BUSINESS AREAS

Glossary

Home
General Glossary

General Glossary

C

Call option: A contract that extends the right to the holder to buy an asset at the price stipulated, from the date of signing to its maturity (American option) or at that same time (European option). In exchange for a premium, the buyer acquires the right to execute the option (to buy), but not the obligation to do so. If the value of the asset at that time is higher than the agreed price plus the cost of the option, it is in the holder's interest to execute the right.
Candidate countries: Countries for which the EU has accepted their application for membership. Membership negotiations with Croatia and Turkey began on 3 October 2005, while negotiations with the Former Yugoslav Republic of Macedonia have not yet begun.
Capital: In its broadest sense it is the set of money resources (or resources which can be converted into money) that a person possesses. In a corporate context, it is the contributions made by shareholders for the creation of a company. When talking about a public limited company, the capital is divided into shares and these can be traded on the stock exchange. Capital is also the name given to the principal of a debt or income (as opposed to interest).
Capital account: A balance of payments account that covers all capital transfers and acquisitions/disposals of non-produced, non-financial assets between residents and non-residents.
Capital markets: Markets in which securities or financial assets are bought and sold by means of medium and long-term operations. Among capital markets, a distinction is made between the credit market and the securities market. Likewise, the following can be distinguished among securities markets: The primary market or the market that deals with the issue of securities, on which newly created assets are exchanged. On this market assets are only traded at the time of issuance or creation. The secondary market or aftermarket, on which assets that have already been created are bought and sold. This market allows for changes in the owner or holder of financial instruments.
Cashcard: An electronic means of payment for small amounts, which has a chip that can be topped up by a given amount (generally at an automatic cash machine). Once the available balance has run out, it can be topped up again.
Cash recycling machine: A device installed in a financial institution and used by the client, that works as an isolated unit, with the capacity to receive, process and dispense banknotes.
Cash transaction: In the case of the Spanish government debt market, it is an outright transaction whereby an asset is transferred during the five working days after the trading date. When the transfer date is not specified, it is understood as being the first working day following the trading date.
Cash transfer: A money transfer between accounts held by a single holder in different banks, which is formalised through an order given by the client to the institution receiving the money, which is then sent to the institution from which the funds originate. The maximum amount of the transfer order shall be €150,000 per charged account per day.
Cash waterfall: Preferential right to payment. This term is used to indicate the preference of some creditors in relation to others to recuperate their money in event of a company going bankrupt.
CCC: The current account code, made up of 20 digits in Spain, that identifies an operative current account in a credit institution.
Central (or central-type) parity: The exchange rate vis-à-vis the euro of currencies of member countries of ERM II, around which the ERM II fluctuation margins are defined.
Central bank: An institution with the mission of defining and enforcing monetary policy within a certain geographical area, including the issuance of its legal tender. Said mission is normally associated with the objective of maintaining price stability. Central banks, depending on the responsibilities assigned thereto, may also perform other functions, such as supervising payment systems, supervising credit institutions, serving as a financial agent for the government, etc.
Central counterparty: An entity whose main function is to interpose itself in security clearing and settlement processes, basing its activity on contract novation. Therefore, it becomes the seller to the buyer and the buyer to the seller, assuming the counterparty and trading risk. To manage said risk, the central counterparty must make an appropriate selection of the participant institutions, ensuring the positions are suitably hedged by demanding collateral, and designing loss distribution mechanisms that avoid possible problems of moral risk.
Central counterparty institution: An entity which, in contracts traded on one or more financial markets, interposes between the counterparties, acting as the buy with respect to the seller and as the seller with respect to the buyer.
Central Credit Register of the Banco de España: A service provided by the Banco de España which contributes to the generation of general credit statistics based on the information regularly transmitted by financial institutions on the risks they acquire through their customers. At the same time, it allows identification of high-risk customers (all risks in excess of €6,000 are recorded). Each person can verify whether the recorded data is correct. The existence of the Central Credit Register allows an entity, prior to extending credit, to become aware of the risks associated to a customer and the possible existence of substantial bad debts.
Central Securities Depository: A service that registers securities and allows operations to be processed as book entries. Securities can be held in physical form or in a dematerialised form (whereby they only exist as book entries). In addition to its custodial and administration functions (issuance and redemption), it may perform comparison, clearing and settlement functions.
Charge to account: An entry or annotation to the debit of an account that, for the account holder, is equivalent to a withdrawal of funds and therefore a decrease in their balance.
Cheque: A document that consists of a payment order which allows its owner to receive a certain amount of money drawn against the funds that the person who signs the cheque (the drawer) has in a banking entity.
Cheque payable to order: A cheque extended to a person that can only be cashed by that person.
Cheque to bearer: A cheque which includes the phrase "to bearer" instead of the name of the beneficiary. It can be cashed by the holder.
Claim: Claims are considered as being those filed by users of financial services for the purpose of obtaining restitution of their interest or right. Claims must highlight specific facts relating to actions or omissions of entities that harm the interests or rights of the claimant due to the breach of contracts, of the regulations on transparency and customer protection, and on good practices and financial uses.
Claimed bills: Bills whose charge and repayment are requested before their maturity date.
Claims Service: The Banco de España service to attend the complaints and claims of bank service users who consider that they have not been duly attended by the Customer Care Service or the ombudsman of a financial institution. The advisory opinions of the Claims Service are not legally binding for the institutions but a high percentage of them are fulfilled.
Classification: Process of selecting banknotes by their state of use. This process classifies used banknotes into those suitable and not suitable for circulation.
Clearing bank documents: To exchange debit and credit documents that represent mutual obligations (such as cheques, bank bills, etc.), in such a manner that it is only necessary to pay the resulting net amounts after the clearing process.
Clearing house: A system made up of a group of bank institutions in order to exchange and settle all kinds of counterclaim assets or documents.
Client: A group of buyers, natural or legal persons, of a company who are regular consumers of their articles.
CMS (Counterfeit Monitoring System): Computer software used by the European Central Bank and the national central banks to manage the information relating to counterfeit euro banknotes and coins detected in European Union countries.
Coin National Analysis Centre (CNAC): As in the case of banknotes, each EU Member State has established a Coin National Analysis Centre (CNAC) for the collection and classification of false euro coins at national scale. In Spain, the CNAC is located within the Banco de España (Cash and Issue Department). The CNAC identifies each type of presumedly false coins and transmits all the new types of false coins that appear to the European Technical and Scientific Centre (ETSC).
Collateral: Financial instruments which are either hypothecated to guarantee the devolution of a loan or are sold as part of a repurchase agreement. In accordance with article 18.1. of the Statutes of the European System of Central Banks, all Eurosystem credit operations (that is, liquidity providing operations) must be based on adequate collateral.
Collateral: The assurance of a main obligation by, for example, a document signed by a third party to guarantee the bank the performance of a client credit operation. It is also the name for a group of assets earmarked for the performance of an operation, generally a credit.
Collateral: An asset that serves as a guarantee to endorse the granting of credit or a bond issue.
Collateral: A guarantee made up of tangible goods, securities, pledges, etc.
Colour photocopier: A machine which allows us to photocopy images in colour. The machine divides an image into colour squares by means of colour-sensitive high-resolution photoelectric cell rows and prints it using the four-colour reproduction principle. The quality of colour copies is becoming increasingly higher, in such a manner that in some cases the difference with the original is difficult to detect. At times the use of a magnifying glass is required.
Combined account: A bank account connected to other provisions, so that if there were not enough balance in the account to honour a payment, the balance of the other connected account would be used.
Commercial paper: A title or document by which a natural or legal person commits to making the payment of a specific amount at a future date. When dealing with a commercial operation, the nature of this document is similar to a bill of exchange.
Compensation per employee: The total remuneration, including gross wages and salaries as well as bonuses, overtime payments and employers' social security contributions, that is payable, in cash or in kind, by employers to employees, divided by the total number of employees.
Complaint: Complaints are considered to be those referring to the operation of the financial services offered by institutions and are presented due to delays, neglect or any other kind of anomalous conduct observed.
Consignment of banknotes: The transport of banknotes from one place (initial) to another (final). The Banco de España makes dispatches or consignments of euro banknotes and coins between its head offices in Madrid and its network of branch offices distributed throughout Spain. It also sends consignments of euro banknotes to other national central banks of the Eurosystem.
Consumer credit: A credit extended by financial institutions for the acquisition of consumer goods (cars, electrical appliances, etc.) or services (travel, etc.).
Continuous cheque: As opposed to the chequebook used by private customers, this type of cheque is printed out using continuous paper rolls and is essentially used by companies that make frequent use of cheques. It must be signed by a person authorised by the company for such purpose.
Continuous Linked Settlement (CLS): A payment system to settle foreign currency purchase and sales operations. It was created in 2002 by large credit institutions with high volumes of foreign currency operations. Its headquarters are in London. This payment system allows simultaneous crediting and debiting of the foreign currencies for each operation (payment versus payment) in the accounts of the institutions involved, eliminating so-called settlement risk - the risk that one of the counterparties breaches its commitment to pay. The currencies settled through the system are: euros, US dollars, pounds sterling, the yen, Swiss francs, Canadian dollars and Australian dollars. Settlement of operations in euros takes place through TARGET in an account the CLS holds in the payments mechanism of the European Central Bank (ECB).
Convergence criteria: Indicators of the degree of macroeconomic stability established by the Treaty of the European Union, whose degree of compliance by each of the Member States must be assessed by the European Council in order to decide on access into the third stage of Economic and Monetary Union (EMU). They were the following: A stable price level and an average inflation rate (observed over a period of one year prior to the examination) that does not exceed by more than 1.5% the average of the three best-performing Member States in terms of price stability. The State should have an average, nominal, long-term interest rate that does not exceed by more than two percentage points the average of the three best-performing Member States in terms of the lowest inflation. The ratio of budget deficit to gross domestic product must not exceed 3%. The ratio of government debt to gross domestic product must not exceed 60%. For at least the last two years, the exchange rate of the State's currency must fall within the normal fluctuations of the European Monetary System and must not have devalued against the currency of another Member State. The objective of the convergence criteria us to guarantee balanced, stress-free economic development for Member States. Therefore, the criteria concerning budget deficits and government debt must continue to remain in force after the third stage of EMU comes into force (1 January 1999). For this purpose a Stability and Growth Pact was approved by the European Council in Amsterdam in June 1997. The European Council of 2 May 1998 decided that Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain fulfilled the convergence criteria and, therefore, would take part in the third stage of EMU from its commencement. Greece joined EMU on 1 January 2001. Every two years, or at the request of any European Union Member State has not yet joined EMU, the European Commission and the ECB submit a report to the European Union Council on the degree to which these States comply with the convergence criteria.
Corporate governance: Rules, procedures and processes through which an organisation is managed and controlled. Corporate governance specifies the distribution of rights and responsibilities among the different persons making up the organisation (such as the board of directors, the management, the shareholders and other stakeholders) and it lays down the rules and procedures for decision-making.
Correspondent agreement: Agreement whereby a credit institution provides payment and other services to another credit institution. Correspondent payments are normally made via reciprocal accounts ("nostro" and "loro"), whereto permanent lines of credit can be assigned. Correspondent services are basically cross-border services but are also provided in certain national contexts, where they are known as agency relations. A "loro" account is the term used by a correspondent entity to describe an account opened in the name of a foreign credit institution. For its part, said entity considers it a "nostro" account.
Correspondent central banking model (CCBM): A mechanism established by the European System of Central Banks with the aim of enabling credit institutions to use assets deposited in another European Union state as collateral in monetary policy operations or intraday credit operations processed through the TARGET payment system. Each central bank, acting as a correspondent, opens and maintains security accounts where it registers the collateral assets of the central bank that extends the financing.
Council of the European Union: Also known as the Council of Ministers of the European Union. This is the EU institution made up of representatives of the governments of the Member States, normally the ministers responsible for the matters under consideration. The EU Council meeting in the composition of the ministers of economics and finance is often referred to as the Ecofin Council. In addition, the Council meets in the composition of Heads of State or Government. It is the Community institution with the most decision-making or executive power, which it can delegate to the European Commission, and is the main legislative power along with the European Parliament. Its main responsibilities are: to pass European laws - jointly with the European Parliament in many policy areas; to co-ordinate the broad economic policies of the Member States; to conclude international agreements between the European Union (EU) and other countries or international organisations; to approve the EU's budget - jointly with the European Parliament; to develop the EU's Common Foreign and Security Policy (CFSP) and to co-ordinate co-operation between the national courts and police forces in criminal matters in Member States. The Council appoints the Secretary-General, who is the High Representative for the Common Foreign and Security Policy of the EU (Mr. PESC), and a Deputy Secretary-General in charge of managing the General Secretariat. Each Member State in turn holds the Council Presidency for a period of six months. The most common voting procedure in the Council is "qualified majority voting". Each country's number of votes is determined in relation to their population, although it is not strictly proportional as certain adjustments are made in favour of the less populous countries. In order to facilitate decision-making in an enlarged EU, the Treaty of Nice extended the requirement of taking decisions by qualified majority, instead of being unanimous. It also established new conditions and considerations for the Member State's votes, designed for a Union of up to 27 members, which were first applied on 1 November 2004. Meanwhile, the text of the European Constitution, approved in June 2004 and which must still be ratified by the Member States, establishes a new definition of a qualified majority for decision making in the Council. When the Constitution comes into effect, decisions will be made on the basis of double majority which will require the support of at least 55% of the Member States, who represent a minimum of 65% if the EU population. If the proposals voted do not come from the Commission or the EU Ministry of Foreign Affairs, the qualified majority will be defined as 72% of the Council members, who represent 65% of the Community population. Furthermore, a blocking minority of at least four Member States is established.
Counterfeit banknote: This term is applied to any reproduction of a legitimate banknote that tries to simulate its characteristics and has been fraudulently produced or altered.
Counterfeit class: A certain type of counterfeit banknotes. The following classes are distinguished in the case of counterfeit euro banknotes: local classes, formed by the counterfeit banknotes that appear in a certain country within the euro area; and common classes, formed by banknotes which have appeared in several countries within the euro area.
Counterfeiting: This is the reproduction of a document or security feature with the intention of deceiving the public. A counterfeit euro banknote is understood to be a banknote that appears to be a euro banknote and has been fraudulently produced or altered. In Spain, money counterfeiting is an offence included in the Penal Code.
Counterparty: Generally speaking, the opposite party in a financial transaction. Within the sphere of the Eurosystem, this expression refers to the group of euro area credit institutions used to perform certain monetary policy-related operations. In order to be recognised as such, the institutions must fulfil the following general selection criteria: Be governed by the minimum reserve requirement system established by the Eurosystem. Be financially solvent. Fulfil the operating requirements established by national central banks and, where applicable, the ECB. The selected entities may: Participate in Eurosystem open market transactions: main refinancing operations, longer-term refinancing operations, fine-tuning operations and structural operations. Access standing facilities.
Credit: A contract whereby a financial institution makes a certain amount of money available to a customer, which the latter must return with interest and in a certain agreed time. Unlike a loan, that capital does not necessarily have to be for a pre-set purpose (such as buying property, in the case of a mortgage loan).
Credit account: Also known as credit policy. An operation that allows a client, often a business, commerce or professional, to dispose of a certain amount of money to adjust their liquidity needs, in exchange for interest payments. It is managed through a current account in which the opening balance is the limit of the policy signed. It is normally short-term with renewable maturity.
Credit card: An electronic instrument that allows payment to be made for consumer goods and services, usually deferred to the end of the month, without requiring cash availability. It also allows money to be withdrawn from automatic cash machines, although a charge applies for this type of operation.
Credit co-operative: A company whose object is to serve the financial needs of its shareholders and third parties by exercising the activity of credit institutions. The number of shareholders is unlimited and their responsibility only amounts to the value of their contributions.
Credit derivative: Financial instrument that separates the credit risk from the underlying financial transaction, allowing said risk to be evaluated and transferred separately.
Credit institution: A company whose business is to receive deposits or other repayable funds, applying these to grant credit. They include banks, savings banks, credit co-operatives, specialised credit institutions (although they cannot receive deposits) and the Official Credit Institute (ICO).
Credit limit: The maximum amount that a credit card holder has available to make payments using the same. Normally a monthly amount is fixed.
Credit line: A contract whereby an entity undertakes to facilitate credit to a customer up to a certain limit. During the validity period of the credit line, the borrower will automatically have access to said amount.
Creditor: A person or entity which is owed an amount of money.
Credit overrun: The amount that exceeds the limits established for a line of credit or credit account.
Credit risk: The risk that a counterparty will not settle the full value of a payment obligation - neither when it becomes due, nor any time thereafter. Credit risk includes replacement cost risk, principal risk and settlement risk.
Credit to account: A credit entry in an account which increases the account's balance. Cheques marked "to be credited to account" or with a similar expression on the obverse can only be cashed if they are previously deposited in a current account, never directly over-the-counter.
Credit to euro area residents: A broad measure of the financing of non-monetary financial institution (MFI) euro area residents (including general governments and the private sector) provided by MFI sector. It is defined as including loans and holdings of securities. The latter includes shares, other equity and debt securities issued by non-MFI euro area residents. As securities can be seen as an alternative source of funds to loans, and as some loans can be securitised, this definition provides more accurate information on the total amount of financing provided by the MFI sector to the economy than a narrow definition comprising loans only.
Credit transfer: A financial operation whereby the creditor of a credit partially or fully transfers it to a third party.
Crossed cheque: A cheque which is crossed by two parallel lines and can only be paid to a bank or to a customer of that bank. If the name of an institution is written between the two lines, it can only be cashed through that institution. If, on the other hand, what comes between the two lines is "and company" or "and co.", it can be cashed in any other banking institution.
Currency in circulation: "Banknotes and coins in circulation that are commonly used to make payments. It includes the banknotes issued by the Eurosystem and the coins issued by the Member States. The currency in circulation as included in monetary aggregate M3 refers only to banknotes and coins in circulation that are held outside the MFI sector (as it appears in the consolidated balance sheet of the MFIs, meaning that the currency issued and held by the MFIs or ""vault cash"" has been subtracted). Excluded are central banks' stocks of own banknotes (as they have not been issued), and collector coins that are not used to make payments."
Currency swap: Two spot and forward operations carried out simultaneously, exchanging one foreign currency for another.
Current account: A balance of payments account that covers all transactions in goods and services, income and current transfers between residents and non-residents.
Custody: Care or vigilance of certain securities or bills. The financial intermediary that is custodian of these goods also takes care of executing the rights that correspond to their maturity.
Customer care service: A specialised department which is mandatory in credit institutions for attending and resolving customer complaints. Those entities belonging to a single group may have a common Customer Care Service for the entire group.

Back