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Definition of Consortium banks

Consortium Banks Image 1

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.



Related Terms:

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.


Money center banks

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


Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.


Bridge Loan

A short term loan to cover the immediate cash requirements until permanent financing is received.



Broker loan rate

Related: Call money rate.


Builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the
early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the
prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount
for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).


Consortium Banks Image 1

Bullet loan

A bank term loan that calls for no amortization.


Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.


Cookie Jar Reserves

An overly aggressive accrual of operating expenses and the creation of
liability accounts done in an effort to reduce future-year operating expenses.


Dealer loan

Overnight, collateralized loan made to a dealer financing his position by borrowing from a
money market bank.


Demand Loan

A loan which must be repaid in full on demand.


Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.


Equivalent loan

Given the after-tax stream associated with a lease, the maximum amount of conventional
debt that the same period-by-period after-tax debt service stream is capable of supporting.


Excess reserves

Any excess of actual reserves above required reserves.


Excess Reserves

reserves of commercial banks in excess of those they are legally required to hold.


Consortium Banks Image 2

Farm Improvement and Marketing Cooperatives Loans Act

See here


Federal agency securities

Securities issued by corporations and agencies created by the U.S. government,
such as the federal home loan Bank Board and Ginnie Mae.



Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.


Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.


Federal Employer Identification Number

A unique identification number issued
by the federal government used for payroll purposes to identify the company
when it deals with the Internal Revenue Service.


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 funds

Non-interest bearing deposits held in reserve for depository institutions at their district federal
reserve Bank. Also, excess reserves lent by banks to each other.


Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.


Federal funds rate

This is the interest rate that banks with excess reserves at a federal reserve district bank
charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction
of U.S. interest rates.


Federal Funds Rate

The interest rate at which banks lend deposits at the federal reserve to one another overnight.


Federal Insurance Contributions Act of 1935 (FICA)

A federal Act authorizing the government to collect Social Security and Medicare payroll taxes.


Consortium Banks Image 3

Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.



Federal Reserve Board

Board of Governors of the federal reserve System.


Federal Reserve System

The central bank of the U.S., established in 1913, and governed by the federal
reserve Board located in Washington, D.C. The system includes 12 federal reserve Banks and is authorized
to regulate monetary policy in the U.S. as well as to supervise federal reserve member banks, bank holding
companies, international operations of U.S.banks, and U.S.operations of foreign banks.


Federal Reserve System

The central banking authority responsible for monetary policy in the United States.


Federal Reserve (the Fed)

The central bank in the United States, responsible for setting interest rates.


Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.


Federally related institutions

Arms of the federal government that are exempt from SEC registration and
whose securities are backed by the full faith and credit of the U.S. government (with the exception of the
Tennessee Valley Authority).


Fixed-rate loan

A loan on which the rate paid by the borrower is fixed for the life of the loan.


Fixed Rate Loan

loan for a fixed period of time with a fixed interest rate for the life of the loan.


Foreign Exchange Reserves

A fund containing the central bank's holdings of foreign currency or claims thereon.


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.


Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.


Free reserves

Excess reserves minus member bank borrowings at the Fed.


Homemade dividend

Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.


Homemade leverage

Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
duplicate the affects of corporate leverage on their own. Thus, if levered firms are priced too high, rational
investors will simply borrow on personal accounts to buy shares in unlevered firms.


Intercompany loan

loan made by one unit of a corporation to another unit of the same corporation.


International Reserves

See foreign exchange reserves.


Inventory loan

A secured short-term loan to purchase inventory. The three basic forms are a blanket
inventory lien, a trust receipt, and field warehousing financing.


Jumbo loan

loans of $1 billion or more. Or, loans that exceed the statutory size limit eligible for purchase or
securitization by the federal agencies.


Legal Reserve Requirement

See reserve requirement.


Loan amortization schedule

The schedule for repaying the interest and principal on a loan.


Loan Capital

Borrowed funds having a fixed interest rate.


Loan Covenants

Express stipulations included in loan agreements that are designed to monitor
corporate performance and restrict corporate acts, affording added protection to the lender.


Loan syndication

Group of banks sharing a loan. See: syndicate.


Loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate
specified in the policy.


Loans payable

Amounts that have been loaned to the company and that it still owes.


Multicurrency loans

Give the borrower the possibility of drawing a loan in different currencies.


Multifamily loans

loans usually represented by conventional mortgages on multi-family rental apartments.


Negative Loan Covenants

loan covenants designed to limit a corporate borrower's behavior
in favor of the lender.


Official reserves

Holdings of gold and foreign currencies by official monetary institutions.


Operating Loan

A loan advanced under an operating line of credit.


Parallel loan

A process whereby two companies in different countries borrow each other's currency for a
specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing
foreign exchange risk. Also referred to as back-to-back loans.


personal loan

A lump sum that you borrow from a financial institution for a specified period of time. To repay the loan, you pay interest on the entire lump sum, and make payments on a scheduled basis.


Positive Loan Covenants

loan covenants expressing minimum and maximum financial measures
that must be met by a borrower.


Project loan certificate (PLC)

A primary program of Ginnie Mae for securitizing FHA-insured and coinsured
multifamily, hospital, and nursing home loans.


Project loan securities

Securities backed by a variety of FHA-insured loan types - primarily multi-family
apartment buildings, hospitals, and nursing homes.


Project loans

Usually FHA-insured and HUD-guaranteed mortgages on multiple-family housing complexes,
nursing homes, hospitals, and other development types.


Required reserves

The dollar amounts based on reserve ratios that banks are required to keep on deposit at a federal reserve Bank.


Required Reserves

reserves that the central bank requires commercial banks to hold.


Reserve

An accounting entry that properly reflects the contingent liabilities.


Reserve currency

A foreign currency held by a central bank or monetary authority for the purposes of
exchange intervention and the settlement of inter-governmental claims.


Reserve Currency

A currency, frequently the U.S. dollar, that is used by other countries to denominate the assets they hold as international reserves.


Reserve Ratio

See reserve requirement.


Reserve Ratio

This calculation is used by states to determine the unemployment contribution rate to charge employers. The ongoing balance of a firm’s unclaimed
contributions from previous years is reduced by unemployment claims for the past year and then divided by the average annual payroll, resulting in a "reserve ratio".


Reserve ratios

Specified percentages of deposits, established by the federal reserve Board, that banks must
keep in a non-interest-bearing account at one of the twelve federal reserve Banks.


Reserve Requirement

Fraction of total deposits that a commercial bank is required by the central bank to hold in the form of reserves.


Reserve requirements

The percentage of different types of deposits that member banks are required to hold
on deposit at the Fed.


Reserved material

Material that has been reserved for a specific purpose.


Reserves

Commercial banks' reserves consist of their holdings of cash and their balances in deposits with the central bank. See also foreign exchange reserves, excess reserves, required reserves, reserve requirement.


Savings and Loan association

National- or state-chartered institution that accepts savings deposits and
invests the bulk of the funds thus received in mortgages.


secured loan or line of credit

A lump sum of funds (loan), or a revolving source of credit with a pre-established limit (line of credit), for which the customer must provide collateral.


Self-liquidating loan

loan to finance current assets, The sale of the current assets provides the cash to repay
the loan.


Term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between
one and ten years and requires a specified repayment schedule.


Term Loan

A secured loan made to business concerns for a specific period (normally three to ten years). It is repaid with interest, usually with periodical payments.


Transaction loan

A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving
credit agreements involve loans that can be used for various purposes.


Variable rate loan

loan made at an interest rate that fluctuates based on a base interest rate such as the
Prime Rate or LIBOR.



 

 

 

 

 

 

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