A

ABCP

Asset-backed commercial paper.

Adequate Capital

The amount of capital a bank needs to cover all the risks it faces. This would be a combination of the requirements for credit, market and operational risk and any additional capital required for risks captured under Pillar 2.

Advanced Internal Ratings Based Approach

The most sophisticated of the three approaches available for the measurement of credit risk under Basel II, where banks can provide their own estimates of PD, LGD, EAD and Maturity. It involves the use of internal models based on internally generated parameters for the calculation of regulatory capital requirements.

Advanced Measurement Approach

The most sophisticated of the three Basel II approaches available for operational risk. Under AMA, the institutions internal operational risk models will generate the regulatory capital requirements. These models will need to meet set quantitative and qualitative criteria.

Aggregate holding company

The company with ultimate control over the subsidiaries and sub groups within a financial group.

ALMM

Additional Liquidity Monitoring Metrics.  Collective name for liquidity reporting returns to meet EU regulatory requirements.

Alternative Standardised Approach (ASA)

A variant to the Standardised Approach to calculating operational risk Pillar 1 capital requirements for retail and commercial banking business lines.

Anchor Scenario

An external benchmark against which to set/compare the severity of particular stress tests e.g. as produced by a regulator, central bank and/or economic forecasting institute.

Asset-Backed Security

A debt security collateralised (backed) by a pool of underlying assets.

Available Stable Funding

In the context of the Net Stable Funding Ratio, it is the total amount of a bank’s (1) capital, (2) preferred stock with maturity of equal to or greater than one year, (3) liabilities with effective maturities of one year or greater and (4) that portion of “stable” non-maturity deposits and/or term deposits with maturities of less than one year that would be expected to stay with the bank for an extended period in a firm-specific (idiosyncratic) stress event.

B

Bail-in

Statutory power of a resolution authority to restructure the liabilities of a distressed financial institution by writing down its unsecured debt and/or converting it to equity, to achieve prompt recapitalisation and restructuring.

Bank for International Settlements

Formed in 1930, it is the oldest of all the international financial organisations, coordinating the activities of national banking regulatory and supervisory bodies on a global level. The BIS governs several committees including the Basel Committee on Banking Supervision.

Banking book

Exposures arising through the issuing of credit to individuals, corporate entities, other non-corporate bodies, governments and countries.

Bank Recovery and Resolution Directive

EU framework for recovery and resolution of banks and investment firms, which aims to provide authorities with tools to act sufficiently early to minimise the impact of a bank’s failure on the economy and financial system.

Basel Accords

The three sets of banking regulations (Basel I, Basel II and Basel III) set by the Basel Committee on Bank Supervision.

Basel I

The 1988 Basel Accord setting out the initial framework for the assessment of regulatory capital requirements for credit risk.

Basel 1.5

BCBS amendment to the 1988 Basel I Capital Accord made in 1996 to incorporate market risk, sometimes referred to as Basel 1.5.

Basel II

The name used to describe the 2004 Basel Accord.

Basel 2.5

BCBS revisions to Basel II agreed in July 2009, including capital requirements for securitisation and trading book exposures.

Basel III

The substantial revision of the previous Basel I and Basel II accords published in December 2010 following endorsement by the G20 Leaders at the Seoul summit in November 2010.

Basel IV

Substantial revisions to the Basel III framework, which due to their scope and significance have collectively been dubbed ‘Basel IV’.

Basel Committee on Banking Supervision

The BIS committee established by the G-10 in 1974, with representation from individual countries' central banks and supervisory authorities, which formulates international supervisory standards and guidelines.

Basic Indicator Approach (BIA)

The most simplistic of the three Basel II approaches to the measurement of operational risk. Under this method a bank calculates its operational risk regulatory capital requirements by taking a single risk-weighted (15 percent for the majority of banks and 12 per cent for banks operating on a limited license) multiple of a three-year average of gross income to produce their regulatory capital requirements.

BOFI

A bank or other financial industry entity.

Borrower Rating

Indicators or forecasts of the potential for credit loss because of an obligor's failure to pay, a delay in payment, or partial repayment.

Business cycle

A cycle of economic activity around a trend growth rate typically characterised by a trough, upswing, peak and downswing.