Financial Terms
Regulation Q

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Definition of Regulation Q

Regulation Q Image 1

Regulation Q

Fed regulation imposing caps on the rates that banks may pay on savings and time deposits.
Currently time deposits with a denomination of $100,000 or more are exempt from Reg Q.

Related Terms:

Accounting Irregularities

Intentional misstatements or omissions of amounts or disclosures in
financial statements done to deceive financial statement users. The term is used interchangeably with fraudulent financial reporting.

Accounts payable

Money owed to suppliers.


Amounts a company owes to creditors.

Accounts payable

Amounts owed by the company for goods and services that have been received, but have not yet been paid for. Usually Accounts payable involves the receipt of an invoice from the company providing the services or goods.

accounts payable

Short-term, non-interest-bearing liabilities of a business
that arise in the course of its activities and operations from purchases on
credit. A business buys many things on credit, whereby the purchase
cost of goods and services are not paid for immediately. This liability
account records the amounts owed for credit purchases that will be paid
in the short run, which generally means about one month.

Accounts payable

Acurrent liability on the balance sheet, representing short-term obligations
to pay suppliers.

Accounts Payable

Amounts due to vendors for purchases on open account, that is, not evidenced
by a signed note.

Regulation Q Image 1

Accounts Payable Days (A/P Days)

The number of days it would take to pay the ending balance
in accounts payable at the average rate of cost of goods sold per day. Calculated by dividing
accounts payable by cost of goods sold per day, which is cost of goods sold divided by 365.

Accrued expenses payable

Expenses that have to be recorded in order for the financial statements to be accurate. Accrued expenses usually do not involve the receipt of an invoice from the company providing the goods or services.

accrued expenses payable

The account that records the short-term, noninterest-
bearing liabilities of a business that accumulate over time, such
as vacation pay owed to employees. This liability is different than
accounts payable, which is the liability account for bills that have been
received by a business from purchases on credit.

Aggregate Demand

Total quantity of goods and services demanded.

Aggregate Demand Curve

Combinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium.

Aggregate Expenditure Curve

AggRegate demand for goods and services drawn as a function of the level of national income.

Aggregate planning

A budgeting process using summary-level information to
derive various budget models, usually at the product family level.

Aggregate Production Function

An equation determining aggRegate output as a function of aggRegate inputs such as labor and capital.

Aggregate Supply

Total quantity of goods and services supplied.

Regulation Q Image 2

Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggRegate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggRegate supply curve does not.


Process in corporate financial planning whereby the smaller investment proposals of each of the
firm's operational units are added up and in effect treated as a big picture.

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.


Using past data to predict future data.

Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.

Balance of Payments

The difference between the demand for and supply of a country's currency on the foreign exchange market.

Balance of Payments Accounts

A statement of a country's transactions with other countries.

Bonds payable

Amounts owed by the company that have been formalized by a legal document called a bond.

Break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between
entering and not entering into the lease arrangement.

Break-even payment rate

The prepayment rate of a MBS coupon that will produce the same CFY as that of
a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon
the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower
than the benchmark coupon the lowest prepayment rate that will do so.

Break-even time

Related: Premium payback period.

Regulation Q Image 3

Canada Savings Bonds

A bond issued each year by the Federal government. These bonds can be cashed in at any time for their full face value.

Cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period.

Clearing House Automated Payments System (CHAPS)

A computerized clearing system for sterling funds
that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the
clearing companies within the structure of the Association for payment Clearing Services (APACS).

Clearing House Interbank Payments System (CHIPS)

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

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.

contingent pay

compensation that is dependent on the
achievement of some performance objective

Coupon payments

A bond's interest payments.

Cross rates

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.

Current Tax Payment Act of 1943

A Federal Act requiring employers to withhold income taxes from employee pay.

Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.

cycle time

the time between the placement of an order to
the time the goods arrive for usage or are produced by
the company; it is equal to value-added time plus nonvalue-
added time

Date of payment

Date dividend checks are mailed.

Delivery versus payment

A transaction in which the buyer's payment for securities is due at the time of
delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be
made by bank wire, check, or direct credit to an account.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Dividend payout ratio

Percentage of earnings paid out as dividends.

dividend payout ratio

Computed by dividing cash dividends for the year
by the net income for the year. It’s simply the percent of net income distributed
as cash dividends for the year.

dividend payout ratio

Percentage of earnings paid out as dividends.

Electronic Federal Tax Payment Systems (EFTPS)

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

employee time sheet

a source document that indicates, for each employee, what jobs were worked on during the day and for what amount of time

Equal Pay Act of 1963

A Federal Act requiring that both sexes receive equal pay
in situations where work requires equivalent effort, responsibility, and skills,
performed under similar working conditions.

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.

expectations theory of exchange rates

Theory that expected spot exchange rate equals the forward rate.

feasible region

the graphical space contained within and on
all of the constraint lines in the graphical solution to a linear
programming problem

Feasible target payout ratios

payout ratios that are consistent with the availability of excess funds to make
cash dividend payments.


See Federal Reserve System.

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.

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).


A wire transfer system for high-value payments operated by the Federal Reserve System.

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination
anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

First-pass regression

A time series Regression to estimate the betas of securities portfolios.

Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
floating-rate payment.

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

Forward Fed funds

Fed funds traded for future delivery.

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-payout lease

See: financial lease.

Graduated-payment mortgages (GPMs)

A type of stepped-payment loan in which the borrower's payments
are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over
a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be
higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference
between what the borrower actually pays and the amount required to fully amortize the mortgage is added to
the unpaid principal balance.

Gross Pay

The amount of earnings due to an employee prior to tax and other deductions.

Growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is NM (not meaningful).

idle time

the amount of time spent in storing inventory or
waiting at a production operation for processing

inspection time

the time taken to perform quality control activities

Interac® Direct Payment

Instead of paying with cash or a credit card, Interac Direct payment allows you to pay for your purchase with a debit card, such as your bank card. The amount of the purchase is electronically debited, or withdrawn, from your bank account (see debit card).
Here's how to pay for items using Interac Direct payment and your bank account:
1. Swipe your bank card (or debit card) through the point of sale (POS) terminal at the store's check-out
2. Enter your personal identification number (PIN), confirm the amount to be paid and indicate the account (chequing) from which the money is to be drawn.
3. The specified amount is then electronically debited from your account.

Interest payable

The amount of interest that is owed but has not been paid at the end of a period.

Interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount.

ISO 14000

a series of international standards that are designed
to support a company’s environmental protection
and pollution prevention goals in balance with socioeconomic

ISO 9000

a comprehensive series of international quality standards
that define the various design, material procurement,
production, quality-control, and delivery requirements and
procedures necessary to produce quality products and services

Just-in-time inventory systems

Systems that schedule materials/inventory to arrive exactly as they are
needed in the production process.

just-in-time (JIT)

a philosophy about when to do something;
the when is “as needed” and the something is a production,
purchasing, or delivery activity

Just-in-time (JIT)

A cluster of manufacturing, design, and delivery practices designed to
continually reduce all types of waste, thereby improving production efficiency.

Just-in-time manufacturing

The term for several manufacturing innovations that
result in a “pull” method of production, in which each manufacturing workstation
creates just enough product for the immediate needs of the next workstation in the
production process.

just-in-time manufacturing system

a production system that attempts to acquire components and produce inventory only as needed, to minimize product defects, and to
reduce lead/setup times for acquisition and production

just-in-time training

a system that maps the skill sets employees
need and delivers the training they need just as they need it

Lag response of prepayments

There is typically a lag of about three months between the time the weighted
average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment
speed is observed.

lead time

see cycle time

Lease Payment

The consideration paid by the lessee to the lessor in exchange for the use of the leased equipment/property. payments are usually made at fixed intervals.

least squares regression analysis

a statistical technique that investigates the association between dependent and independent variables; it determines the line of "best fit" for a set of observations by minimizing the sum of the squares
of the vertical deviations between actual points and the
Regression line; it can be used to determine the fixed and
variable portions of a mixed cost







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