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Glossary of Financial Terms

B

Balance

The total amount of money in an account or credit extended against a credit account at a given time.

Balance Sheet

A table illustrating the assets and liabilities of an individual or company at a given time.

Balance Transfer

The act of using credit obtained from one source to repay credit already extended from another source.

Bank

An establishment that provides various financial services to companies and individuals.

· See Also · Schedule I Bank · Schedule II Bank · Schedule III Bank

Bank Act

The Canadian federal legislation passed in 1871 governing banking operations and is updated every 10 years.

See updated Canada Bank Act for more information.

Bank Card

A card with a unique magnetic stripe issued by a financial institution allowing the customer to conduct various banking transactions at ATM's and bank service counters.

· See Also · Debit Card

Bank Draft

A cheque drawn by a bank to the credit of the individual or organization named on the draft.

· See Also · Cheque

Bank of Canada

Canada's central bank founded in 1934 responsible for monetary policy, bank notes, etc., but does not provide banking services to the public. Its principal role is defined by the Canadian Banking Act as: "to promote the economic and financial welfare of Canada".

See the Bank of Canada website for more information.

Bank of Canada Advance

A secured loan made by the Bank of Canada to a member of the Canadian Payments Association.

Bank Rate

The rate of interest charged on one day loans to banks by a central bank.

Bank Reconciliation

The adjustments made to the balance of an account that reflect transactions made against an account since the most recent statement of that account.

Bank Secrecy Act

The Bank Secrecy Act is also known as the Currency and Foreign Transactions Reporting Act. This act, passed by the United States congress in 1970, requires financial institutions to help government agencies to detect and prevent money laundering. Financial institutions must keep records of cash purchases of negotiable financial instruments, file reports of large cash transactions exceeding $10,000 (for a daily aggregate amount), and to report any activity that might signify money laundering, tax evasion, or other criminal activity.

The United States government is very serious about the BSA and has the right to revoke a bank charter if an institution does not comply to these regulations.

Bank Spread

The difference between the amount of interest a bank charges for credit and the amount it pays on deposits.

Banking Software

A general banking industry term used to describe the software required to run a bank, credit union or building society. The vendors that participate in selling banking software range from specialists, who may be focused on a specific part of banking functionality to "enterprise offerings" that include a complete integrated banking system. Generally speaking, however, every vendor must interface to systems other than their own to perform functions such as cheque clearing, ATM functionality, etc.

Bankruptcy

A legal state in which an individual or corporation enters at a time that they are no longer able to satisfy obligations of indebtedness to their creditor(s).

Basis Point

One one-hundredth of a percentage point as it relates to interest or the value of stocks, bonds or other financial products. Agent commissions, such as those related to a mortgage broker or investment advisor are often based on basis points for the face amount of the mortgage or financial instrument.

Bill 198

Some have referred to this Ontario tabled legislation as "Canada's Sarbanes Oxley". They're right in saying so but the bill itself is wide in scope and touches on so many areas that it is hard to digest. The original bill, in its full form, is here (NOT recommended for reading). An easier-to-read overview of the bill, as it pertains to Sarbanes-Oxley-esque regulations, by David Brown of the Law Society of Upper Canada, is here.

Bill Presentment

The process whereby a customer uses a computer to view and / or pay their bills.

Billing Statement

A (usually monthly) statement of debits, credits and other transactions occurring on an account during a specific period of time.

Blind Trust

An established trust whereby the beneficiary does not have any specific information regarding the amount, type or management of the assets contained in that trust.

Blue Chip

A publicly traded company with a reputation for consistent growth, earnings and returns on investment. The term comes from the blue-colored chips, which are typically the most valuable in the game of poker.

Bond

An investment certificate issued by a government or company bearing a specific interest rate over a fixed period of time. Bonds are generally issued for a fixed term (the maturity) longer than one year.

· See Also · Canada Savings Bond · Canada Premium Bond

Bounced Cheque

A cheque issued on an account without the funds to honour it.

· See Also · N.S.F. Cheque

Bridge Financing

Within an investment context, bridge financing is typically extended to a company which is expected to become publicly traded in the short term. Often, this is referred to as "mezzanine financing". In the context of a mortgage Bridge Financing is used to help span two real estate transactions (e.g. the purchase of a new home before an existing home is sold).

· See Also · Mezzanine Financing

Broker

An intermediate person or organization who buys or sells financial products on behalf of a consumer. Within the financial industry there are mortgage brokers, investment dealers, insurance agents, etc. who focus on delivering personal service to their clients. In some cases these brokers work for a single company (e.g. a State Farm Agent will only sell financial products from State Farm) while in other cases these agents will sell multiple products from multiple companies. In most cases these financial brokers are licensed by a specific regulatory body.

· See Also · Agent · Managing General Agent

Broker Premium

The fee charged by a broker to act as the middle-man between a buyer and a seller. Often these fees are quoted in "basis points".

· See Also · Basis Points

BSA

Acronym for Bank Secrecy Act (see full definition above)

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