Banking Law Fundamentals
Expert-defined terms from the Professional Certificate in Banking and Finance Law course at London School of Business and Administration. Free to read, free to share, paired with a professional course.
Absolute Assignment refers to the transfer of all rights and interests in a p… #
Related terms include Novation and Transfer of Ownership. Absolute assignment is commonly used in banking to transfer the ownership of a loan from one bank to another, allowing the new owner to collect payments and enforce the terms of the loan.
Acceptance refers to the act of agreeing to the terms of a contract or <b… #
Related terms include Offer and Consideration. Acceptance is a critical component of contract formation in banking law, as it indicates the parties' intention to be bound by the terms of the agreement.
Account Agreement refers to a contract between a bank and its customer th… #
Related terms include Deposit Account and Bank-Customer Relationship. Account agreements are essential in banking law, as they establish the framework for the bank-customer relationship and provide a basis for resolving disputes.
Accommodation Party refers to a party that signs a negotiable instrument ,… #
Related terms include Surety and Guarantor. Accommodation parties are commonly used in banking law to provide additional credit support for a borrower, allowing the borrower to access credit that might not be available otherwise.
ACH (Automated Clearing House) refers to an electronic payment system tha… #
Related terms include Electronic Fund Transfer and Wire Transfer. ACH is a critical component of the banking system, as it enables efficient and secure transfer of funds between accounts.
Adjustable #
Rate Mortgage (ARM) refers to a type of mortgage loan where the interest rate can change over time, often based on market conditions. Related terms include Fixed-Rate Mortgage and Interest Rate Risk. Adjustable-rate mortgages are commonly used in banking law to provide borrowers with flexible interest rates, allowing them to take advantage of changes in market conditions.
Affinity Card refers to a type of credit card that is co #
branded with a particular organization or charity, often offering rewards or benefits to cardholders. Related terms include Co-Branded Card and Rewards Program. Affinity cards are popular in banking law, as they allow banks to partner with organizations and offer unique benefits to cardholders.
Agency Agreement refers to a contract between a bank and its customer tha… #
Related terms include Fiduciary Duty and Principal-Agent Relationship. Agency agreements are essential in banking law, as they establish the framework for the agency relationship and provide a basis for resolving disputes.
Aggregate Credit Limit refers to the total credit limit available to a bo… #
Related terms include Credit Limit and Credit Facility. Aggregate credit limits are critical in banking law, as they help banks manage credit risk and ensure that borrowers do not exceed their credit capacity.
Amortization Schedule refers to a schedule that outlines the principal… #
Related terms include Loan Repayment and Interest Calculation. Amortization schedules are essential in banking law, as they provide a clear understanding of the loan repayment terms and help borrowers manage their debt obligations.
Annual Percentage Rate (APR) refers to the interest rate charged on a … #
Related terms include Interest Rate and Fee Disclosure. APR is a critical component of banking law, as it provides a standardized measure of the cost of credit and helps borrowers compare different credit options.
Anti #
Money Laundering (AML) refers to laws and regulations designed to prevent the laundering of illicit funds through the financial system, often requiring banks to implement know-your-customer and reporting procedures. Related terms include Know-Your-Customer and Suspicious Activity Report. AML is essential in banking law, as it helps prevent the financing of terrorism and other criminal activities.
Asset #
Based Lending refers to a type of lending where the loan is secured by a specific asset, such as inventory or equipment, often used by small businesses and entrepreneurs. Related terms include Secured Lending and Collateral. Asset-based lending is popular in banking law, as it allows lenders to manage credit risk and provide financing to borrowers who may not qualify for traditional loans.
Assignment refers to the transfer of rights or interests in a c… #
Related terms include Novation and Transfer of Ownership. Assignment is commonly used in banking to transfer the ownership of a loan from one bank to another, allowing the new owner to collect payments and enforce the terms of the loan.
Automated Teller Machine (ATM) refers to a machine that allows customers… #
Related terms include Electronic Banking and Self-Service Banking. ATMs are a critical component of the banking system, as they provide customers with convenient access to their accounts and enable banks to reduce costs and improve efficiency.
Bank Holding Company refers to a company that owns or controls one or mor… #
Related terms include Bank Subsidiary and Affiliate. Bank holding companies are essential in banking law, as they provide a framework for the ownership and control of banks and help regulate the banking industry.
Bank Secrecy Act (BSA) refers to laws and regulations designed to prevent the <i… #
Related terms include Anti-Money Laundering and Suspicious Activity Report. BSA is critical in banking law, as it helps prevent the financing of terrorism and other criminal activities.
Bankruptcy refers to a legal process where an individual or business</… #
Related terms include Insolvency and Debt Restructuring. Bankruptcy is a complex area of banking law, as it involves the intersection of contract law, property law, and insolvency law.
Bill of Exchange refers to a negotiable instrument that orders a payer… #
Related terms include Check and Promissory Note. Bills of exchange are essential in banking law, as they provide a standardized mechanism for making payments and transferring funds.
Branch Banking refers to a banking model where a bank operates multiple <… #
Related terms include Retail Banking and Commercial Banking. Branch banking is a traditional model of banking, as it allows banks to provide personalized services to customers and build relationships with the local community.
Call Option refers to a financial instrument that gives the holder … #
Related terms include Put Option and Derivative. Call options are commonly used in banking law to manage risk and provide flexibility in investment portfolios.
Capital Adequacy refers to the regulatory requirement that banks maintain… #
Related terms include Basel Accords and Risk-Based Capital. Capital adequacy is essential in banking law, as it helps banks manage risk and maintain stability in the financial system.
Cashier's Check refers to a check that is guaranteed by a bank, of… #
Related terms include Certified Check and Bank Draft. Cashier's checks are commonly used in banking law to provide a secure and reliable mechanism for making payments.
Central Bank refers to a bank that is responsible for monetary policy<… #
Related terms include Monetary Policy and Financial Regulation. Central banks are critical in banking law, as they play a key role in maintaining the stability of the financial system and regulating the banking industry.
Certificate of Deposit (CD) refers to a time deposit offered by a bank wi… #
Related terms include Time Deposit and Savings Account. CDs are popular in banking law, as they provide customers with a low-risk investment option and help banks manage their liquidity.
Check refers to a negotiable instrument that orders a payer to pay… #
Related terms include Bill of Exchange and Draft. Checks are essential in banking law, as they provide a standardized mechanism for making payments and transferring funds.
Check Clearing refers to the process by which a check is collected … #
Related terms include Electronic Fund Transfer and Wire Transfer. Check clearing is critical in banking law, as it enables the efficient and secure transfer of funds between accounts.
Collateral refers to assets or property that are used to secure… #
Related terms include Secured Lending and Asset-Based Lending. Collateral is essential in banking law, as it helps lenders manage credit risk and provides a basis for recovering losses in the event of default.
Commercial Banking refers to banking services provided to businesses</… #
Related terms include Retail Banking and Corporate Banking. Commercial banking is a critical component of the banking system, as it provides businesses with access to capital and financial services.
Commodity refers to a physical good or resource that is traded on… #
Related terms include Derivative and Futures Contract. Commodities are essential in banking law, as they provide a basis for risk management and investment in the physical economy.
Compound Interest refers to interest that is calculated on both th… #
Related terms include Simple Interest and Interest Calculation. Compound interest is critical in banking law, as it provides a mechanism for calculating interest on loans and investments.
Confidentiality refers to the duty of a bank to maintain the secrecy</… #
Related terms include Bank Secrecy Act and Customer Confidentiality. Confidentiality is essential in banking law, as it helps maintain trust and confidence in the banking system.
Consumer Banking refers to banking services provided to individuals</b… #
Related terms include Retail Banking and Personal Banking. Consumer banking is a critical component of the banking system, as it provides individuals with access to financial services and products.
Corporate Banking refers to banking services provided to corporations<… #
Related terms include Commercial Banking and Investment Banking. Corporate banking is essential in banking law, as it provides large businesses with access to capital and financial services.
Credit Bureau refers to a company that collects and maintains info… #
Related terms include Credit Report and Credit Score. Credit bureaus are critical in banking law, as they provide lenders with essential information for making credit decisions.
Credit Card refers to a type of loan that allows the cardholder to… #
Related terms include Revolving Credit and Charge Card. Credit cards are popular in banking law, as they provide consumers with a convenient and flexible way to make purchases and manage their finances.
Credit Facility refers to a type of loan that provides a borrower … #
Related terms include Revolving Credit and Term Loan. Credit facilities are essential in banking law, as they provide businesses with flexible access to capital and help manage cash flow.
Credit Limit refers to the maximum amount of credit that a lend… #
Related terms include Credit Facility and Loan Agreement. Credit limits are critical in banking law, as they help lenders manage credit risk and provide a basis for determining the amount of credit to extend to a borrower.
Credit Report refers to a document that contains information about an ind… #
Related terms include Credit Bureau and Credit Score. Credit reports are essential in banking law, as they provide lenders with essential information for making credit decisions.
Credit Score refers to a numerical rating that represents an individual's… #
Related terms include Credit Report and Credit Bureau. Credit scores are critical in banking law, as they provide a standardized measure of creditworthiness and help lenders make informed credit decisions.
Current Account refers to a type of bank account that allows customers to… #
Related terms include Checking Account and Demand Deposit. Current accounts are essential in banking law, as they provide customers with a convenient and flexible way to manage their finances.
Debit Card refers to a type of card that allows the cardholder to… #
Related terms include Credit Card and ATM Card. Debit cards are popular in banking law, as they provide consumers with a convenient and secure way to make purchases and manage their finances.
Default refers to the failure of a borrower to repay a l… #
Related terms include Loan Default and Credit Default. Default is a critical concept in banking law, as it provides a basis for lenders to take action against borrowers who fail to repay their debts.
Deposit Account refers to a type of bank account that allows customers to… #
Related terms include Checking Account and Savings Account. Deposit accounts are essential in banking law, as they provide customers with a safe and secure way to manage their finances.
Derivative refers to a financial instrument that derives its value… #
Related terms include Option and Futures Contract. Derivatives are critical in banking law, as they provide a mechanism for managing risk and investing in the financial markets.
Disclosure refers to the requirement that banks and other financial in… #
Related terms include Transparency and Consumer Protection. Disclosure is essential in banking law, as it helps maintain trust and confidence in the banking system.
Draft refers to a negotiable instrument that orders a payer to pay… #
Related terms include Bill of Exchange and Check. Drafts are essential in banking law, as they provide a standardized mechanism for making payments and transferring funds.
Electronic Banking refers to the use of electronic channels to provide <b… #
Related terms include Internet Banking and Mobile Banking. Electronic banking is a critical component of the banking system, as it provides customers with convenient and secure access to their accounts and financial services.
Electronic Fund Transfer (EFT) refers to the transfer of funds between <b… #
Related terms include Automated Clearing House and Wire Transfer. EFT is essential in banking law, as it enables the efficient and secure transfer of funds between accounts.
Fiduciary Duty refers to the obligation of a bank or other financial i… #
Related terms include Trust and Confidence. Fiduciary duty is critical in banking law, as it helps maintain trust and confidence in the banking system.
Financial Institution refers to a company or organization that pro… #
Related terms include Bank and Credit Union. Financial institutions are essential in banking law, as they provide a wide range of financial services and products to customers.
Fixed #
Rate Loan refers to a type of loan where the interest rate is fixed for the life of the loan, often providing predictable payments and protection from interest rate risk. Related terms include Adjustable-Rate Loan and Floating-Rate Loan. Fixed-rate loans are popular in banking law, as they provide borrowers with a stable and predictable payment schedule.
Foreign Exchange refers to the exchange of one currency for anothe… #
Related terms include Currency Exchange and Foreign Currency Transaction. Foreign exchange is critical in banking law, as it provides a mechanism for converting currencies and managing exchange rate risk.
Foreclosure refers to the process by which a lender seizes and … #
Related terms include Loan Default and Credit Default. Foreclosure is a critical concept in banking law, as it provides a basis for lenders to recover losses in the event of default.
Fund Transfer refers to the transfer of funds between accounts or… #
Related terms include Electronic Fund Transfer and Wire Transfer. Fund transfer is essential in banking law, as it enables the efficient and secure transfer of funds between accounts.
Futures Contract refers to a type of derivative that obligates the… #
Related terms include Option and Derivative. Futures contracts are critical in banking law, as they provide a mechanism for managing risk and investing in the financial markets.
Garnishment refers to the process by which a creditor seizes</b… #
Related terms include Attachment and Levy. Garnishment is a critical concept in banking law, as it provides a basis for creditors to recover losses in the event of default.
Guarantee refers to a promise by one party to pay or per… #
Related terms include Surety and Indemnity. Guarantees are essential in banking law, as they provide a mechanism for managing credit risk and providing additional security for lenders.
Hedging refers to the use of derivatives or other financial ins… #
Related terms include Derivative and Risk Management. Hedging is critical in banking law, as it provides a mechanism for managing risk and protecting against losses.
Insider Trading refers to the buying or selling of securities</… #
Related terms include Securities Law and Corporate Governance. Insider trading is a critical concept in banking law, as it involves the misuse of confidential information and can have serious consequences for the integrity of the financial markets.
Interest Rate refers to the rate at which interest is charged</… #
Related terms include APR and Interest Calculation. Interest rates are essential in banking law, as they provide a mechanism for calculating interest on loans and investments.
Investment Banking refers to banking services provided to corporations… #
Related terms include Corporate Banking and Financial Advisory. Investment banking is a critical component of the banking system, as it provides corporations and institutions with access to capital and financial expertise.
Irrevocable Letter of Credit refers to a type of letter of credit that <b… #
Related terms include Letter of Credit and Guaranty. Irrevocable letters of credit are essential in banking law, as they provide a secure and reliable mechanism for making payments and transferring funds.
Know #
Your-Customer (KYC) refers to the process of verifying the identity and legitimacy of a customer or client, often used to prevent money laundering and terrorist financing. Related terms include Anti-Money Laundering and Customer Due Diligence. KYC is critical in banking law, as it helps prevent the misuse of the financial system and maintains the integrity of the banking industry.
Large Exposure refers to a loan or credit facility that exceeds… #
Related terms include Capital Adequacy and Risk-Based Capital. Large exposures are essential in banking law, as they help banks manage credit risk and maintain stability in the financial system.
Letter of Credit refers to a document that guarantees payment to a… #
Related terms include Guaranty and Irrevocable Letter of Credit. Letters of credit are critical in banking law, as they provide a secure and reliable mechanism for making payments and transferring funds.
Leverage refers to the use of debt or borrowed funds to … #
Related terms include Debt and Risk Management. Leverage is essential in banking law, as it provides a mechanism for managing risk and increasing returns on investment.
Line of Credit refers to a type of loan that provides a borrower w… #
Related terms include Revolving Credit and Credit Facility. Lines of credit are popular in banking law, as they provide businesses with flexible access to capital and help manage cash flow.
Loan Agreement refers to a contract between a lender and a borr… #
Related terms include Credit Agreement and Loan Contract. Loan agreements are essential in banking law, as they establish the framework for the loan relationship and provide a basis for resolving disputes.
Loan Default refers to the failure of a borrower to repay a… #
Related terms include Default and Credit Default. Loan default is a critical concept in banking law, as it provides a basis for lenders to take action against borrowers who fail to repay their debts.
Maturity Date refers to the date on which a loan or investment<… #
Related terms include Loan Repayment and Investment Maturity. Maturity dates are essential in banking law, as they provide a clear understanding of the loan repayment terms and help borrowers manage their debt obligations.
Merchant Banking refers to banking services provided to merchants … #
Related terms include Commercial Banking and Trade Finance. Merchant banking is a critical component of the banking system, as it provides merchants and traders with access to capital and financial services.
Microfinance refers to the provision of financial services to l… #
Related terms include Financial Inclusion and Microcredit. Microfinance is essential in banking law, as it provides access to financial services for underserved populations and helps promote economic development.
Money Laundering refers to the process of concealing or disguis… #
Related terms include Anti-Money Laundering and Financial Crime. Money laundering is a critical concept in banking law, as it involves the misuse of the financial system and can have serious consequences for the integrity of the banking industry.
Mortgage refers to a loan that is secured by a property or… #
Related terms include Mortgage Loan and Mortgage Lender. Mortgages are essential in banking law, as they provide a mechanism for financing real estate transactions and help individuals and businesses access capital.
Mortgage #
Backed Security (MBS) refers to a type of security that is backed by a pool of mortgage loans, often used to finance the origination of new mortgage loans. Related terms include Asset-Backed Security and Securitization. MBS are critical in banking law, as they provide a mechanism for financing mortgage loans and help manage risk in the financial system.
Negotiable Instrument refers to a document that can be transferred … #
Related terms include Check and Bill of Exchange. Negotiable instruments are essential in banking law, as they provide a standardized mechanism for making payments and transferring funds.
Netting refers to the process of offsetting debts or obl… #
Related terms include Setoff and Recoupment. Netting is critical in banking law, as it helps manage risk and improve the efficiency of financial transactions.
Offshore Banking refers to banking services provided in a foreign coun… #
Related terms include International Banking and Cross-Border Banking. Offshore banking is a critical component of the banking system, as it provides access to financial services and products in multiple jurisdictions.
Option refers to a type of derivative that gives the holder the ri… #
Related terms include Call Option and Put Option. Options are essential in banking law, as they provide a mechanism for managing risk and investing in the financial markets.
Overdraft refers to a situation in which a customer's account b… #
Related terms include Overdraft Protection and Overdraft Fee. Overdrafts are critical in banking law, as they provide a mechanism for managing cash flow and helping customers avoid penalties and fees.
Pawnbroking refers to the business of lending money to individuals… #
Related terms include Pawn Shop and Collateral Loan. Pawnbroking is a critical component of the banking system, as it provides access to financial services for individuals who may not qualify for traditional loans.
Payment System refers to a network or system that enables the t… #
Payment System refers to a network or system that enables the transfer of funds between parties, often including electronic fund transfer, check clearing, and