Formal promises by a bank to lend money according to the terms outlined in the commitment

Minimum average deposit balances that bank customers must maintain at the bank, usually in the form of noninterest bearing demand deposits

An agreement under which a bank customer can borrow up to a predetermined limit on a short-term basis (less than a year)

Interest-bearing accounts of individuals and partnerships

The equity or ownership funds of a bank; the account against which bank loan and security losses are charged

Instruments (with an underlying asset) that lenders can use to minimise their credit risk exposure

A comparison of the value of assets that will either mature or be repriced within a given time interval with the value of liabilities that will either mature or be repriced during the same time period

Savings accounts that pay higher interest than general savings accounts and have more restrictive limits on transactions, balance limits, regular deposit requirements and the like

Maintaining suffi cient cash and noncash assets that can quickly be converted into cash with minimal value loss

The simultaneous buying of a cap and selling of a floor to limit the movement of a bank's liability costs within a specified range

A loan that provides term financing to take care of temporary discrepancies between business revenues and expenses that arise because of the manufacturing or sales cycle of a business

The funding of fixed-rate loans with deposits or borrowed funds of the same maturity

Loans to farmers to finance farming activities

The Australian government ban on mergers and takeovers between the four major banks (National Australia Bank, Commonwealth Bank, ANZ, Westpac) aimed at maintaining competition within the sector

Short-term assets that can be converted quickly into cash at a price near their purchase price

Long-term, subordinated notes and debentures, some of which may be convertible into common stock

Measures of the percentage of loans or loan commitments allocated to a given geographic location, loan type or business type

A loan on which the interest rate does not change over the loan's term

Short- and long-term instruments that raise funds from public debt issues. Common forms are commercial paper, medium- to long term debentures and unsecured notes including euro notes and Eurobonds

A form of finance in which the owner of the asset (the lessor) allows a third party (the lessee) to use that asset, according to particular terms and conditions that are set out in a lease contract, in return for lease payments

Activities that represent either contingent assets or contingent liabilities

Accounts set up to cover expected losses on loans and investments and to account for revaluation of assets

An account representing the value of cheques drawn on other banks but not yet collected

A method for analysing a potential borrower's character by a score based on the information in the borrower's credit report

The cash assets on a bank's balance sheet. They consist of vault cash, deposits at correspondent banks and deposits held at the RBA

An LOC in which the bank guarantees payment for goods in a commercial transaction

A formal legal agreement under which a bank agrees to lend up to a certain limit for a period exceeding a year, in which the lender can draw down and pay back the amount lent

A loan to supply cash for a specific transaction with repayment coming from an identifiable cash flow

Loans that finance the acquisition of an asset or assets

Savings accounts that offer high interest with no or limited fees and limited transaction options

Hedging of a specifi c transaction

The purchase of a put option (that is, an option to sell) on a fi nancial futures contract to limit increases in the cost of banks' liabilities without sacrificing the possibility of benefiting from interest rate declines
Asn: cap

The sale of a call option (i.e. an option to buy) on a fi nancial futures contract to set a lower limit for liability costs

A loan on which the interest rate is periodically adjusted to refl ect changes in a designated short-term interest rate indicator such as the Australian BBSW rate

The accumulated portion of the bank's profit that has not been paid out to shareholders as dividends

The bank's ability to accommodate deposit withdrawals and loan requests, and pay off other liabilities as they become due

A rating system to assess a bank's position in terms of the risk components capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk

Commercial bills held as assets on the balance sheet

A longer-term arrangement, at the end of which ownership of the leased asset is usually transferred to the lessee

Unconditional promises made in writing by the borrower to pay the lender a specific amount of money, usually at some specified future date

Vault cash, cash items in the process of collection and balances held with the RBA and short-term investments

An operating account that is approved to go into debit up to a certain limit

Loans to individuals that usually have terms of up to five years for purchases such as cars, holidays, computers and boats

Using instruments of risk management, such as financial futures, options on financial futures and interest rate swaps to reduce the interest rate risk of the firm's entire balance sheet

Acquiring liquidity from the liability side of the balance sheet

A measure of the difference between the duration of a bank's assets and the duration of its liabilities

Short-term arrangements in which the asset is maintained by the lessor for the duration of the lease, with the asset returned to the lessor at the end of the lease