Wednesday, December 28, 2011

3. (C) Basic Banking Guide A to Z


C

Call center
Telephone service facility set up to handle a large number of (usually) both inbound and outbound calls. Some firms, however, specialize only in calls that are inbound (for assistance, help, or ordering) or outbound (for sales promotion or other messages). 

Call deposit
An investment account offered through banks which allow investors instant access to their accounts. Withdrawals and deposits can be made at any time. Rules and benefits differ depending upon the bank offering the deposit account.

Call money market
Market in which brokers and dealers borrow money to satisfy their credit needs, either to finance their own inventory of securities or to cover their customers’ margin accounts.


Called up
Value of the issued shares which have remained fully or partially unpaid, and whose holders have now been called upon to pay the balance.

Cancellation of cheque
A cheque that is passed by a bank officer as paid charged to the customer,s account. Once canceled, a cheque is no longer negotiable.

Capital
Owners own investment in the company. The net worth of a business; it  is, the amount by which company’s  assets exceed its liabilities. The money, property, and other valuables which collectively represent the wealth of an individual or business. Wealth in the form of money or property owned by a person or business and human resources of economic value

Capital Account       
In financial accounting, the capital account is one of the accounts in shareholders’ equity. Sole proprietorships have a single capital account in the owner’s equity. Partnerships maintain a capital account for each of the partners. In economics, the capital account is one of two primary components of the balance of payments, the other being the current account.

Capital assets
It refers to any asset used to make money, as opposed to assets used for personal enjoyment or consumption. All tangible properties which cannot easily be converted into cash  and which is usually held for a long period, including real estate, equipment machinery, etc.

Capital base
The capital acquired during an IPO (initial public offering), or the additional offerings of a company, plus any reserve and retained earnings.

Capital clause
The capital clause is a clause in Memorandum of Association (MA) which must state the amount of capital with which company is registered giving details of number of shares and the type of shares of the company. A company cannot issue share capital in excess of the limit specified in the Capital clause without altering the capital clause of the MA.

Capital expenditure
Funds spent for the acquisition of a long-term asset or for the improvement of the life of any existing asset.

Capital gain 
Any increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset’s purchase price.

Capital gain tax
A capital gains tax (CGT) is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property.

Capitalization
The sum of a corporation’s long-term debt, stock and retained earnings also called invested capital. The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share here also called market cap or market capitalization.

Capitalization of profit
Conversion of retained earnings into paid-up capital, by issuing bonus shares to current shareholders in proportion to their shareholdings.

Cargo
The goods, merchandise, or whatever is conveyed / loaded on the ship, other vessel or aircraft; 

Carriage
The act of transporting; conveyance, the expense of transportation.

Carriage forward
Carriage forward” means that the recipient shall pay for the delivery charges.

Carriage inward
Delivery expenses incurred through the purchase of goods.

Carry over
To transfer (an account) to the next column, page, or book relating to the same account.

Cartel
Group of companies who attempt to control price or supply of a commodity through mutual command on production. it is illegal among companies / banks

Cash
Money in the form of coins or banknotes issued by a government of ant country, money or an equivalent, such as a cheque, paid at the time of making a purchase. Ready money; especially, coin or specie; but also applied to bank notes, drafts, bonds, 

Cash account
An account in which all transactions are in ready money excluding credit transactions.

Cash against document (CAD)
Cash against documents is a type of transaction in which the title for purchased goods is released to the buyer after the total sale price is paid using cash.

Cash book
A cashbook is an accounting book that is composed of cash receipts plus disbursements. This balance is posted to the cash account in the ledger.

Cash card
A cash card (also known as a debit card, or ATM card) is a card issued by a bank, for the customers to obtain cash at any time 24 hours a day and seven days a week from a machine called ATM.

Cash discount
A reduction in the price of an item for sale allowed if payment is made immediately or within a stipulated period, a reduction in the invoice amount in consideration of quick payment.

Cash dispenser
An unattended machine (ATM) placed outside some banks branches that dispenses cash/money when a personal coded card is used.

Cash float
The amount of money, a banks teller use to keep for making payments of the cheques and giving change to the customers. Shop keepers also maintain cash float to meet requirement of their customers.

Cash flow
A revenue or expense flow that changes a cash account over a given period. Cash inflows usually arise from one of three activities – financing, operations or investing – although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments An accounting statement called the “statement of cash flows”, which shows the amount of cash generated and used by a company in a given period.

Cashiers cheque
This is a check drawn on the funds of the bank and as such its payment is guaranteed by the bank. These are issued after receipts of their value .They are usually treated as cash since most banks clear them instantly. A cashier cheque is a kind of a draft drawn by a branch on its Head Office or Main Office. This is an order instrument can be paid on present at counter, but generally issued as crossed cheque. This is very customer’s friendly instrument as this instrument serves the purpose of both demand draft and pay order. Pay order is issued and paid by the same branch, Draft is paid by the branch on which it is drawn, while cashier cheque, can be paid at any branch of the bank. Cashier’s Cheque, contains name of issuing branch and its code, instrument number, date, drawn on main office, amount in words & figures. It can be issued for any amount, and require signatures of two authorized officers.

Cash in hand
Cash in actual possession; also called cash-on-hand.

Cash insurance limit
This refers to the cash related insurance limits, such as cash on counter limit, cash in safe limit, cash in transact limit.

Cash limit
Amount of money that can be withdrawn as cash at a time / in a month by use of ATM card / credit card. It also refers to the cash spending limit of a business concern in a given period.

Cash management account
Cash Management Account is a banking service provide to the high profile business customers through which customers can speedily obtain funds from their collection accounts to their main account through computer module. The module collects & consolidates data of customer’s bank account in any location in the country. Through cash Management, customers can speedup their account receivable & utilize their funds to the optimum level.

Cash margin
Cash deposit taken as security from the customers at the time of issuing Guarantee or opening letter of credit.

Cash ratio
This is a formula for measuring liquidity of the company by calculating ratio between cash and all cash equivalent assets and all current liabilities:
Cash ratio = Cash equivalent + cash

Current liabilities
Banks keep cash as a percentage of the total of customer’s deposits e.g. 1 or 1,50% of the total customers deposits. Higher cash holding effects negatively on the profitability of the bank.

Cedel
Cedel was a clearing company of securities. It was founded in 1971 and was owned by of 92 banks. Since July 2002 it is a division of Deutsche Börse, and known as Clearstream. Specialized in clearance and settlement between the banks

Central bank
A central bank, reserve bank, or monetary authority is the entity responsible for the monetary policy of a country or of a group of member states. It is a bank that can lend money to other banks in times of need. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loan interest rates and acting as a lender of last resort to the banking sector during times of financial crisis. (SBP being the central bank of Pakistan has rescued many commercial banks at the time of crises) It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.

Central processing unit (CPU)
The computer CPU is responsible for handling all instructions and calculation it receives from other hardware components in the computer and software programs running on the computer. It is the brains of the computer. The CPU is where most calculations and take place. The fundamental operation of most CPUs is to execute a sequence of stored instructions called a program. The program is represented by a series of numbers that are kept in some kind of computer memory. There are four steps that nearly all CPUs use in their operation fetch, decode, execute, and write back. In banking considering operational requirement of Basel II CPU has become more important. Because through CPU, better control can be exercised, record can be maintained as per SOP (slandered operating procedure) new products can be easily lounged, and sale target can be more effectively monitored.  

Certificate
An official document wherein recording of particular fact, event, or level of achievement are given, a document issued at the request of customer wherein details of customers financial stability, or details of customers performance of a particular achievement is given. 

Certificate of commencement of business
A private limited company can commence business on receipt of certificate of incorporation. A public company has, however, to wait to commence business till a certificate of commencement of business is received from the registrar of the joint stock companies. The certificate of commencement of business is granted on fulfilling the following a few other requirements:-

1) Where prospectus has been issued inviting the public on subscribe for shares.
2) Shares payable in cash have been allotted to the amount of minimum subscription.
3) Every director of the company has paid the full amount of the shares payable in cash.
4) There is no money liable to be paid to applicants for shares which have been offered for subscription.
5) A statutory declaration by the chief executive or one of the directors and the security    that the aforesaid conditions have been compared with.
The registrar on being fully satisfied that:
1- The verified declaration has been filed.
2- All other requirements of the ordinance have been compiled with.
The registrar will issue a certificate called, “certificate of commencement of business”. On receipt of this certificate a company is entitled to commence business. A company which has not issued a prospectus shall have to file a statement in lieu of prospectus for getting the certificate of commencement of businessThis content can be found on the following page:http://www.investorwords.com/714/capitalization.html 

Certificate of Deposit
A written acknowledgment of a bank that it has received from the person named a specified sum of money as a deposit, often for a fixed term at projected rate of profit. These certificates are not negotiable instrument.

Certificate of incorporation
The certificate of incorporation is an official certificate issued by the registrar on successful incorporation of a limited company. The certificate states the company number, name and date of incorporation.

Certificate of insurance
This is a document issued by an insurance company, it certifies that an insurance policy has been bought and shows an abstract of the most important provisions of the insurance contract. But it is not a substitute for the actual policy, and is normally a non-negotiable document-it cannot be assigned to a third party, and is unacceptable under the terms of a letter of credit and in making a claim.

Certificate of origin
A Certificate of Origin (CO or COO) is a document used in international trade. It states that from which country the shipped goods originate. In a CO  it does not mean the country the goods are shipped from, but the country where their goods are actually made. This raises a definition problem in cases where less than 100% of the raw materials and processes and added value are not all from one country. In that case country from where more than 50% of the sales price of the goods originate is acceptable as the country of origin.

Certificate of registration
A certificate issued by competent authorities wherein recording of particular fact, event, or level of achievement are given, such as income tax registration, a document issued by registrar evidencing that the charge given by the company has been registered.

Certificate of release
A certificate signed by a banker/ lender indicating that a loan against the security has been fully paid and all debts satisfied.

Certified cheque
A cheque containing certification that the person who issued the cheque has sufficient funds in his / her account to cover payment of the cheque.

Charge-off
Write off as a bad debt, the over due balance on a credit  that  the banker / lender no longer expects to be repaid 

Chain of title
A chain of title is the sequence of historical transfers of title to a property. The “chain” runs from the present owner back to the original. This report provides clarification that title is clear of any claims.

Chamber of commerce
This is an association formed by businessmen to protect and promote their rights, interest in an area. The role of the Chamber of Commerce is to act on behalf of its members at local and national levels. Their role is to act as the voices of businesses, to give businesses access to information and help businesses improve security give suggestions for budgetary measures and import / export policies. 

Charge
When property moveable or immoveable, of any person by act of parties or by operation of law made security for payment of money to another without creation of mortgage, the person who lend money is said to have charge on the property. A charge can be fixed or floating. A fixed charge is created for a certain figure for certain property by agreement which can cover company’s fixed assets i.e. land building machinery. The customer cannot deal with the property under charge. In case of floating charge, customer can freely deals with its property according to his / her will. The lender (Bank) can enforce its right in case of default. No interest is transferred in immoveable property under a charge; the document creating charge against immoveable property can be registered under section 17 1-b of the registration Act. In case of financing to the limited company against securities except pledge, charge must be registered with the registrar of the company within 21 days of the execution of the charge documents and obtain certificate of registration of charge. Late registration will attract penalty. In case of non-registration bank will be deprived for their right against those who have registered charge.

Chargeable assets
An asset on which capital gain tax is taken when sold. Assets which are not chargeable include cars, and some types of investments.

Charge account
A credit arrangement in which a customer receives purchased goods or services before paying for them, a consumer credit line that can be used up to a certain limit or paid down at any time.

Charges
The amount of money that one  has to pay for something, especially for an financial accommodation or service rendered such as, sums of money paid by a customer for a bank’s services.

Charity organization
A charitable organization is a type of non-profit organization. The term can technically refer to a public charity. E.g. charitable, educational, religious, or other activities serving the public interest or common good.

Charter
A document issued by a sovereign, legislature, or other authority, creating a public or private corporation, such as , college, or bank, and defining its privileges and purposes, A document outlining the principles, functions, and organization of a body.

Chartered accountant
A person possesses premium accountancy qualifications & becomes member of the Institute of Accountants in Pakistan or Institute of Accountants in England and wale (C.A.)

Charter party
A contract by which part or all of a ship is leased for a voyage or a stated time.

Charter party bill of lading
B/L issued by the hirer (charterer), and not by the owner, of the ship (vessel) transporting the shipment. Since the owners of the vessel often have the right to lay claim to the cargo aboard the ship (in case of a dispute with the charterer) banks generally refuse to accept such B/Ls as collateral for loans, or for payment under a letter of credit.

Checking account behavior
Account behavior is checked by matching numbers and size of transactions with declared sources of income at the time of opening the account.

Cheque
A printed form, used for withdrawal of money, to make payments from bank account. It is the standard document drawn on a particular bank, through which cash is withdrawn; payments are made to settle financial transactions. It is a negotiable instrument, which can be issued payable to the bearer or order on demand. According to the Negotiable instrument Act 1881 Section 6 A “cheque” is a bill of Exchange drawn on a specified banker & not express to be payable otherwise than on demand.

Cheque book
A book containing blank cheques issued by a bank.

Cheque truncation
The conversion of data on a cheque into an electronic image after a cheque enters the processing system. Cheque truncation eliminates the need to return canceled cheques to customers.

Chequeing account
A demand deposit account subject to withdrawal of funds by cheque.

Circumstantial evidence
Proof of existence or non-existence of a disputed fact, based on reasoning and not on personal knowledge or observation. In some cases, circumstantial evidence is given higher weight, because direct evidence may be mistaken or may be under prejudice.

Claim
Some ones demand by virtue of a right to pay; or demand the recognition of a right, title, possession, etc.

Claused bill of lading
A bill of lading that shows a shortfall or damage in the delivered goods. Typically, if the shipped products deviate from the delivery specifications or expected quality, the receiver may declare a Claused bill of lading.

Also known as a “dirty bill of lading” or “foul bill of lading.”

Clean bill
A negotiable instrument which has no commercial document attached.

Clearing
Clearing means presenting a cheque, pay order, draft or other negotiable instruments through the banking procedure / channel for its ultimate payment through clearing house by the drawee bank. In every day business financial transactions are settled through cheques of different banks. These cheques are deposited by the customers of the banks in their accounts. As such every day, Thousands of cheques are transported from various banks and financial institutions to reach the branches where the concerned accounts are maintained (upon which the cheques are drawn). The massive number of cheque-based transactions makes sorting a formidable task. For instance, in Karachi alone over hundred thousands of cheques come for, within city and inter-city clearance on a daily basis. In order to handle this huge task, an independent body is required. SBP has allowed NIFT (National Institutional Facilitation Technologies) to handle clearing process in big cities.

Clearing house
Clearing house is a place where representative of each of the clearing bank, attend there on each business day to exchange cheques & other negotiable instruments drown upon each other and to settle claims between them. NIFT function on behalf of State Bank of Pakistan and supervising function of clearing house in major cities and coordinate with Clearing Member Banks & SBP in settlement of their claims. 

Clearing house inter bank payment system (CHIPS)
CHIPS is a system for paying & receiving funds through the use of electronic terminals situated at banks who are members or associates of CHIPS system in New York city  USA. The associates’ members who include many foreign banks must select a correspondent from one of the member bank through which daily CHIPS transactions are settled. At the end of each business day, the clearing house notifies the net credit or debit positions of each member. The net position of & associate member is adjusted by debiting / crediting their account with correspondent bank. The correspondent banks which are member of Federal Reserve Bank settle their own & their associate’s member’s net position through balance maintained with Federal Reserve Bank New York.

Closed-end credit
Generally, any credit sale agreement in which the amount advanced, plus any finance charges, is expected to be repaid in full by a specified date. 

Closing costs
The total expenses incurred by sellers and buyers in transferring title in a property. The closing cost may include the origination fee, lawyers fees,  title search,  survey charge, recordation fees, and the credit report charge etc.

Closing price
The price of the last transaction for a given share / security at the end of a  trading session. 

Closing rate
The spot rates for the sale & purchase of foreign currencies at the close of days business, the exchange rate of two or more currencies at the close of business of a balance sheet date, for example, at the end of the accounting year.

Club account

Coin
A coin is a piece of hard material, usually metal or a metallic material, issued by a government. Coins are used as a form of money in transactions of various kinds. These are usually used for lower-valued units, and banknotes for the higher values. In most money systems, the highest value coin made for circulation is worth less than the lowest-value note.

Collateral
In bank financing, collateral is a borrower’s pledge of specific property to secure repayment of a loan. It refer to secured lending, also known as asset-based lending. In Pakistan, the use of collateral is the main way to secure bank financing. The chances of acquiring a loan depends on the value of assets, whether real estate or any other; as collateral. Collateral security is the additional security in addition to the primary security. The various forms of collateral offered to secure bank loans may be grouped into three divisions, stocks and bonds, merchandise, and real estate. 

Collecting banker
A collecting banker is one who undertakes to collect the amount of a cheques & bills for his customer from the paying banker. A banker is under no legal obligation to collect cheques drawn upon other banks for a customer. But this function is performed by every modern bank. 

Collection
Handling by the bank the job of collection, includes, presentation, acceptance, payments sand other matters related to collection of documents whether clean or documentary.

Collection agencies
Collecting agency is a firm whose purpose is to collect on delinquent accounts. The Collector should try to trace the customer and ensure full settlement of outstanding. If the customer is unable to settle the outstanding, the collector will ensure that a settlement plan (as per guidelines given by the bank / financial institution.) is agreed by the customers. In case the customer does not agree to pay despite all these efforts, then a legal case should be initiated against the customer.
State Bank of Pakistan has formulated guidelines vide BPRD circular No 13 dated 13 Non 2008 on debt collection, which should be followed in their debt collection efforts:-
i) Before proceeding for debt collection/recovery. A minimum of 14 days notice will be served to the customer / borrower through letter/SMS advising him/her to make overdue payment, 
ii) customers / borrowers shall not contacted at an inconvenient time (b) proper disclosure of identity, name of the bank and the purpose of call is provided (c) only lawful and acceptable business language and professional attitude is adopted in establishing such contact. 
iii) Banks/ DFIs shall also ensure that (a) collection calls are properly recorded (b) customers / borrowers are contacted at the given address/phone numbers and in case they cannot be contacted, at alternate address/phone number obtained through collection efforts (c) “Visit Reports” shall be kept on record in the form of hard copy or on electronic collection systems for at least six months (d) collection staff shall not harass their family members. 

Combined transport
Carriage of goods by at least two modes of transportation.

Combined transport bill of lading
B/L issued for containerized door-to-door shipments that have to use different ships and/or different means of transportation (aircraft, railcars, ships, trucks, etc.) from origin to destination. Unlike in case of a through bill of lading, the principal carrier or the freight forwarder (who issued the multimodal B/L) takes on full liability under a contract of carriage for the entire journey and over all modes of transportation. Also called combined bill of lading, combined transport bill of lading, intermodal bill of lading, or multimodal transport bill of lading.

Commercial Bank
Financial institution which (1) accepts demand and time deposits, (2) makes loans to individuals and organizations (including consumer loans), and (3) provides services such as collections, international banking, trade project financing .  In the past commercial banks prefers to make short-term loans instead of the long-term ones (which are handled by organizations such development finance companies and home mortgage companies) but in now commercial banks are providing house building financing facilities under the umbrella of consumer products.

Commercial documents
Written record of certain aspects of a commercial transaction, such as, commercial invoice, shipping or transport document, certificate of origin etc.

Commercial invoice
This is a document which contains the details of goods. It is a vital document required by customs authorities to determine true value of the imported goods, for assessment of duties and taxes. A commercial invoice (in addition to other information), must identify the buyer and seller, and clearly indicate the (1) date and terms of sale, (2) quantity, weight and/or volume of the shipment, (3) type of packaging, (4) complete description of goods, (5) unit value and total value.

Commission
Mutually agreed upon, or fixed by custom or law, fee collected by the banks for facilitating, initiating, and/or executing a commercial transaction.

Commission agent
Agent who solicits and procures business from potential customers on behalf of one or more principals, usually against payment of a percentage of the realized sales revenue as commission.

Common carrier
Transportation ‘For hire’ that serves all customers without discrimination, provides scheduled service to designated points or within a designated area, carries only the type of cargo for which it is certified, and  is named as the carrier in the contract of carriage. 

Common seal

Company
Voluntary association formed and organized to carry on a business in the legal name of the association (see company name). Types of companies include sole-proprietorship, partnership, limited liability, etc.

Company accounts
Accounts made up only at the end of a company’s financial year. For a manufacturing companies, the company’s accounts consist of manufacturing account, trading account, profit and loss account, and balance sheet. A trading company’s accounts will include all of the above except the manufacturing account. 

Company seal
Stamped or blind-embossed imprint of a company's legal name, as an additional evidence that an agreement or a document was executed on behalf of the company by its authorized agents or officers.

Compliance
In order to keep the working of Audit Department aligned with the best international practices, a new division, captioned as ‘Compliance Division’, has been created in each bank. With a view to have more emphasis and focus on the compliance, this division is responsible for monitoring compliance of various administrative / operative instructions, rules, and regulations issued by SBP. The compliance division constantly review and report status of compliance and non-compliance to the banks senior management and central bank.

Compound annual return (CAR)
The compound annual return shows the investment return, assuming the investment grew at the same rate every year. For example, suppose an investment grew from Rs.4,000 to Rs.8,000 over four years. The total return is ((Rs.8,000-Rs4,000)/Rs.4,000), or 100%, and the simple annual return is 100%/4, or 25%. The compound annual return, in contrast, compounds the annual increment in value each year. The compound annual return includes each year’s increment; its rate will always be lower than the simple return. The compound annual return doesn’t indicate whether the investment actually grew at such an even rate. But for comparing different investments over time, the compound annual return is useful.

Compound interest
Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. Compound interest differs from simple interest, in that simple interest is calculated solely as a percentage of the principal sum. The equation for compound interest is: P = C(1+ r/n) int. Where:    P = future value    C = initial deposit    r = interest rate (expressed as a fraction: e.g. 0.06 for 6%)    n = # of times per year interest is compounded    t = number of years invested.

Comprehensive policy
Combination of several coverage to protect the insured. The most common example of comprehensive insurance policy is fully comprehensive car insurance policy. Comprehensive motor policy provides an ‘all risks’ level of protection for policyholder and vehicle. Each insurer is delivered fully comprehensive car insurance cover with slight variations. Fully comprehensive motor insurance cover everything as in a standard Third Party Fire and Theft (TPFT) policy with the addition of accidental damage. This is defined as damage to insured’s vehicle, which includes malicious damage.

Conditions
Terms / clauses in a contract, or agreement, which has for its object to suspend, or in some way to modify, the principal obligation; It is also the case of a future uncertain event, which may or may not happen, and on the occurrence or non-occurrence of which, the accomplishment, rescission, or modification of an obligation or testamentary disposition is made to depend.

Conditional
A contract is an exchange of promises between two or more parties to do, or refrain from doing, an act which is enforceable in a court of law. It is a binding legal agreement. Conditional” means “situation or circumstance”. If a particular condition is true, then a particular result happens.

Confirmed credit
A letter of credit which a bank other than the bank that opened it agrees to honor as though they had themselves issued it. This additional confirmation is in addition to the obligation of the bank which issued the letter of credit.

Consideration
Something that is or is to be kept in mind in making a decision, evaluating facts, etc e.g. value given in exchange for the promise, price paid.

Consign
To hand over or deliver formally or officially, to ship, as by common carrier.

Consignee
The one to whom something, such as goods or merchandise, is consigned

Consignment
The act of consigning, Some thing that is consigned,

The standard unit of value of a currency, as the Pak Rupees in Pakistan dollar in the United States

Consignor
A person or company that consigns goods, merchandise, etc.

Consolidated balance sheet
A comprehensive balance sheet that shows the financial health of a company and all its  subsidiaries. It combines the assets and liabilities of the various subsidiaries of a company into a single snapshot. Most balance sheets for large banks are consolidated.              

Consolidated fund
Treasury’s current account with the central bank through with all or almost all of a government’s expenditures and receipts pass.

Consortium
Short-term arrangement in which several banks (from the same or different countries) pool their financial and human resources to undertake a large project that benefits all members of the group.

Consular invoice
A document prepared by the shipper and certified in the country of origin by a consul of the country of importation. It shows the transaction details and origin of the goods.

Consumer
Per or body who acquires goods or services for direct use or ownership, rather than for resale or use in production and manufacturing.

Consumer credit
Credit from banks for personal use, other then business is call consumer credit. In Pakistan, the last decade has seen a revolution in consumer credit.  The well-being of a credit institutions, and ultimately their survival, depends on the ability to make lending decision correctly. 

Container bill of lading
B/L issued by a freight forwarder of container to the shipping company as a receipt for the goods being shipped. It is not a complete document / B/L, but it has a legal standing similar to that of a normal (carrier’s) B/L. If not specifically prohibited, it is capable of being negotiated and of acceptance by the importer’s bank for payment under a letter of credit.

Contingent liability
A contingent liability is a potential liability. This means that the contingent liability might become an actual liability and a loss, or it might not. It depends on something in the future. It is a liability which has to be show in balance sheet as contra item. these are also called Non funds based liabilities e.g. L/C , L/G liability.

Contra account
An account on the balance sheet that offsets the balance of a related and corresponding account.(reported on both sides of the balance sheet.

Contract
A contract is an exchange of promises between two or more parties to do, or refrain from doing, an act which is enforceable in a court of law. A contractual relationship is evidenced by, an offer, acceptance of the offer, and a legal and valuable consideration. Each party to a contract has rights and duties relative to the rights and duties of the other parties. 

Control account
Control accounts are general ledger accounts whose balance reflects the total of balances of related subsidiary ledger accounts. The purpose of the control account is to keep the general ledger free of details. For example sum total of current accounts is agreed with balance out standing in current account ledger. As such CD ledger is control account.

Conventional fixed-rate loan 
A fixed-rate loan offers  a set mark-up rate and payments that do not change throughout the life, or "term," of the loan.

Convertible
Generally used for Currency that can be quickly and easily bought and sold for other currencies. For example US $ is convertible currency in Pakistan.

Conveyance deed
Agreement of transferring property title from one person to another.

Co-ownership
The term “co-ownership agreement” refers to a contract between parties who own property together. It can cover many different types of relationships, including groups of friends, family members, partners or any combination of these types of relationships.

Co-Ownership Agreement is sometimes referred to as a “tenants in common agreement”. In any case, the contract specifies the rights and obligations between tenants in common when they own property together.

Copyright
Legal monopoly that protects published or unpublished original work (for the duration of its author’s life plus 50 years) from unauthorized duplication without due credit and compensation. Copyright covers not only books but also advertisements, articles, graphic designs, labels, letters  lyrics, maps, musical compositions, product designs, etc.

Core banking System
This is a software application which record transactions, maintain customer information, calculate fee on services, interest on loans and deposits, and provide solution of almost all type of services offered. The data is stored in backend databases in digital form.  The whole bank comes under one server, and various branches of a bank can be interconnected through the internet or telephone lines to form a core banking network of the bank. A customer can operate his account from any branch of the bank. The greatest advantage of having a Core Bank System is that new features and functionalities can be easily added to the system.

Corporation
The word “corporation” derives from the Latin word corpus, which means a “body of people”. A corporation is a legal entity (artificial person) separate from the persons that own it. People work together in corporations to produce value and generate income. In modern times, corporations have become an increasingly dominant part of economic life. People rely on corporations for employment, for their goods and services, for the value of the pensions, for economic growth and social development.

Corporate policy
It is, a documented set of broad guidelines, formulated after an analysis of all internal and external factors that can affect a company's objectives, operations, and plans. It is formulated by the company's board of directors, lays down the company's response in different possible situations. It also determines the formulation and implementation of strategy, and directs and restricts the plans, decisions, and actions of the company's exectives in achievement of its objectives.

Corporate tax
Tax payable by the company on its profit.

Correspondent bank
A bank that regularly performs services for another financial institution usually located in another country. Services typically include handling out-of-area checks, trusts and technical services in exchange for a fee. Correspondent banks typically provide banking services when the others banks, often foreign banks, aren’t able to offer the services or find that it is more cost effective to outsource this need. Commercial banks typically provide correspondent banking services.

Cost
Valuation in terms of money of  effort,  material, resources,  time and utilities consumed,  risks incurred, and  opportunity forgone in production and delivery of a good or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses. 

Cost accounting
Method of accounting in which all elements of cost incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded. This data is then summarized and analyzed to arrive at a selling price, or to determine where income earnings/ saving are possible.

Cost centre
A cost center is part of an organization that does not produce direct profit and adds to the cost of running a company. Examples of cost centers include research and development departments, marketing departments, help desks and customer service contact centers etc.

Cost of capital
Opportunity cost of funds employed in a business; the rate of return investors could earn if an alternative investment avenue (usually time deposit) was chosen.

Cost of Money
Profit/Interest that could be earned if the amount invested in a business was invested in government securities or in fixed investment.

Cost & freight (C&F)
Term of sale signifying that the price invoiced or quoted by a seller for a shipment does not include insurance charges, but includes all expenses up to a named port of destination. 

Cost insurance& freight (CIF)
Term of sale signifying that the price invoiced or quoted by a seller includes insurance and all other charges up to the named port of destination.

Cost of money
Opportunity cost of funds employed in a business; the rate of return investors could earn if an alternative investment avenue (usually time deposit) was chosen.

Cost of sale
Sum of direct material, direct labor, and factory overheads incurred in making a product. Purchase price of a merchandise. Also called cost of goods sold.

Counter
Raised bench across which banks staff sits, this is the fixture which divides office area from public area. The counters are built according to the customer requirements; which includes cash transfer tray, with screen to the level of security required.

Counter claim
A defendant’s answer claiming that it was the plaintiff – not the defendant – who committed legal wrongs, and that as a result it is the defendant who is entitled to money damages or other relief. A counterclaim is commonly, but not always based on the same events that form the basis of the plaintiff’s complaint.

Counterfeit
An imitation intended to be passed off fraudulently or misleadingly as genuine; forgery, to make fraudulent copies of something valuable, to make an imitation of without authorization.

Counterfeit note
Forged notes, If a counterfeit note is found, Police Forces should be informed providing them with the information regarding from whom and where the counterfeit banknote has been acquired. This is against the law to posses or passes on a note for which one know to be a counterfeit. Printing and circulation of forged notes are offences under Sections 489A to 489E of the Pakistan Penal Code and are punishable in the courts of law by fine or imprisonment or both, depending on the offence. 

Counter-foil
A part of a bank check, money order, deposit slip etc., that is kept by the issuer and on which a record of the transaction is made.

Counter guarantee
Back-to-back guarantee given by an obligor (purchaser of guarantee)  to indemnify a surety (banker) in a three-party contract (such as a performance bond). A counter guarantee is cashed in the event the obligor fails in the performance of a contract and the beneficiary calls upon the surety to honor the bond of guarantee.

Counterpart
A correspondent part, In banking contract where the different parties’ signatures appear on separate copies is said to have been signed in “counterparts”.

Counterparty
The other party or participant in an agreement, court case, deal, or negotiation.  Members of a group connected via a common bond (such as involvement in the management or ownership of a business) or purpose, and affected directly or indirectly by the financial or legal obligations of the other members.

Countersign
To attest authenticity or correctness of an already signed document by adding one’s own signature.

Coupon
Bond’s detachable counterfoil presented by a bondholder to the bond issuer for receiving profit payment. If coupons are exhausted before the bond’s maturity date, the bondholder may apply for a new set.

Cover note
Summary document issued by an insurer as an interim cover for the period before a formal insurance policy is issued.

Credit
In accounting terms, an entry on the left-hand side of an account record. It has the effect of decreasing an asset or expense account, or of increasing a capital, liability, or revenue account. Arrangement of funds by the banks for increasing purchasing power of  the customer through lending. 

Credit advice
Communication by the bank to the customer advising  receipt of payment and its credit to the account.

Credit Cards
Credit card is a system of payment through plastic card issued to users. In this system, the issuing bank lends money to the consumer (or the user) for retail transactions at merchant outlets and / or cash advance transactions (on ATMs). These transaction amounts are paid to the merchant by the bank next day, whereas card member has the facility to pay later to the issuing bank. Most credit cards are issued by the banks and are of the same shape and size, as specified by the applicable ISO standard. Generally Credit cards can be of three types, silver, gold and platinum.

Credit limit
Credit limit is the maximum amount of borrowing that a bank, financial institution or other lender will extend to a customer for a particular line of credit (also called a credit line). For example, maximum amount of credit that a bank or other lender will extend to a card holder to borrow against a single card.

Credit bureau
An agency that collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Typical clients include banks, financial institutions, credit card companies, and other financing companies. 

Creditors
A person or organization which extends credit to others.

Credit Rating
An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities.

Credit risk
An assessment of the credit worthiness of individuals and corporations by the bank / financial institutions is called credit risk. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities. Basel II explicitly requires financial institutions to assess the credit exposure for each customer and for each credit facility using the following measures:
Probability of Default (PD) – the probability that a specific customer will default within the next 12 months.
Loss Given Default (LGD) – the percentage of each credit facility that will be lost if the customer defaults.
Exposure at Default (EAD) – the expected exposure for each credit facility in the event of a default.
Once the financial institution is able to assess the PD, LGD and EAD for its customers and for its credit facilities, the calculation of the minimum capital requirement is straightforward.

Credit scoring
Credit scoring is designed to give banks a fast, accurate prediction of the risk involved in giving a loan. Score is determined on Percentage basis and vast majority falls between 60s to 70s %. The higher the score, the better is the rating. When determining how high a score will be, five characteristics separate the cream of the crop from everyone else. In order of score significance: 
Past delinquency: People who have failed to make payments in the past tend to do the same in the future. 
The way credit has been used: Someone who is maxed out or close to the limit on a credit card is considered a greater risk than someone who doesn’t look at the high credit line as a license to print money. 
The age of the credit file: Fair Isaac’s model assumes people who have had credit for a long time are less risky. 
The number of times a person asks for credit: The system frowns upon those who have initiated several requests for credit cards, loans or other debt instruments over a short period. 
A customer’s mix of credit: Someone with only a secured credit card is generally riskier than someone who has a combination of installment and revolving loans. This content can be found on the following page:

Credit slip Pay-in slip
Credit Slip is a slip through which a person can deposit his money or cheque in his bank account. It is also called as Deposit Slip.

Crossed cheque
A cross cheque is one bearing across its face two parallel lines with or without words “not negotiable”,” payees account only”, “& co”, or two lines with the name of a bank .A cross cheque must be collected through a banker & can not be cashed on counter.

Cross guarantee
In many countries a significant method of corporate-group capital raising is cross-guarantee financing, where each company within a guarantee group guarantees the performance of the others.

Cross Rate
The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in. 
For example, if an exchange rate between the Euro and the Japanese Yen was quoted in a Pakistani newspaper, this would be considered a cross rate in this context, because neither the euro or the yen is the standard currency of the Pakistan. However, if the exchange rate between the euro and the Pak Rupees were quoted in that same newspaper, it would not be considered a exchange rate because the quote involves the Pakistan’s official currency.

Currency
Currency is the tokens used as money in a country. In addition to the traditional metal coins and paper bank notes, modern currency also includes cheques drawn on bank accounts, money orders, travelers cheques.

Current account
In banking term, this is a non interest-bearing bank account which allows the accountholder to write cheques against the funds in the account. In economic term the difference between a nation’s total exports of goods, services, and transfers, and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities.

Current assets
These are the assets which are convertible into cash at short notice also called Liquid assets or 
In finance, current liabilities are considered liabilities of  short term assets.

Current liabilities
The business that are to be settled in cash within the fiscal year or the operating cycle, whichever period is longer.

Current Ratio
This is the ratio of current assets to current liabilities. It indicates ability of a company to meet short-term financial obligations it measures whether or not a firm has enough resources to pay its debts over the next 12 months Though every industry has its range of acceptable current-ratios, a ratio of 2:1 is considered desirable in most sectors including banking.

Custodian
Trustee who holds trust assets in his or her name. In banking Bank  holds securities for safe keeping on behalf of its customers, as custodian.

Custom
Customs is the guardian of any country’s borders against movement of contra band goods and is facilitator of bona fide trade . It provides a major source of revenue to the Government in the form of taxes levied on the goods traded across the borders. It also helps to protect the domestic industry, discourage consumptions of luxury goods.

Custom duties
Custom duty is a tax which a state collects on goods imported or exported out of the boundaries of the country. It forms a significant source of revenue for all countries especially in developing countries like Pakistan. In Pakistan, custom duties are levied on the goods and at the rates specified in the schedules to the Custom Tariff.

Customer
The word customer means a relationship wherein money is the consideration. The relationship between bank and the customer starts as soon as bank receives cash from the customer on a deposit slip. That is why a token money is taken in cash form to open the account. This is imperative that before start of the relationship as customer, banker should complete all required formalities defined under PR M1 M2 & M5 are completed.

Customer base
The clients to whom a Bank sells products and services. The customer base is a relatively broad number of customers, which includes walk-in customers.

CDD (Customers Due Diligence)
Customers Due Diligence is the care that is required to be exercised by the bank to identify their clients / customers in order to ascertain relevant information pertinent to doing business with them. In Pakistan, CDD is a regulatory policy requirement to be implemented to check of the customer, their sources of funds and nature of business etc.

Customers satisfaction
Customer’s satisfaction means, “to meet or surpass customer’s expectation”. Degree of satisfaction can be measured by the number of repeat customers or utilization of the level of the banking facility.

Customs invoice
Commercial invoice required by customs in which the exporter states the description, quantity and selling price, freight, insurance, and packing costs, terms of delivery and payment, weight and/or volume of the goods for the purpose of determining customs import value at the port of destination.

Cut-off time
A time of day established by a bank for receipt of deposits. After the cut-off time, deposits are considered received on the next banking day. 

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