Banco de España - General Glossary

General Glossary

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Safety deposit box: A place specially reserved in the safes of bank branch offices which can be hired by customers upon request. This box can be used to deposit goods or cash without having to declare its contents.
Savings account/current account: A deposit available on demand (at any time) in the case of the current account, or upon notice-in the case of the savings account (although this requirement is becoming less common and in practice the savings account assumes the practices of a demand deposit). The basic difference between them is that with the current account you can dispose of your funds through cheques, while the savings account uses a bank book, whose entries substitute the statements that are characteristic of the current account.
Savings book: A synonym of savings account, it is a kind of deposit that is different to a current account because it uses a book and does not operate with cheques, although it may have other distinctive characteristics, depending on the institution, such as the need to give notice for availability, not allowing overdrafts, greater remuneration, etc.
Securities other than shares: These represent the promise of the issuer (borrower) to make one or more payments to the holder (lender) at a future date or dates. These securities usually incorporate a specific nominal interest rate (the coupon) or are sold at a discount on the amount that will be reimbursed upon maturity. Securities other than shares at a term of over one year are classified as long-term securities.
Securitisation: A transaction whereby an institution transforms a non-tradable collection right or asset (for example mortgage loans of bank customers) into homogenous, standardised fixed-income securities, which it can then trade on organised securities markets (exchanges).
Seizure: Withholding, immobilisation or confiscation of assets by order of a judge or competent authority.
Sepblac: Initials in Spanish of the Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences. Sepblac is the Spanish Financial Intelligence Unit. It is one of the supporting organisations of the Commission for the Prevention of Money Laundering, presided by the State Secretary for Economy. It carries out actions to prevent the use of the financial system or of companies or professionals of another nature to launder money, as well as investigating and preventing administrative infringements of the legal regime on capital movements and external economic transactions.
Settlement of interests: The payment of the interest accrued under the terms established in a bank account contract (interest rate, settlement period, etc.)
Settlement risk: The risk that settlement in a transfer system will not take place as expected, usually owing to a party defaulting on one or more settlement obligations. This risk includes, in particular, operational risks, credit risks and liquidity risks.
Share: An equity instrument or security which represents a fraction of a company's capital, converting its holder in a shareholder of the company and awarding him/her a series of financial and voting rights, such as the right to participate in the company's profits via receipt of a dividend, preferential subscription rights for new shares or the right to vote at General Shareholders' meetings. Shares can be traded on regulated markets or stock exchanges. From an investor's viewpoint, a share is an equity instrument, which means it is not possible to know the return that an investment in shares will yield. Therefore, investments in shares involve a level of uncertainty, in the sense that it is not possible to anticipate the dividends (profits to be distributed) that will be obtained, or to predict how the market price (listing) will evolve in the future.
Soft loan: A loan extended with favourable conditions (term and interest rate) for the borrower.
Specialised lending institution: Credit institution which engages in one or several of the following activities: granting of loans and advances, factoring, financial leasing, issuance and management of credit cards or granting of sureties and guarantees.
Stability and Growth Pact: An agreement between EU Member States whereby these undertake to maintain healthy public finances in the third stage of EMU, as a means for strengthening the conditions to achieve price stability and strong sustainable growth that will favour job creation. The Stability and Growth Pact establishes maximum reference value for budget deficit (3% of GDP) and government debt (60% of GDP). Nevertheless, the Pact allows Member States to incur an exceptional and temporary deficit in excess of the aforementioned proportion in the event of unusual circumstances beyond their control or serious economic recession. Within the framework of the pact, those EU Member States which have adopted the euro must submit a stability programme to the EU Council every year in order for both institutions to evaluate the degree of fulfilment of the pact by each Member State. This programme must include the situation with respect to budgetary and government debt balance objectives, expected evolution of the most relevant macroeconomic variables, the measures that will be adopted to reach the objectives of the pact and analysis of the changes in the economic scenario with regard to achievement of objectives. Those EU Member States which have not yet adopted the euro must submit a convergence programme to the Council and Commission every year, similar to that described above, but also including monetary policy objectives and their relation to price stability and exchange rates. The European Commission and Economic and Financial Committee analyse said stability and convergence programmes and inform the EU Council as to their suitability. If the Council observes significant deviations with respect to the achievement of objectives, it will make recommendations to the corresponding Member State. If the earmarked Member State does not take the adequate measures, the recommendations will become warnings and can lead to economic sanctions.
Structural operation: A procedure to adjust structural liquidity in the lending sector. It can be by injection or absorption of liquidity, instrumented through reverse transactions, outright transactions or by issuing ECB debt certificates, which the Eurosystem carries out with credit institutions and the national central banks enforce by standard auctions or through bilateral procedures, which may or may not have a regular periodicity and no standardised maturity.
Subordinated debt: A fixed-income instrument issued with a subordinated status in relation to those of normal issues, mainly because its owner has a lower priority in the hierarchy of common creditors in terms of collection preference (priority order). In the case of credit institutions, this debt is considered, together with preference shares, a hybrid capital instrument in that it fulfils certain requirements that partially assimilate it to the ordinary capital of credit institutions and is accountable as entity equity.
Subrogation: Modification of the terms and conditions of a contract in order to substitute one person (natural or legal) for another in the exercise of a right or fulfilment of an obligation. In a mortgage loan, for example, it implies changing the financial institution with which the borrower assumes the payment obligation.
Supervision of financial institutions: The basic purpose of banking supervision is to safeguard the stability of the financial system, for which it is necessary to monitor solvency and compliance with regulations which specifically govern credit institutions. From this perspective, the supervisory function of the Banco de España consists of designing and applying analysis and verification systems which provide up-to-date information on the situation of institutions and their risk profile. This information is used to adopt any pertinent measures to prevent possible crises or reduce their number, importance and cost.
Supplier: A natural or legal person which supplies an asset or service to an entity.
Surety: A form of guarantee that consists of a commitment undertaken by a person (the guarantor) to assume responsibility for the obligation contracted by another person (the debtor) in the event of non-fulfilment by the latter.
Systemic risk: The risk that the inability of one participant to meet its payment obligations in a system will cause other participants to be unable to meet their obligations as well, potentially with spill-over effects such as considerable liquidity or credit problems, threatening the stability of the financial system. That inability to meet obligations can be caused by operational or financial problems.