M

Macroeconomic

The wider economy as a whole e.g. UK, European, world economies.

Macroprudential

Prudential measures pertaining to the wider financial system and economy.

Mark-to-Market

The valuation of an asset or liability based on its current market price, or that of similar assets or liabilities.

Market Disclosure

See disclosure requirements.

Market Risk

The risk of losses of on- and off-balance sheet positions arising from changes in market price.

Market-Wide Stress

Adverse financial market conditions, including disruption in financial markets, generally affecting firms operating within the firm’s own market sector.

Maturity

The date on which payment of a financial obligation is due.

Microeconomic

The economic model/behaviour pertaining to an individual bank or institution.

Microprudential

The exercise of caution or prudential measures pertaining to an individual bank or institution.

Minimum Capital Requirements

The minimum amount of regulatory capital that a financial institution must hold to meet its Pillar 1 requirements for credit, market and operational risk and to meet Pillar 2A supervisory requirements concerning other particular risks that it faces, including credit concentration risk.

Mismatch

In the context of liquidity, the difference between cash inflows (from maturing loans) and outflows (from maturing deposits) at a particular point in time. A negative mismatch is where outflows exceed inflows.

Money Market

A financial market for short-term borrowing, lending, buying and selling assets over-the-counter.

Mortgage Backed Bonds

A form of capital raising instrument issued by a financial institution that is secured on a given portfolio of mortgages on its balance sheet. Should the bank be wound up the bondholders would have claim on these assets in preference to other creditors.

MRCR

Market Risk Capital Requirement. The capital charge (or capital resources requirement) for market risk.

MREL

Minimum Requirement for regulatory capital and Eligible Liabilities. MREL is a regulatory requirement for banks to maintain sufficient regulatory capital and eligible liabilities which can credibly bear losses in the event that a bank fails.

MTM

Mark-to-market.
 

Multilateral Development Bank

An institution that provides financing for the purpose of national development.

N

Net Interest Income

The net income resulting from the spread between interest paid out on deposits and interest earned on assets (lending).

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows.

Net Stable Funding Ratio

The ratio of the amount of Available Stable Funding to the required amount of stable funding, which must be greater than 100% to meet the minimum Basel III regulatory standard.

Netting Agreement

An agreement to net gains and losses on transactions so that a single net amount is owed by one party to the other.

O

Obligor

Borrower or borrowing group to whom a loan is extended.

OECD

Organisation for Economic Co-operation and Development group of 30 member countries. Capital adequacy requirements distinguish between exposures in OECD and non-OECD sovereigns and banks.

Off-Balance Sheet

Assets/liabilities that have been committed but not yet transacted. In terms of credit risk, off balance sheet items are obligations to make loans or other payments in the future.

OIS

Overnight Index Swap. An interest rate swap that exchanges a fixed rate of interest for floating rate payments based on a notional principal. The floating rate is a specified published daily overnight rate for the OIS currency.

OLAR

Overall Liquidity Adequacy Rule, which requires that adequate liquidity resources are maintained at all times to meet liabilities as they fall due, under both normal and stressed conditions.

On-Balance Sheet

Items that appear within the bank's balance sheet e.g. loans which have actually been made (see off balance sheet, above).

One-Way CSA

A Credit Support Annex agreement under which only one of the counterparties is required to post collateral.

Operational Risk

The risks associated with the internal failure of systems or people, or the risk arising from external events. These are risk events such as internal fraud, the failure of internal IT infrastructure (e.g. for payment and settlement) or external factors such as terrorism, which have the potential to impact on the institutions ability to carry out its business.

Operational Risk Requirement

The Capital Charge for Operational Risk i.e. the amount of regulatory capital that must be assigned for operational risk.

Option (contract)

A derivative contract that offers the right to buy (call option) an asset for a pre-agreed (strike) price or to sell at an agreed price (put option).

OTC

Over-the-counter (off-exchange trading).

OTD

The Originate-to-Distribute model of lending, where the originator of a loan sells it to various third parties.

Output Floor

Minimum Pillar 1 capital requirements calculated using internal models.

Over-the-Counter (trading)

The trading of financial instruments (such as stocks, bonds, commodities or derivatives) directly between two parties, rather than via a trading exchange such as a futures exchange or stock exchange.