Inglés para Finanzas y Banca: Vocabulario Esencial

"overdraft facility"

A pre-approved arrangement with a bank allowing an account holder to withdraw more money than the account currently holds, up to an agreed limit.

"The business used its overdraft facility to cover payroll while waiting for customer invoices to be paid."

"standing order"

An instruction to a bank to pay a fixed amount to another account at regular intervals automatically.

"She set up a standing order for £500 each month to transfer funds to her savings account."

"direct debit"

An automatic payment arrangement where an organisation collects varying amounts directly from a customer's bank account with prior authorisation.

"The utility company collects quarterly bills via direct debit, so customers never miss a payment."

"correspondent bank"

A financial institution that provides services on behalf of another bank, typically in a different country, to facilitate cross-border transactions.

"The international wire transfer was routed through a correspondent bank in New York before reaching the beneficiary."

"clearing"

The process by which banks exchange and reconcile payment instructions and transfer funds between each other to settle transactions.

"Most domestic cheques take two business days to pass through the clearing system."

"know your customer (KYC)"

The mandatory process banks use to verify the identity of clients and assess the risk of illegal activity such as money laundering.

"The compliance officer requested additional documentation to complete the KYC process for the new corporate client."

"nostro account"

A bank account held by a domestic bank at a foreign bank in the foreign bank's local currency, used to facilitate international transactions.

"The treasury team monitored the nostro account balances in euros and Japanese yen daily."

"letter of credit"

A financial instrument issued by a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount.

"The exporter required an irrevocable letter of credit before shipping the goods to the new overseas buyer."

"collateral"

An asset pledged by a borrower to a lender as security for a loan, which can be seized if the borrower defaults.

"The company used its warehouse property as collateral to secure a five-year term loan."

"credit scoring"

A statistical method used by lenders to evaluate the creditworthiness of a borrower based on financial history and other data points.

"Her strong credit scoring enabled her to qualify for the lowest available mortgage rate."

"loan-to-value ratio (LTV)"

The ratio of a loan amount to the appraised value of the asset being financed, expressed as a percentage.

"A loan-to-value ratio above 80% typically requires the borrower to purchase private mortgage insurance."

"non-performing loan (NPL)"

A loan on which the borrower has not made scheduled interest or principal payments for a defined period, usually 90 days or more.

"Rising unemployment pushed the bank's non-performing loan ratio to 4.2%, prompting a review of credit standards."

"amortisation schedule"

A table showing each periodic loan payment, broken down into the principal repayment and interest charge over the life of the loan.

"The borrower requested an amortisation schedule to understand how quickly the loan balance would decrease."

"covenant"

A condition written into a loan agreement that the borrower must comply with, such as maintaining certain financial ratios.

"The lender invoked its rights under the financial covenant after the borrower's interest coverage ratio fell below 1.5x."

"syndicated loan"

A large loan provided by a group of lenders who work together to fund a single borrower, sharing the risk and return.

"The infrastructure project was financed through a $2 billion syndicated loan arranged by three major investment banks."

"debt service coverage ratio (DSCR)"

A measure of the cash flow available to service debt, calculated by dividing net operating income by total debt service.

"The project finance team required a minimum debt service coverage ratio of 1.25x before approving the loan."

"initial public offering (IPO)"

The first time a private company offers shares to the general public on a stock exchange to raise capital.

"The technology startup raised $500 million in its initial public offering on the Nasdaq exchange."

"underwriting"

The process by which investment banks commit to purchasing a new issue of securities and reselling them to investors, taking on the risk of the offering.

"Goldman Sachs led the underwriting of the bond issue, guaranteeing the company would receive the full proceeds."

"yield curve"

A graph that plots the interest rates of bonds with equal credit quality but different maturity dates, used to gauge economic expectations.

"An inverted yield curve, where short-term rates exceed long-term rates, is often seen as a recession indicator."

"market maker"

A firm that continuously quotes both buy and sell prices for a financial instrument, providing liquidity to the market.

"Without a market maker willing to provide two-way quotes, trading in the small-cap stock became very difficult."

"secondary market"

A market where previously issued securities are bought and sold among investors, as opposed to being purchased from the issuer.

"After the IPO, shares traded freely in the secondary market, and prices rose 30% on the first day."

"book building"

The process by which an underwriter attempts to determine the price at which an IPO will be offered, based on investor demand.

"During the book building process, the bank collected orders from institutional investors at various price points."

"rights issue"

An offer to existing shareholders to purchase additional shares at a discounted price in proportion to their current holdings.

"The bank launched a rights issue to raise new capital and strengthen its balance sheet after the losses."

"bond indenture"

The formal legal contract between a bond issuer and the bondholders, specifying the terms of the bond including interest rate, maturity, and covenants.

"Lawyers spent weeks reviewing the bond indenture to ensure all protective covenants were appropriately drafted."

"value at risk (VaR)"

A statistical measure that estimates the potential loss in value of a portfolio over a defined period for a given confidence interval.

"The trading desk reported a daily value at risk of $4 million at a 99% confidence level."

"counterparty risk"

The risk that the other party in a financial contract will default on its obligations before the final settlement of the transaction.

"Counterparty risk increased sharply during the financial crisis as interbank lending dried up."

"liquidity risk"

The danger that a bank cannot meet its short-term financial obligations because it cannot convert assets into cash quickly enough.

"The bank stress-tested its liquidity risk position by simulating a sudden 30% withdrawal of deposits."

"stress testing"

A simulation technique used to evaluate how a bank's portfolio performs under extreme but plausible adverse economic conditions.

"Regulators required all systemically important banks to publish the results of their annual stress testing."

"hedging"

A risk management strategy using financial instruments such as derivatives to offset potential losses in an existing position.

"The airline hedged its jet fuel exposure by entering into forward contracts to lock in current prices."

"credit default swap (CDS)"

A financial derivative contract that allows one party to transfer the credit risk of a reference entity to another party in exchange for periodic payments.

"Investors bought credit default swaps on mortgage-backed securities as insurance against borrower defaults."

"operational risk"

The risk of losses resulting from inadequate internal processes, people, systems, or external events, including fraud and cyber attacks.

"The large data breach prompted the board to increase the operational risk budget significantly."

"Basel III"

An international regulatory framework developed after the 2008 financial crisis that sets minimum capital, leverage, and liquidity requirements for banks.

"Under Basel III, banks must hold a Common Equity Tier 1 capital ratio of at least 4.5% of risk-weighted assets."

"due diligence"

The comprehensive investigation and analysis of a target company's financial, legal, and operational affairs before a merger, acquisition, or investment.

"The acquiring bank's legal and finance teams conducted six weeks of due diligence before signing the deal."

"leveraged buyout (LBO)"

The acquisition of a company using a significant amount of borrowed money, with the assets of the acquired company often used as collateral for the loans.

"The private equity firm structured a leveraged buyout, financing 70% of the purchase price with debt."

"discounted cash flow (DCF)"

A valuation method that estimates the value of an investment based on its expected future cash flows, adjusted for the time value of money.

"The analyst built a discounted cash flow model to determine the intrinsic value of the target company."

"accretive"

Describing an acquisition or transaction that immediately increases the acquirer's earnings per share upon completion.

"Management announced the merger would be accretive to earnings from the first full year of combined operations."

"fairness opinion"

A professional evaluation provided by an investment bank confirming that the terms of a proposed transaction are financially fair to shareholders.

"The board commissioned an independent fairness opinion before recommending the takeover bid to shareholders."

"tombstone"

An advertisement or announcement, historically printed in the financial press, that publicises the completion of a significant financial transaction.

"The bank displayed the tombstone for the landmark $3 billion bond issuance in its deal-room lobby."

"breakup fee"

A penalty paid by a party that withdraws from a merger or acquisition agreement, designed to compensate the other party for wasted time and costs.

"The target company would receive a $50 million breakup fee if the acquirer terminated the agreement."

"mezzanine financing"

A hybrid form of capital that sits between senior debt and equity in the capital structure, combining features of both debt and equity.

"The real estate developer used mezzanine financing to bridge the gap between the senior mortgage and its equity contribution."

"anti-money laundering (AML)"

A set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income.

"The bank was fined $200 million for failures in its anti-money laundering controls that allowed illicit funds to flow through accounts."

"suspicious activity report (SAR)"

A report filed by a financial institution to regulatory authorities when a transaction or activity is suspected of involving money laundering or fraud.

"The compliance officer filed a suspicious activity report after noticing an unusual series of large cash deposits."

"capital adequacy ratio (CAR)"

A measure of a bank's available capital expressed as a percentage of its risk-weighted credit exposures, used to assess financial stability.

"The regulator required banks to maintain a minimum capital adequacy ratio of 10.5% including all buffer requirements."

"systemically important financial institution (SIFI)"

A bank or financial institution whose failure could trigger a wider financial crisis due to its size, interconnectedness, and complexity.

"As a designated systemically important financial institution, the bank faced additional capital surcharges and recovery planning requirements."

"ring-fencing"

The regulatory requirement for large banks to separate their retail banking operations from riskier investment banking activities.

"UK legislation required major banks to complete ring-fencing of their retail operations by 2019."

"stress test"

A regulatory exercise in which a bank's balance sheet is subjected to hypothetical adverse economic scenarios to assess its resilience.

"The Federal Reserve's annual stress test requires banks to demonstrate they can survive a severe economic downturn."

"fiduciary duty"

The legal obligation of a financial professional to act in the best interests of their client, putting the client's needs above their own.

"The fund manager violated her fiduciary duty by directing trades to a broker in exchange for personal gifts."

"regulatory capital"

The minimum amount of capital a bank is required to hold under prudential rules to absorb unexpected losses and remain solvent.

"The bank raised new equity to boost its regulatory capital above the minimum requirement following the stress test results."