Definition of Federally related institutions

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).

Accidental Dismemberment: (Credit Insurance)

Provides additional financial SECurity should an insured person be dismembered or lose the use of a limb as the result of an accident.

Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.

Arms index

Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining
issues) (Total up volume )/ (total down volume). An advance/decline market indicator. Less than 1.0 indicates
bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average.

Asset-Backed Securities

Bond or note SECured by assets of company.

Asset-backed security

A SECurity that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.

authority

the right (usually by virtue of position or rank) to use resources to accomplish a task or achieve an objective

Available-for-Sale Security

A debt or equity SECurity not classified as a held-to-maturity SECurity or a trading SECurity. Can be classified as a current or noncurrent investment depending on the intended holding period.

Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.

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.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which SECurities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the SECurities they own as well as those they
are holding for customers. In the case of other SECurities where a book-entry has developed, engraved
SECurities do exist somewhere in quite a few cases. These SECurities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Borrower (Credit Insurance)

A consumer who borrows money from a lender.

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.

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.

Consumer credit

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

Consumer Credit Protection Act

A federal Act specifying the proportion of
total pay that may be garnished.

Convertible security

A SECurity that can be converted into common stock at the option of the SECurity holder,
including convertible bonds and convertible preferred stock.

Credit

Money loaned.

Credit

Buying or selling goods or services now with the intention of payment following at some time in
the future (as opposed to buying or selling goods or services for cash).

Credit

One side of a journal entry, usually depicted as the right side.

Credit

A rating of a company's credit (ability to payback debt), usually by a third party credit agency.

credit

On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.
However, ‘credit’ also means money that you borrow from a financial lender, like a bank. A credit card, for example, is a card that allows you to access funds which you then have to repay.

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 analysis

Procedure to determine the likelihood a customer will pay its bills.

credit bureau

An organization that provides financial institutions with credit information concerning existing or potential customers who are looking to obtain credit services.

credit card

A revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance.

Credit Crunch

A decline in the ability or willingness of banks to lend.

Credit enhancement

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

Credit Loss

A loan receivable that has proven uncollectible and is written off.

credit memo

A record of the funds which have been credited to your account.

Credit period

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

credit policy

Standards set to determine the amount and nature of credit to extend to customers.

Credit Rationing

Restriction of loans by lenders so that not all borrowers willing to pay the current interest rate are able to obtain loans.

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 Risk

Financial and moral risk that an obligation will not be paid and a loss will result.

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

Credit Terms

Conditions under which credit is extended by a lender to a borrower.

Credit Union

credit unions are community based financial co-operatives and most offer a full range of services. All are owned and controlled by members who are also shareholders. credit unions are regulated provincially and insured by a stabilization fund, deposit insurance or guarantee corporation.
credit unions are supported by a system of provincial credit union Centrals, a national credit union Central and affiliated national financial co-operatives.

Crediting rate

The interest rate offered on an investment type insurance policy.

Creditor

Lender of money.

Creditor

Person or business that is owed money.

Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.

Creditor Proof Protection

The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
The provincial insurance acts protect life insurance products which have a family class beneficiary. Family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Quebec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same SECurity should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

Creditors

Purchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a
term used in the Balance Sheet to denote current liabilities.

Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.

Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.

Debt (Credit Insurance)

Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be SECured.

Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.

Debt Security

A SECurity representing a debt relationship with an enterprise, including a government
SECurity, municipal SECurity, corporate bond, convertible debt issue, and commercial
paper.

Demand line of credit

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

Derivative security

A financial SECurity, such as an option, or future, whose value is derived in part from the
value and characteristics of another SECurity, the underlying SECurity.

Disability Insurance (Credit Insurance)

Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Electronic Federal Tax Payment Systems (EFTPS)

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

Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.

Equity Security

An ownership interest in an enterprise, including preferred and common stock.

Eurocredits

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

Evergreen credit

Revolving credit without maturity.

Exchangeable Security

SECurity that grants the SECurity holder the right to exchange the SECurity for the
common stock of a firm other than the issuer of the SECurity.

Exempt securities

Instruments exempt from the registration requirements of the SECurities Act of 1933 or the
margin requirements of the SEC Act of 1934. Such SECurities include government bonds, agencies, munis,
commercial paper, and private placements.

Export Credit Insurance

The granting of insurance to cover the commercial and political risks of selling in foreign markets.

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 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 Insurance Contributions Act of 1935 (FICA)

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

Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.

Federal Reserve Banks

The twelve district banks in the federal Reserve System.

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.

Five Cs of credit

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

Fixed-dollar security

A nonnegotiable debt SECurity that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.

Fixed-income security

A SECurity that pays a specified cash flow over a
specific period. Bonds are typical fixed-income SECurities.

floating-rate security

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

Foreign tax credit

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

Formalized Line of Credit

A contractual commitment to make loans to a particular borrower up to a specified maximum during a specified period, usually one year.

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.

Full cost

The cost of a product/service that includes an allocation of all the (production and
non-production) costs of the business.

Full-Cost Method

A method of accounting for petroleum exploration and development expenditures
that permits capitalization of all such expenditures, including those leading to productive
as well as nonproductive wells.

full costing

see absorption costing

Full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.

Full Credit Period

The period of trade credit given by a supplier to its customer.

Full Employment

The level of employment corresponding to the natural rate of unemployment.

Full-Employment Output

The level of output produced by the economy when operating at the natural rate of unemployment.

Full faith-and-credit obligations

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

Full-payout lease

See: financial lease.

Full price

Also called dirty price, the price of a bond including accrued interest. Related: flat price.

Full-service lease

Also called rental lease. Lease in which the lessor promises to maintain and insure the
equipment leased.

Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible SECurities
and warrants have been exercised.

Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by FASB No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.

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