Definition of Bank collection float

Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

Automated Clearing House (ACH)

A collection of 32 regional electronic interbank networks used to
process transactions electronically with a guaranteed one-day bank collection float.

ABM (automated banking machine)

A bank machine, sometimes referred to as an automated teller machine (ATM).

Agency bank

A form of organization commonly used by foreign banks to enter the U.S. market. An agency
bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank.

Availability float

Checks deposited by a company that have not yet been cleared.

availability float

Checks already deposited that have not yet been cleared.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

BAN (Bank anticipation notes)

Notes issued by states and municipalities to obtain interim financing for
projects that will eventually be funded long term through the sale of a bond issue.

Bank

Money in a bank cheque account, the difference between receipts and payments.

Bank discount basis

A convention used for quoting bids and offers for treasury bills in terms of annualized
yield , based on a 360-day year.

Bank draft

A draft addressed to a bank.

bank draft

A guaranteed form of payment which is issued in amounts over $5,000.

Bank for International Settlements (BIS)

An international bank headquartered in Basel, Switzerland, which
serves as a forum for monetary cooperation among several European central banks, the bank of Japan, and the
U.S. Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international banking activity and promulgates rules concerning
international bank regulation.

Bank line

Line of credit granted by a bank to a customer.

Bank overdraft

Money owed to the bank in a cheque account where payments exceed receipts.

Bank reconciliation

The process of taking the balances from the bank statement and the general ledger and making adjustments so that they agree.

Bank reconciliation

A comparison between the cash position recorded on a company’s
books and the position noted on the records of its bank, usually resulting in some
changes to the book balance to account for transactions that are recorded on the
bank’s records but not the company’s.

Bank wire

A computer message system linking major banks. It is used not for effecting payments, but as a
mechanism to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of
funds into that bank's account.

Banker's acceptance

A short-term credit investment created by a non-financial firm and guaranteed by a
bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These
instruments have been a popular investment for money market funds. They are commonly used in
international transactions.

Bankers Acceptances

A bill of exchange, or draft, drawn by the borrower for payment on a specified date, and accepted by a chartered bank. Upon acceptance, the bill becomes, in effect, a postdated certified cheque.

Bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.

bankruptcy

The reorganization or liquidation of a firm that cannot pay its debts.

Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely
with debt.

Central Bank

A public agency responsible for regulating and controlling an economy's monetary and financial institutions. It is the sole money-issuing authority.

Clean Float

A flexible exchange rate system in which the government does not intervene.

Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.

Collection Department

An internal department within a company staffed by specialists in collecting past due accounts or accounts receivable.

Collection float

The negative float that is created between the time when you deposit a check in your account
and the time when funds are made available.

Collection fractions

The percentage of a given month's sales collected during the month of sale and each
month following the month of sale.

Collection policy

Procedures followed by a firm in attempting to collect accounts receivables.

collection policy

Procedures to collect and monitor receivables.

Commercial Bank

A privately owned, profit-seeking firm that accepts deposits and makes loans.

concentration banking

System whereby customers make payments to a regional collection center which transfers funds to
a principal bank.

Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Dirty float

A system of floating exchange rates in which the government occasionally intervenes to change
the direction of the value of the country's currency.

Dirty Float

A flexible exchange rate system in which the government intervenes.

Disbursement float

A decrease in book cash but no immediate change in bank cash, generated by checks
written by the firm.

Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.

Eurobank

A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.

Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.

Federal Financing Bank

A federal institution that lends to a wide array of federal credit agencies funds it
obtains by borrowing from the U.S. Treasury.

Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
Federal Home Loan banks play a role analogous to that played by the Federal Reserve banks vis-à-vis
member commercial banks.

Federal Reserve Banks

The twelve district banks in the Federal Reserve System.

Float

The number of shares that are actively tradable in the market, excluding shares that are held by officers
and major stakeholders that have agreements not to sell until someone else is offered the stock.

Floater

floating rate bond.

Floating Charge

Charge or assignment on a company's total assets as security for a loan on total assets without specifying specific assets.

Floating exchange rate

A country's decision to allow its currency value to freely change. The currency is not
constrained by central bank intervention and does not have to maintain its relationship with another currency
in a narrow band. The currency value is determined by trading in the foreign exchange market.

Floating Exchange Rate

See flexible exchange rate.

Floating Interest Rate

A rate that fluctuates with general market condition.

Floating lien

General lien against a company's assets or against a particular class of assets.

Floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a specific-maturity Treasury yield.

Floating-rate note (FRN)

Note whose interest payment varies with short-term interest rates.

Floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate,
usually in exchange for a fixed-rate payment

Floating-rate preferred

Preferred stock paying dividends that vary with short-term interest rates.

floating-rate security

Security paying dividends or interest that vary with short-term interest rates.

Floating supply

The amount of securities believed to be available for immediate purchase, that is, in the
hands of dealers and investors wanting to sell.

Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.

Fractional Reserve Banking

A banking system in which banks hold only a fraction of their outstanding deposits in cash or on deposit with the central bank.

Free float

An exchange rate system characterized by the absence of government intervention. Also known as
clean float.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

International Bank for Reconstruction and Development - IBRD or World Bank

International bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high
economic priority.

International Banking Facility (IBF)

International banking Facility. A branch that an American bank
establishes in the United States to do Eurocurrency business.

Inverse floating rate note

A variable rate security whose coupon rate increases as a benchmark interest rate declines.

Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.

Investment Banker

Middleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter.

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Mail float

Refers to the part of the collection and disbursement process where checks are trapped in the postal system.

Managed float

Also known as "dirty" float, this is a system of floating exchange rates with central bank
intervention to reduce currency fluctuations.

Merchant bank

A British term for a bank that specializes not in lending out its own funds, but in providing
various financial services such as accepting bills arising out of trade, underwriting new issues, and providing
advice on acquisitions, mergers, foreign exchange, portfolio management, etc.

Merchant Bank

A financial institution that engages in investment banking functions, such as advising clients in mergers and acquisitions, underwriting securities and taking debt or equity positions.

Money center banks

banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.

Net float

Sum of disbursement float and collection float.

net float

Difference between payment float and availability float.

Payment float

Company-written checks that have not yet cleared.

payment float

Checks written by a company that have not yet cleared.

PIBOR (Paris Interbank Offer Rate)

The deposit rate on interbank transactions in the Eurocurrency market
quoted in Paris.

Positive float

See:float.

Prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
reorganization and then file it along with the bankruptcy petition.

Risk of Collection

Chance that a borrower or trade debtor will not repay an obligation as promised.

Society for Worldwide Interbank Financial Telecommunications (SWIFT)

A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.

Wholesale mortgage banking

The purchasing of loans originated by others, with the servicing rights
released to the buyer.

World Bank

A multilateral development finance agency created by the 1944 Bretton Woods, New
Hampshire negotiations. It makes loans to developing countries for social overhead capital projects, which are
guaranteed by the recipient country. See: International bank for Reconstruction and Development.

World Bank

The International bank for Reconstruction and Development, an international organization that provides long-term loans to developing countries to improve their infrastructure.

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