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Home About Deposit Insurance Glossary of Terms
Glossary of Terms for Deposit Insurance - Page 2 Print
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Glossary of Terms for Deposit Insurance
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Netting/netting arrangements This refers to the reduction of an accountholder's insured deposits by the amount of outstanding loans in a failed institution or the reduction of an accountholder's outstanding loans by the amount of deposits above the coverage limit.

Open-bank assistance - A resolution method in which an insured bank in danger of failing receives assistance in the form of a direct loan, an assisted merger, or a purchase of assets.

Paybox - A deposit insurer with powers limited to paying off the claims of depositors.

Purchase-and-assumption transaction (sales) - A resolution method in which a healthy bank or group of investors assume some or all of the obligations, and purchase some or all of the assets of the failed bank.

Receiver - The legal entity that undertakes the winding down of the affairs of an insolvent bank.

Recovery - The amount of net collections of a banks assets.

Regulatory discipline - Governs the establishment of new banks; qualifications of directors and managers; business activities; change of control; and standards for risk-management, internal controls, and external audits.

Risk minimiser A deposit insurer with the powers to reduce the risks it faces. These powers may include the ability to control entry and exit from the deposit insurance system, assess and manage its own risks and may conduct examinations of banks, or request such examinations.

Set-off - Rrefers to situations where the claim of a creditor in an insolvent bank (for example, a deposit) is deducted from a claim of the bank against the creditor (for example, a loan).

Situational analysis - An examination that policymakers undertake to assess factors such as: the state of the economy; current monetary and fiscal policies; the state and structure of the banking system; public attitudes and expectations; the state of the legal, prudential regulatory and supervisory; accounting and disclosure regimes.

Supervisory discipline - Requires that banks are monitored for safety and soundness as well as compliance issues and that corrective actions are taken promptly, including the closure of a bank when necessary.

Suspense account A suspense account is used when not enough information is available to post a transaction with the right offset. For example, dividends and interest are paid to a trust account on their payable date even if all of the money from depositors and paying agents is not received on time.

Systemic risk A risk that has implications for the general health of the financial system and can have serious adverse implications for financial stability and overall economic conditions.

Trust Account An account held on behalf of another person and administered/maintained by a trustee. It is usually established under a trust agreement.

Trustee - An individual or organization which holds or manages and invests assets for the benefit of another such as a parent that manages a deposit account for his/her child. The trustee is legally obliged to make all trust-related decisions with the trustee's interests in mind, and may be liable for damages in the event of not doing so. Trustees may be entitled to a payment for their services, if specified in the trust deed. In the specific case of the bond market, a trustee administers a bond issue for a borrower, and ensures that the issuer meets all the terms and conditions associated with the borrowing.



 
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Disclaimer

Please Note: This website is designed to give general information about deposit insurance and should not be relied upon as definitive. The actual deposit insurance coverage provided by BDIC following the failure of a member institution is based on the deposit account records at the failed member institution and is governed by the Deposit Insurance Act.