Banking

Residential Mortgage-Backed Security (RMBS)

Residential Mortgage-Backed Security (RMBS)

Residential mortgage-backed securities (RMBS) are a sort of debt-based investment that is backed by a large pool of residential mortgages (home loans). Because there is a significant demand for the ownership of a personal or family dwelling, interest on loans such as mortgages, home equity loans,.....

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Proof of Funds (POF)

Proof of Funds (POF)

Proof of Funds (POF) is a letter or document certifying that there is sufficient funds (money) for a person, entity, or company to complete a transaction. For example, for people seeking mortgages, a POF is normally mandatory because lenders are far more likely to issue them to those who have ade.....

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Agency Bond

Agency Bond

The term agency bond is the debt issued by a government-sponsored enterprise (GSE) or a federal agency, also referred to as agency debt. Usually, though, they are less liquid than treasuries and do not have the same total federal guarantee. It is a protection provided by a government-sponsored co.....

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Hypothecation

Hypothecation

The word “Hypothecation” implies giving the lender an asset as collateral security. It happens when an asset, such as income generated by the asset, is pledged as collateral to secure a loan, without giving up title, possession, or ownership rights. It is the procedure in which a debtor under.....

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Schedule Bank

Schedule Bank

Schedule Bank Banks implies the financial institution that takes public deposits and extends credit to those who need it. They are a substantial part of the financial system, which assists in the overall economic development. The bank whose name is included in the schedule of the Central Bank of .....

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Free Banking

Free Banking

Free banking is an establishment where note-issuing banks are allowed to set up in the same way as any other type of business. It is a system in which unregulated banks can issue currency and transferable deposits redeemable in common base money. It is a monetary arrangement where banks are free .....

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Bank Reserves

Bank Reserves

Bank reserves are the minimum cash reserves that financial institutions must keep in their vaults at any given time. These are a commercial bank’s cash holdings physically held by the bank, and deposits held in the bank’s account with the central bank. It equals the cash physically a.....

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Regulatory Capital

Regulatory Capital

A Regulatory Capital (also known as capital adequacy) is the amount of capital a bank or another financial institution has to have as required by its financial regulator. These are standardized regulations in place for banks and other depository institutions that determine how much liquid capital.....

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Capital Adequacy Ratio (CAR)

Capital Adequacy Ratio (CAR)

Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital in relation to its risk-weighted assets and current liabilities. It is also known as Capital to Risk (Weighted) Assets Ratio (CRAR), which is the ratio of a bank’s capital to its risk. It is a measurement of a bank’s avai.....

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Tier 2 Capital

Tier 2 Capital

Tier 2 capital includes a number of important and legitimate constituents of a bank’s capital requirement. It is designated as supplementary capital and is composed of items such as revaluation reserves, undisclosed reserves, hybrid instruments, and subordinated term debt. It is the seconda.....

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Tier 1 Capital

Tier 1 Capital

Tier 1 capital is the primary funding source of the bank. It is the core measure of a bank’s financial strength from a regulator’s point of view. It is a bank’s core capital and includes disclosed reserves—that appears on the bank’s financial statements—and equity capi.....

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Letter of Hypothecation

Letter of Hypothecation

Letter of Hypothecation is a written agreement, which authorizes a bank or lender to repossess and sell the pledged item in case of a default. An instrument that gives a firm, banker or a person a lien over goods in consideration for advances of money is known as a letter of hypothecation. It mea.....

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