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Banking Industry
The banking industry is averse to risk, and is now characterized by narrower profit margins and a low tolerance for inefficiency. Banking and finance industries may be in a better shape than most other industries, due to the nature of real time transactions and regulatory compliance. Banks, investment banking industry and all other commercial banking industry, including the private banking industry are in search of more control and greater flexibility when it comes to disaster recovery and business continuity. Large financial institutions have the resources to extend their locations geographically and to create and maintain operational redundancy. Smaller and regional banks have to work out more innovative approaches that are cost-effective and operationally trustworthy. One of the biggest threats facing the banking industry is Internet security. The investment banking industry, in fact the entire commercial banking industry was hard-hit in 2003, when the SoBig, CodeRed and Blaster viruses swept through the United States, which cost the commercial banking industry millions of dollars in downtime. Small banks operating in the private banking industry sector were the worse hit since they lacked the large infrastructure to support themselves during the disaster.
Dictionary of Banking Terms:
Dictionary of Banking Terms is providing thousands of terms and definitions to help you learn more about banking, banking practices, laws, and regulations.
Annual Percentage Rate (APR) - The cost of credit expressed as an annual rate. APR is a percentage that is calculated on the basis of the amount financed, the finance charges, and the term of the loan.
Balance – In banking it refers to the amount of money in a specific account and in credit it refers to the amount owed.
Bond –Bonds are IOUs issued by a corporation, the U.S. Government, or a city. It is held by the lender as receipt that the business or institution has borrowed a specific amount of money. All bonds pay an annual interest and are payable in full at a specific date written on the bond.
Bounced check -A check that a bank has refused to cash or pay because the account holder does not have sufficient funds to cover it in their account.
Canceled check – Is a "used" check that has been paid and deducted from the account of the person who wrote the check. These have extra information on them from the bank and are usually mailed to the account holder each month with the statement, though many banks keep records that are available upon request. Canceled checks must be kept for reference and tax purposes.
Cashier's check - A check issued by a bank, drawn on its own funds rather than on the funds of its depositors.
Certificate of Deposit (CD) -A savings account in which an individual promises to deposit the money for a set period of time, and for which the bank pays higher interest than a regular savings account.
Clear - A check is "cleared" when its amount is debited or deducted from the payer's account and credited or added to the payee's account.
Commercial bank – These are non-governmental financial institutions and are also called full-service banks because of the wide range of services they provide. Commercial banks also sell and redeem U.S. savings bonds.
Compound interest - Interest calculated on the original principal and on the interest already accrued.
Credit union – This is a member-owned financial institution, either state or federally chartered. Credit unions are often more competitive than banks and savings and loan associations because its nonprofit status makes its operating costs lower.
Endorse - To sign, as the payee, the back of a check before cashing, depositing, or giving it to someone else. The first endorsement must be made by the payee to authorize the transaction and later endorsements can be made by whoever receives the check.
Federal Reserve System - A governmental agency set up by the Congress to organize and regulate banking throughout the United States. The twelve reserve banks keep paper and currency reserves for affiliated banks.
Market economy – This is an economic system that permits an open exchange of goods and services between producers and consumers.
Overdraft - A check written for more money than is currently in the account. The check is said to have "bounced" if the bank refuses to cash the check.
Payee -An individual or company to whom a check is written; one who receives money as payment.
Payer -An individual or company who writes a check; one who gives money as payment.
Savings and Loan Association - State- or federally-chartered financial intermediary that accepts deposits from the public and invests those funds primarily in residential mortgage loans.
Service charge - A monthly fee a bank charges for handling a checking account.
Stop payment - A request made to a bank to not pay a specific check. If requested soon enough, the check will not be debited from the payer's account. The bank makes a nominal charge for this service.
Terms - The period of time and the interest rate agreed between creditor and debtor to repay a loan.
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