Commercial Banks, Savings Banks Industry Terminology

ABS (Asset-Backed Securities)

Fixed-income securities collateralized by pools of loans (e.g., auto, credit card, student). Cash flows to investors come from borrowers’ payments, often structured in tranches with varying risk and maturity.

The bank sold a tranche of auto loan ABS; We hedged our credit card ABS exposure; Investor demand for prime ABS tightened spreads

ACH (Automated Clearing House)

U.S. batch electronic payment network used for direct deposits and debits. Low-cost, next-day or same-day settlement for recurring and one-off transactions.

Payroll is paid via ACH direct deposit; We initiated an ACH debit for the utility bill; ACH returns spiked after the weekend

ACL (Allowance for Credit Losses)

Balance sheet reserve that reflects expected lifetime credit losses under CECL. A contra-asset against loans and certain securities, adjusted through the provision for credit losses.

We increased the ACL due to deteriorating CRE; ACL coverage of NPLs rose to 180%; CECL modeling drove a higher day‑one ACL

ALM (Asset-Liability Management)

Governance, modeling, and execution to balance earnings and capital sensitivity to interest-rate and liquidity risks across the balance sheet. Often overseen by an Asset-Liability Committee (ALCO).

The ALCO meets monthly to oversee ALM; We used swaps as part of our ALM strategy; ALM modeling showed NII at risk in a +200 bp shock

AML (Anti-Money Laundering)

Laws, controls, and monitoring to detect and report money laundering and terrorist financing (e.g., KYC, transaction monitoring, sanctions screening, filing SARs/CTRs).

Our AML system flagged unusual wire patterns; The AML officer escalated a SAR; We enhanced AML controls for high‑risk jurisdictions

Basel III

Global regulatory framework setting minimum capital, leverage, and liquidity standards (e.g., CET1, LCR, NSFR), phased in after the 2008 crisis.

The proposal raises Basel III output floors; Our LCR easily meets Basel III; Basel III endgame impacts RWA density

Basis Points (bps)

A unit equal to 0.01%. Commonly used to express interest rate changes, spreads, and fees.

The Fed hiked 25 bps; The loan spread widened by 15 bps; Deposit betas rose 40 bps this quarter

Brokered Deposits

Deposits obtained through a third-party broker. Often less stable and subject to regulatory limits/conditions, especially for less-than-well-capitalized banks.

We capped brokered deposit growth; The bank relied on brokered CDs for funding; New rules affected our brokered classification

BSA (Bank Secrecy Act)

U.S. law requiring financial institutions to help detect and prevent money laundering, including KYC, CTRs, SARs, and recordkeeping requirements.

BSA training is mandatory for all staff; The BSA exam focused on SAR quality; Our BSA/AML model was validated

C&I (Commercial and Industrial) Loans

Loans to businesses for working capital, equipment, and general corporate purposes. Often revolving lines with covenants, pricing grids, and collateral.

We booked a C&I line for working capital; C&I utilization increased 200 bps; The C&I portfolio shifted to more floating rates

CAMELS Rating

Confidential supervisory score of banks across Capital, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk (1 best to 5 worst).

The exam resulted in a 2-rated CAMELS; Liquidity weakness hurt our CAMELS score; Management component improved under CAMELS

CECL (Current Expected Credit Losses)

Accounting standard (ASC 326) requiring lifetime expected credit loss recognition on financial assets measured at amortized cost, recorded through the ACL.

CECL requires lifetime loss estimates at origination; We updated CECL macro scenarios; CECL increased reserves for credit cards

CET1 Ratio (Common Equity Tier 1 Ratio)

Regulatory capital ratio: CET1 capital divided by risk-weighted assets. Key solvency metric under Basel III.

CET1 rose to 11.8%; The G‑SIB surcharge increases CET1 needs; RWA optimization boosted the CET1 ratio

CFPB (Consumer Financial Protection Bureau)

U.S. regulator overseeing consumer financial laws (e.g., Reg E, Reg Z, UDAAP), supervision, rulemaking, and enforcement.

CFPB issued a rule on overdrafts; We responded to a CFPB CID; CFPB exam tested our Reg Z compliance

CHIPS (Clearing House Interbank Payments System)

Private U.S. large-value USD payment system using real-time bilateral/multilateral netting, widely used for cross-border and domestic high-value payments.

The USD leg settled over CHIPS; We queued a large-value payment in CHIPS; CHIPS throughput credit reduced liquidity needs

Core Deposits

Stable, relationship-based deposits (e.g., checking, savings, MMDA) viewed as lower-cost and stickier than wholesale or brokered funding.

Core deposit growth lowered funding costs; We focused on deepening core checking; The surge in noncore time deposits hurt core mix

CRA (Community Reinvestment Act)

U.S. law encouraging banks to meet credit needs of their entire communities, including low- and moderate-income areas. Exam-based ratings affect expansion plans.

Our CRA rating was Satisfactory; We expanded LMI small-business lending for CRA; The CRA exam reviewed branch distribution

CTR (Currency Transaction Report)

Report filed with FinCEN for cash transactions over $10,000 in a business day, including aggregation across related transactions.

A CTR was filed for a $12,000 cash deposit; CTR aggregation rules triggered; CTR exceptions were reviewed in audit

Debt-to-Income Ratio (DTI)

Borrower’s total monthly debt payments divided by gross monthly income. Common mortgage and consumer underwriting criterion.

The borrower’s DTI is 38%; Underwriting caps DTI at 43% for QM; Rising DTIs tightened mortgage credit box

Deposit Beta

The percentage of a market rate change that passes through to a bank’s deposit rates. Indicates pricing sensitivity and funding cost dynamics.

Our interest-bearing deposit beta was 45%; Digital banks pushed betas higher; We modeled lagged betas for savings

Dodd-Frank Act

2010 U.S. financial reform law covering consumer protection, systemic risk oversight, stress testing, capital, and proprietary trading limits.

Dodd-Frank created the CFPB; We’re subject to Dodd-Frank stress testing; The Volcker Rule under Dodd-Frank limits trading

Durbin Amendment

Section of Dodd-Frank limiting debit card interchange fees for large issuers and requiring network routing choice.

Durbin capped debit interchange for us; Dual-routing compliance under Durbin; Post-Durbin, we shifted to checking fees

ECR (Earnings Credit Rate)

A rate used to credit commercial deposit balances to offset service fees on analysis accounts; not cash interest.

ECRs offset treasury management fees; We raised ECR following rate hikes; Analysis statements show unused ECR

EFT (Electronic Funds Transfer)

Electronic movement of funds, including ACH, card transactions, ATM withdrawals, and certain account-to-account transfers.

The refund posted via EFT; Reg E covers consumer EFT errors; EFT rails include ACH and card networks

Efficiency Ratio

Noninterest expense divided by net revenue (net interest income plus noninterest income). Lower indicates better operating efficiency.

Our efficiency ratio improved to 54%; Branch closures helped the efficiency ratio; We target sub‑50% efficiency longer term

Escrow Account

Account where funds are held for a specific purpose, such as mortgage borrowers’ property taxes/insurance or construction holdbacks.

The servicer disbursed taxes from escrow; Escrow shortages triggered an analysis; Construction escrow holds retainage

FDIC Insurance

U.S. deposit insurance protecting eligible deposits up to standard limits per depositor, per insured bank, per ownership category.

Balances exceed FDIC limits in this entity; We advised clients on FDIC coverage categories; FDIC assessments increased this year

Fed Funds Rate

Benchmark overnight interest rate for unsecured lending of reserves between depository institutions; primary monetary policy tool.

A 25 bp hike raised our prime rate; Fed funds futures imply cuts; NIM is sensitive to fed funds moves

Fedwire Funds Service

Federal Reserve’s real-time gross settlement (RTGS) system for large-value, time-critical USD payments with immediate finality.

We sent the wire via Fedwire; Fedwire is RTGS with immediate finality; End-of-day Fedwire caps were adjusted

FFIEC (Federal Financial Institutions Examination Council)

Interagency U.S. body that prescribes uniform principles, reporting (e.g., Call Reports), and exam standards for financial institutions.

FFIEC Call Report updates go live Q2; We used FFIEC guidance on cybersecurity; FFIEC maps inform CRA analysis

FHLB Advances

Collateralized borrowings from the Federal Home Loan Banks that provide term funding and liquidity to member institutions.

We tapped FHLB advances for liquidity; Collateral haircuts increased at the FHLB; Laddered FHLB terms to match assets

FICO Score

Widely used consumer credit score (300–850) predicting likelihood of delinquency; key input to underwriting and pricing.

Minimum FICO is 680 for this product; FICO migration affected CECL; We priced tiers by FICO bands

Fintech Partnership

A collaboration with a technology firm to deliver financial services (e.g., digital origination, payments, BaaS), requiring robust risk and compliance oversight.

We launched an embedded finance fintech partnership; The bank-as-a-service fintech partnership expanded; Diligence covered the fintech’s compliance stack

FTP (Funds Transfer Pricing)

Internal pricing framework that allocates funding costs/credits and liquidity value to business lines, enabling risk-adjusted performance measurement.

FTP credits stable deposits; We adjusted FTP to reflect liquidity premiums; Business unit ROE improved after FTP changes

GLBA (Gramm-Leach-Bliley Act)

U.S. law enabling financial holding companies and requiring consumer financial privacy and information security (Safeguards Rule).

GLBA privacy notices were mailed; Our GLBA Safeguards assessment passed; GLBA allowed affiliations across banking and securities

G-SIB Surcharge

Additional CET1 capital buffer applied to global systemically important banks, based on size, interconnectedness, complexity, and cross-border activity.

The G‑SIB surcharge raised our CET1 requirement; Activity indicators increased our G‑SIB score; We managed cross‑jurisdictional claims for G‑SIB

HELOC (Home Equity Line of Credit)

Revolving credit line secured by a borrower’s home equity, typically interest-only during draw period with variable rates.

HELOC draw utilization rose; We converted the HELOC to amortizing; HELOC underwriting capped CLTV at 85%

HMDA (Home Mortgage Disclosure Act)

U.S. law requiring reporting of home lending data to assess market trends and fair lending performance.

HMDA LAR was submitted on time; HMDA data show pricing disparities; We remediated HMDA geocoding errors

HQLA (High-Quality Liquid Assets)

Assets eligible for the LCR numerator, categorized by liquidity and credit quality (Level 1, 2A, 2B) with haircuts and caps.

We increased Level 1 HQLA; MBS haircuts limit Level 2B HQLA; HQLA buffers support our LCR

HTM (Held-to-Maturity)

Accounting category for debt securities recorded at amortized cost when the bank has the intent and ability to hold to maturity; limited sales permitted.

The bond was reclassified to HTM; Unrealized losses sit in OCI for AFS, not HTM; HTM sales could taint the portfolio

Interchange Fee

Fee paid by the merchant’s acquirer to the card issuer on each card transaction; governed by network rules and regulated for debit in the U.S.

Debit interchange fell post‑Durbin; We negotiated lower credit interchange with the network; Interchange revenue offset rewards costs

Interest Rate Risk in the Banking Book (IRRBB)

Risk to earnings and economic value from interest rate movements affecting accrual portfolios (loans, deposits, securities). Managed via ALM.

EVE declined under IRRBB stress; We monitor IRRBB through gap and duration; IRRBB policy limits NII at risk

Interest Rate Swap

Derivative contract exchanging fixed and floating interest payments on a notional principal to manage interest rate exposure.

We swapped fixed to floating to reduce duration; The swap receives SOFR; Swap collateral is posted daily

KYB (Know Your Business)

Due diligence to identify and verify business customers and their beneficial owners, assessing risk for AML compliance.

KYB verified the LLC’s ownership; Enhanced KYB for a money services business; KYB screening flagged a sanctioned director

KYC (Know Your Customer)

Customer identification and verification, risk profiling, and ongoing monitoring to comply with AML/sanctions and prevent financial crime.

KYC captured passport and address; We refreshed KYC for PEPs; KYC risk scoring triggered EDD

LCR (Liquidity Coverage Ratio)

Basel III ratio of HQLA to projected 30‑day net cash outflows under stress; must be at least 100% for covered banks.

LCR increased to 125%; Retail outflow assumptions drive LCR; HQLA optimization improved our LCR

LIBOR-SOFR Transition

Industry shift from LIBOR to risk-free rates (e.g., SOFR in the U.S.), affecting contracts, systems, discounting, and hedging.

We amended legacy loans to SOFR; The swap curve moved to SOFR discounting; Fallback language governed the LIBOR transition

Liquidity Risk

Risk of being unable to meet obligations without unacceptable losses. Managed through buffers, diversified funding, and contingency plans.

We increased contingent liquidity to cover stress outflows; Wholesale funding raised liquidity risk; The liquidity stress test showed gaps in week 2

Loan-to-Value (LTV)

Loan amount divided by collateral appraised value; key risk metric in real estate lending.

LTV on the CRE loan is 65%; We require lower LTVs for construction; Rising appraisals improved portfolio LTVs

NIM (Net Interest Margin)

Net interest income divided by average earning assets; measures core earning power from the spread between asset yields and funding costs.

NIM compressed as deposit costs rose; Asset mix shift lifted NIM; Hedge amortization affected reported NIM