Definition of FCIA

FCIA

Foreign Credit Insurance Association. A private U.S. consortium of insurance companies that offers
trade credit insurance to U.S. exporters in conjunction with the U.S. Export-Import Bank.

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.

Balance of trade

Net flow of goods (Exports minus Imports) between countries.

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 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.

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 line

Line of credit granted by a Bank to a customer.

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.

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.

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 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.

Basket trades

Related: Program trades.

Best-interests-of-creditors test

The requirement that a claim holder voting against a plan of reorganization
must receive at least as much as he would have if the debtor were liquidated.

Block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.

Clearing House Interbank Payments System (CHIPS)

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

Coinsurance effect

Refers to the fact that the merger of two firms decreases the probability of default on
either firm's debt.

Comparative credit analysis

A method of analysis in which a firm is compared to others that have a desired
target debt rating in order to infer an appropriate financial ratio target.

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.

Consumer credit

credit granted by a firm to consumers for the purchase of goods or services. Also called
retail credit.

Controlled foreign corporation (CFC)

A Foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.

Counter trade

The exchange of goods for other goods rather than for cash; barter.

Credit

Money loaned.

Credit analysis

The process of analyzing information on companies and bond issues in order to estimate the
ability of the issuer to live up to its future contractual obligations. Related: default risk

Credit enhancement

Purchase of the financial guarantee of a large insurance company to raise funds.

Credit period

The length of time for which the customer is granted credit.

Credit risk

The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
payment may not be made on a negotiable instrument. Related: Default risk

Credit scoring

A statistical technique wherein several financial characteristics are combined to form a single
score to represent a customer's creditworthiness.

Credit spread

Related:Quality spread

Crediting rate

The interest rate offered on an investment type insurance policy.

Creditor

Lender of money.

Demand line of credit

A Bank line of credit that enables a customer to borrow on a daily or on-demand basis.

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.

Eurocredits

Intermediate-term loans of Eurocurrencies made by Banking syndicates to corporate and
government borrowers.

Evergreen credit

Revolving credit without maturity.

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 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 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.

Five Cs of credit

Five characteristics that are used to form a judgement about a customer's creditworthiness:
character, capacity, capital, collateral, and conditions.

Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.

Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".

Foreign banking market

That portion of domestic Bank loans supplied to Foreigners for use abroad.

Foreign bond

A bond issued on the domestic capital market of anther company.

Foreign bond market

That portion of the domestic bond market that represents issues floated by Foreign
companies to governments.

Foreign currency

Foreign money.

Foreign currency option

An option that conveys the right to buy or sell a specified amount of Foreign
currency at a specified price within a specified time period.

Foreign currency translation

The process of restating Foreign currency accounts of subsidiaries into the
reporting currency of the parent company in order to prepare consolidated financial statements.

Foreign direct investment (FDI)

The acquisition abroad of physical assets such as plant and equipment, with
operating control residing in the parent corporation.

Foreign equity market

That portion of the domestic equity market that represents issues floated by Foreign companies.

Foreign exchange

Currency from another country.

Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
Foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Foreign exchange dealer

A firm or individual that buys Foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.

Foreign exchange risk

The risk that a long or short position in a Foreign currency might have to be closed out
at a loss due to an adverse movement in the currency rates.

Foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency
at one or more future dates.

Foreign market

Part of a nation's internal market, representing the mechanisms for issuing and trading
securities of entities domiciled outside that nation. Compare external market and domestic market.

Foreign market beta

A measure of Foreign market risk that is derived from the capital asset pricing model.

Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for Exporting U.S.-produced goods.

Foreign tax credit

Home country credit against domestic income tax for Foreign taxes paid on Foreign
derived earnings.

Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.

Full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and
large cities which have diverse funding sources.

Going-private transactions

Publicly owned stock in a firm is replaced with complete equity ownership by a
private group. The shares are delisted from stock exchanges and can no longer be purchased in the open
markets.

Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.

Guaranteed insurance contract

A contract promising a stated nominal interest rate over some specific time
period, usually several years.

Import-substitution development strategy

A development strategy followed by many Latin American
countries and other LDCs that emphasized Import substitution - accomplished through protectionism - as the
route to economic growth.

Informationless trades

trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Information-motivated trades

trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Insurance principle

The law of averages. The average outcome for many independent trials of an experiment
will approach the expected value of the experiment.

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.

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 tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Letter of credit (L/C)

A form of guarantee of payment issued by a Bank used to guarantee the payment of
interest and repayment of principal on bond issues.

Line of credit

An informal arrangement between a Bank and a customer establishing a maximum loan
balance that the Bank will permit the borrower to maintain.

Line of credit

An informal arrangement between a Bank and a customer establishing a maximum loan
balance that the Bank will permit the borrower to maintain.

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.

Money center banks

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

National Futures Association (NFA)

The futures industry self regulatory organization established in 1982.

OPEC (Organization of Petroleum Exporting Countries)

A cartel of oil-producing countries.

PIBOR (Paris Interbank Offer Rate)

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

Portfolio insurance

A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.

Posttrade benchmarks

Prices after the decision to trade.

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.

Pre-trade benchmarks

Prices occurring before or at the decision to trade.

Private Export Funding Corporation (PEFCO)

Company that mobilizes private capital for financing the
Export of big-ticket items by U.S. firms by purchasing at fixed interest rates the medium- to long-term debt
obligations of Importers of U.S. products.

Private-label pass-throughs

Related: Conventional pass-throughs.

Private placement

The sale of a bond or other security directly to a limited number of investors.

Private unrequited transfers

Refers to resident immigrant workers' remittances to their country of origin as
well as gifts, dowries, inheritances, prizes, charitable contributions, etc.

Program trades

Also called basket trades, orders requiring the execution of trades in a large number of
different stocks at as near the same time as possible. Related: block trade

Publicly traded assets

Assets that can be traded in a public market, such as the stock market.

Registered trader

A member of the exchange who executes frequent trades for his or her own account.

Retail credit

credit granted by a firm to consumers for the purchase of goods or services.
See: consumer credit.

Reversing trade

Entering the opposite side of a currently held futures position to close out the position.

Revolving credit agreement

A legal commitment wherein a Bank promises to lend a customer up to a
specified maximum amount during a specified period.

Revolving line of credit

A Bank line of credit on which the customer pays a commitment fee and can take
down and repay funds according to his needs. Normally the line involves a firm commitment from the Bank
for a period of several years.

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