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EAD
Exposure at default. The expected gross exposure of a facility upon default of the counterparty.
EBA
EC
ECAI
External credit assessment institution that is recognised by the FSA for risk weighting purposes under the Standardised Approach to Credit Risk and for securitisation-based approaches.
Economic capital
The amount of capital that a financial institution deems to be appropriate based on their own internal assessment, to meet the needs of their business undertaking.
Economic capital modelling
The use of internal models and processes to calculate the economic capital requirements of a bank.
EL
European Banking Authority
The European Banking Authority (EBA) provides advice to the European Commission and other EU institutions on banking regulation and policy issues. The EBA replaced the Committee of European Banking Supervisors (CEBS) in January 2011. It is responsible for promoting the convergence of supervisory practice throughout the European Union. The EBA also fosters common implementation and consistent application of Community legislation.
European Commission
The European Commission embodies and upholds the general interests of the European Union. It is represented by 20 appointed Commissioners (including its President) and has the sole right of initiative on the proposal of legislation.
European Council
The European Council is formed of representatives of Member States governments (usually Ministers) who meet to discuss issues of importance and agree legislative proposals. For Financial Services the main Council is ECOFIN (Economic and Financial Affairs committee) at which the Chancellor represents the UK.
Export Credit Agency (ECA)
An institution responsible for financing arrangement allowing a foreign buyer of exported goods and/or services to defer payment over a period of time, often providing an insurance or guarantee arrangement.
Exposure at Default (EAD)
The expected exposure of a bank for a given loan upon default of the counterparty.
External credit rating
An assessment of a company's credit worthiness produced by an agency. These ratings are produced for a company on a fee-based basis.
FCA
Financial Conduct Authority
The new regulatory authority focussing on consumer protection and markets. The FCA will, inter alia, take over responsibility from the FSA for supervising conduct of business and prudential regulation of those firms not shared with the Prudential Regulation Authority (PRA).
Financial Conglomerate
A financial group with cross-sector activities. For instance a financial conglomerate may contain a combination of credit institutions, investment firms and insurance operations.
FIRB
Firm
Commonly used to mean a bank (credit Institution) or an investment firm.
FOR
Fixed Overhead Requirement. Capital requirement for a regulated UK investment firm that is equal to 25% of the firms ‘relevant’ fixed expenditure i.e. total expenditure in the firm’s accounts but excluding certain operating expenses such as staff bonuses, interest payments and transaction commissions and fees.
Floor
Minimum. On a sliding scale, the floor would be the minimum percentage or amount that would apply.
Foundation Internal Ratings Based Approach
The intermediate of the three approaches to credit risk. Banks are required to use internal models to calculate their regulatory capital requirements. The supervisory authority will supply some of the parameters for these models (LGDs and EADs).
FSA
Financial Services Authority.
FSMA
Financial Services and Markets Act, 2000. Sets out the objectives and regulatory duties of the FSA, which are conferred on it by the Act.
FTP
Funds transfer pricing. FTP is an internal measurement framework designed to assess the financial impact of a bank's sources and uses of funds. FTP measures the ‘true’ cost of funding an earning asset and credit for an interest-bearing liability. Transfer pricing rates vary according to repricing term and other attributes, with the aim to represent the alternative ‘opportunity’ rate for the bank's sources or uses of funds.
FX Swap
An agreement to buy (sell) an amount of currency at an agreed rate and to resell (repurchase) the same amount of currency for a later date to (from) the same counterparty, also at an agreed rate. Not to be confused with a cross currency swap.
GENPRU
The General Prudential Sourcebook for banks, building societies, insurers and investment firms.
GHOS
The Group of Central Bank Governors and Heads of Supervision, the Basel Committee's oversight body.
Goodwill
The difference between the total value of a business and the value of the net assets on its balance sheet. The value represents the ability of the business to generate profits and cash in the future.
Groupe de Contact
The main working group of the Committee of European Banking Supervisors.
Guarantees
An agreement by a third party to cover the potential loss to a credit institution should a specified counterparty default on their commitments.
Haircut
The reduction in the value of an asset in determining its value for meeting capital requirements or its worth as collateral.
High volatility commercial real estate (HVCRE)
Significant concentrations in certain property (normally commercial) acquisitions, development and construction loans that lack "substantial equity" or are not "significantly pre-leased". For instance lending where the performance of the lending will very much depend on the success of the underlying investment.
Home Supervisor
The supervisor for the country from which a banking entity is headquartered.
Homogeneity
Extent to which individual assets in a pool display the same risk characteristics.
Host Supervisor
The supervisor for the country in which a foreign bank has a banking office or subsidiary.
Hypothecation
The pledging of securities or other assets as collateral to secure a loan or credit facility.
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