bank. The desk undertakes operations i the n exchange markets for the account of the Federal Open Market Committee, a s agent for the U.S. Treasury and a agent s f foreign cen al banks. or tr The IMF grew out of the Bretton Woods Conference of 1944. The main functions of the International Monetary Fund are to lend funds to member nations to finance temporary balance of payments problems, to f c l t t the expansion and aiiae balanced growth of international t de ra , and to promote international monetary cooperation among nations. The IMF a s lo creates s e i l drawing r g t (SDRs), pca ihs which provide member nations with a source of additional r s r e . eevs 18 Currently, the IMF has 138 members, • including the United S a e . Member tts nations a e required to subscribe to a Fund r quota, paid mainly i t e r own currency. n hi Special Drawing Rights (SDRs) A type of international money created by the IMF and allocated to i s member t nations. Although SDRs a e only account r ing e tr e (not actual coin or paper, and n is not backed by precious metal), they a e r an international res v a s t Subject to er e s e . c ertain conditions of the IMF, a nation that has a balance of payments d f c t can eii use SDRs to s t l debts to another ete nation or to the IMF. Eurodollars Deposits denominated i U.S. d l a s a n olr t banks and other f n n i l in i u i n out i a c a st t t o s s d the United S a e . Although t i ie tts hs name originated because of the l r e ag amounts of such deposits held a banks i t n Western Europe, s m l r deposits i other iia n p arts of the world a e a s c le Euro r l o al d dlas olr. Bank for International The BIS, located i B l Switzerland, n as e, was established i 1930 to administer the n post-World War Ireparations agreements. Since the 1960s, the BIS has evolved into an important internationalmonetary i s i nt tution, and i has provided a forum i t n which c ntral bankers meet and consult e on a monthly b s s As an independent ai. f a c a organization, the BIS performs a in n i l Settlements (BIS) 19 variety of banking, t u t e and agent rse, functions, primarily with ce r banks. nt al At present the BIS has 29 members, 20 of which a e ce r ntral banks. The Federal Reserve i represented a BIS meetings, s t but i not a member. The BIS i the only s s international f n n i lin it t o i which i a c a st u i n n most Eastern European countries a e r members. The Soviet Union, East Germany, and Albania, however, a e r not members. Swap Arrangements Short-term reciprocal l n s of c e i ie rdt between the Federal Reserve and 14 for eign cen ra banks a well a the Bank of t l s s International Settlements. Through a swap transaction, the Federal Reserve can, in e f c , borrow foreign currency i fet n order to purchase d l a s i the foreign olr n exchange market. In doing so the demand f do l r i increased and the dollar’ or l a s s s foreign exchange value i increased. Simi s l r y the Federal Reserve can temporarily al, provide do l r to foreign ce las ntral banks through swap arrangements. consumer credit Credit Creditworthiness The promise to pay i the future i order n n t buy or borrow i the present; a sum of o n money due a person or a bus e . in ss Past and future a i i y to repay debts. blt 20 Credit History The record of how a person has'borrow&d and repaid d ebts. Credit Scoring System A s a i t c l system used to r t c e i ttsia ae rdt applicants according to various charac t r s i sr e i t c elated to creditworthiness. Credit Card Any card, p a e or coupon book used lt, from time to time or repeatedly up to a certain l m t to borrow money or buy ii goods and s r i e on c e i . evcs rdt Debit Card A p a t c card, si i a i appearance to a lsi mlr n c di card, that customers may use to re t make purchases through a point of s l ae terminal. The machine-readable card allows immediate withdrawal from the customer’ checking or savings account s with the money being transferred to the merchant’ account. s Annual Percentage Rate The cost of cr it on a yearly b s s ed ai expressed a a percentage. s Finance Charge The t t l d la amount paid to get c e i . o a ol r rdt Asset Property that can be used to repay debt, such a stocks and bonds or a c r s a. Collateral Security 21 Property offered to support a loan o r c e i and subject to sei re on d f u t rdt zu eal. Property pledged to the creditor i case n of a d fault; s c l a e a . e ee o l t r l Security I nterest Liability on an The creditor’ r g t t take property or s ih o a portion of property offered a s c r t . s euiy Legal res on b it to repay debt. p si il y Account Default Failure to meet the terms of a c e i rdt agreement. Open End Credit A l n of c e i that may be used repeat ie rdt edly up to a certain l m t a o c l e a i i , ls a l d charge account or revolving c e i . rdt Open End Lease A l a e that may involve a balloon pay es ment based on the value of the property when i i returned. ts Balloon Payment Co-signer Service Charge Points A l r e extra payment that may be ag charged a the end of a loan or l a e t es. Another person who s g s for a loan and in assumes equal l a i i y f i. i b l t or t A component of some finance charges, such a the f e f t i g r n an overdraft s e or r g e i g checking account into u e s. Some extra percent of the amount borrowed, included a part of the loan f e s e. Finance charges paid a the beginning of a t f r t mortgage i addition to monthly is n i t r s ; each point equals one percent of neet the amount financed. 22 Overdraft Checking Account A l n of c e i that allows a person to ie rdt write checks f r more than the actual o balance, with a finance charge on the overdraft. Appraisal Fee The charge for estimating the value of property offered a s c r t . s euiy index Annual Percentage R a t e .......................................21 Appraisal F e e ..........................................................23 A s s e t .......................................................................... 21 A utom ated Clearing H o u s e .................................11 A utom ated Teller Machines (A T M )................ 12 Balloon P a y m e n t ................................................... 22 Bank Holding C o m p a n y ....................................16 Bank For International Settlem ents (BIS) . . 19 Bank Reserves....................................................... 4 B ankw ire.................................................................11 Cease-and-Desist O rd e r....................................... 17 Certificate o f Deposit ( C D ) ............................. 5 Check C l e a r i n g .................................................... 9 Collateral.................................................................21 Commercial B a n k s ............................................. 14 Com ptroller o f the C u r r e n c y ..........................13 C orrespondent B a n k .......................................... 16 Co-Signer.................................................................22 Credit....................................................................... 20 Credit C a r d .......................................................... 21 Credit H isto ry ....................................................... 21 Credit Scoring S y s te m ....................................... 21 Credit U n io n s ....................................................... 15 C re d itw o rth in ess.................................................20 Culpeper Sw itch....................................................n Current Account B a la n c e ................................ 17 Debit C a rd ..............................................................21 D e fa u lt.................................................................... 22 23 Demand D e p o s i t ................................................. 5 Deposit Ceiling Rates o f I n t e r e s t ................... 6 The D esk................................................................. 3 Discount R a te ....................................................... 3 Discount W indow ................................................. 3 Edge C o rp o ra tio n .................................................17 Electronic Fund Transfer System (EFTS) . . 10 E u r o d o lla r s .......................................................... 19 Federal Deposit Insurance C orporation (F D IC ).................................................................... 13 Federal Home Loan Bank B o a r d ................... 13 Federal F u n d s ....................................................... 5 Federal Open Market Com m ittee (FOMC). . 2 Federal Reserve N o t e s ....................................... 6 Federal Reserve S y s t e m ....................................12 F e d w i r e .................................................................10 Finance C h a r g e ....................................................21 Financial I n s titu tio n .......................................... 14 Fiscal Agency S e rv ice s....................................... 8 Fiscal P o licy .......................................................... 8 F l o a t ....................................................................... 10 Foreign Exchange D e s k ....................................18 Foreign Exchange T ran sactio n s.......................18 Grandfathered A ctivities....................................17 International Monetary Fund ( I M F ) ............. 18 Lender o f Last R e s o r t ....................................... 4 Liability on an A c c o u n t ....................................22 Matched Sale-Purchase Agreem ents................ 8 M onetary Policy.................................................... 1 M o n e y .................................................................... 1 Money S t o c k ....................................................... 1 M utual Savings Banks.......................................... 15 National Credit Union Adm inistration . . . . 14 Negotiable Order o f Withdrawal (NOW A c c o u n t).................................................... 5 Open End C r e d i t .................................................22 Open E nd L ease....................................................22 Open Market O p e ratio n s.................................... 3 Overdraft Checking A c c o u n t ..........................23 Paym ents Mechanism.......................................... 9 Permissible Nonbank A ctiv ities.......................16 Point o f Sale (P O S )............................................. 11 24 Points....................................................... 7 . . . . 22 Regional Check Processing Center (RCPC). . 9 Repurchase A g re e m e n ts................................... 8 Reserve R e q u ire m e n ts....................................... 4 Savings and Loan A s s o c ia tio n s .......................15 S e c u r i t y .................................................................21 Security I n t e r e s t .................................................22 Service Charge.......................................................22 Special Drawing Rights ( S D R s ).......................19 Swap Arrangem ents............................................. 20 Thrift In s titu tio n .................................................16 Trade D e f i c i t .......................................................18 Treasury B ills ....................................................... 7 Treasury B o n d s .................................................... 7 Treasury N o t e s .................................................... 7 Treasury S e c u rities............................................. 6 V e lo c ity ................................................................. 5
@FedFRASER