Banking in Australia Glossary

A$ - Australian dollar; ISO 4217 currency code AUD.

ABARES - Australian Bureau of Agricultural and Resource Economics and Sciences

ABCP - Asset-backed commercial paper

ABF - Asian Bond Fund. An initiative of the EMEAP central banks aimed at deepening regional financial markets. The first stage (ABF1) is a fund investing in US dollar sovereign and quasi-sovereign bonds issued in eight of the eleven EMEAP economies (i.e. excluding Australia, Japan and New Zealand). The second stage (ABF2) comprises eight single-market funds that invest in domestic currency-denominated government and quasi-government currency bonds issued in these economies, as well as the Pan-Asian Bond Index Fund (PAIF).

ABS - Australian Bureau of Statistics. The central statistical authority for the Australian Government.

ACC - Asian Consultative Council (of the BIS). Its main purpose is to provide a vehicle for communication between the Asian & Pacific members of the BIS and the Board of Management on matters of interest and concern to the Asian central banking community, including the operation of the BIS Hong Kong Office.

ACCC - Australian Competition and Consumer Commission. A Commonwealth statutory authority responsible for ensuring compliance with the Competition and Consumer Act 2010 (formerly the Trade Practices Act 1974) and the provisions of the Conduct Code. The Commission's consumer protection work complements that of State and Territory consumer affairs agencies.

accrual accounting - Revenues and expenses are recorded as they are earned or incurred, regardless of whether cash has been received or disbursed. For example, sales on credit would be recognised as revenue, even though the debt may not be settled for some time.

acquirer - An institution that provides a merchant with facilities to accept card payments, accounts to the merchant for the proceeds and clears and settles the resulting obligations with card issuers.

ACT - Australian Competition Tribunal

ADI - Authorised deposit-taking institution. ADIs (banks, building societies and credit unions) are supervised by the Australian Prudential Regulation Authority (APRA).

AEDT - Australian Eastern Daylight-saving Time

AEST - Australian Eastern Standard Time

AFIs - All Financial Intermediaries

AFMA - Australian Financial Markets Association. A national industry body representing about 200 organisations which participate in the Australian over-the-counter (OTC) wholesale financial markets. Transactions include foreign exchange, interest rate products, financial derivatives, repurchase agreements, commodities, equity and electricity derivatives.

agency banking - Since 1 July 1999 all Australian Government departments and agencies have been responsible for their own individual banking arrangements. Under devolved banking arrangements, agencies are required to test the services previously provided by the Reserve Bank of Australia (RBA) against what is available from other financial institutions. However, the Australian Government's core account, the Official Public Account, remained with the RBA. A system sweeps balances of Australian Government departments and agencies from their transactional banker to the Official Public Account at the RBA each night.

aggregate demand - Gross domestic product as measured by the sum of final expenditure on goods and services produced, plus exports minus imports.

aggregate supply - Gross domestic product as measured by the value of goods and services produced, less the cost of production.

AIF - Automated Information Facility. An automated message service used by banks to assist with credit and liquidity management.

AIFRS - Australian equivalents to International Financial Reporting Standards

AMMD - Authorised Money Market Dealers

ANNI - Austraclear National Network Infrastructure

ANZSIC - Australian and New Zealand Standard Industrial Classification

AOFM - Australian Office of Financial Management. A prescribed agency, within the Treasury portfolio, responsible for the Australian Government's debt management activities, which includes running tenders of CGS and advising the Treasurer on all aspects of Australian Government debt management.

APCA - Australian Payments Clearing Association Limited. A public company owned by banks, building societies and credit unions which has specific accountability for key parts of the Australian payments system, particularly payments clearing operations.

APCS - Australian Paper Clearing System operated by Australian Payments Clearing Association Limited (APCA).

APEC - Asia-Pacific Economic Co-operation forum. APEC was established in 1989 and has become the primary regional vehicle for promoting open trade and practical economic co-operation. It has 21 member countries, including Australia.

appreciation - An increase in the value of an asset. In foreign-exchange terms, it is a relative increase in the value of one currency compared to another.

APRA - Australian Prudential Regulation Authority. APRA is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance companies, friendly societies, and most members of the superannuation industry.

ASB - Australian Savings Bond. A superseded form of fixed-interest coupon bond, cashable on thirty days' notice after an initial holding period.

ASIC - Australian Securities and Investments Commission. One of three Australian Government bodies (the others being the Australian Prudential Regulation Authority and the Reserve Bank of Australia) that regulates financial services. ASIC is the national regulator of Australia's companies. ASIC has responsibility for market protection and consumer integrity issues across the financial system.

ASX - The Australian Securities Exchange is Australia's primary national exchange for equities, warrants and equity-related securities.

ASX Clear - It provides central counterparty services for a range of financial products traded on the ASX, including equities, warrants, and equity-related derivatives. ASX Clear is a wholly-owned subsidiary of the ASX group. Formerly the Australian Clearing House.

ASX Clear (Futures) - It provides central counterparty services for the ASX 24 (formerly SFE) market. It is a wholly-owned subsidiary of the ASX group. Formerly SFE Clearing Corporation.

ASX Settlement - It provides settlement services for ASX markets, as well as for a small number of transactions undertaken on the National Stock Exchange (NSX). ASX Settlement is a wholly-owned subsidiary of the ASX group. Formerly the ASX Settlement and Transfer Corporation.

ASX 24 - ASX 24 is a derivatives market operated by the ASX group. Formerly the Sydney Futures Exchange.

ATM - Automated Teller Machine

AUD - Australian dollar (ISO 4217 currency code); A$ is more commonly used.

AUSTRAC - Australian Transaction Reports and Analysis Centre

Austraclear - Austraclear provides settlement services for the OTC debt market and for derivatives traded on the SFE and ASX markets. Austraclear is a wholly-owned subsidiary of the ASX group.

Australian Securities Exchange - The Australian Securities Exchange is Australia's primary national exchange for equities, warrants and equity-related derivatives.

AWOTE - Average weekly ordinary-time earnings. A measure of earnings for full-time employed adults compiled by the Australian Bureau of Statistics.

balance of payments - A summary of the economic transactions between residents of one country and residents of other countries.

bank accepted bill of exchange - A bank accepted bill of exchange is a bill of exchange that lists a bank as the acceptor of the bill. As an acceptor, a bank has a liability to pay the holder the face value of the bill at maturity. In certain circumstances, the liability is contingent on the borrower, or drawer, defaulting.

bankruptcy - A legal status, which can be initiated by a creditor or person concerned, whereby the bankrupt's property is vested in a trustee and, with the exception of certain personal and professional property, is available for distribution to creditors.

basis point - A basis point is 1/100^th of 1 per cent or 0.01 per cent. The term is used in money and securities markets to define differences in interest or yield.

BECS - Bulk Electronic Clearing System operated by Australian Payments Clearing Association Limited (APCA).

bid - The price offered to purchase securities in the primary market. In relation to a tender, a bid also includes the volume willing to be bought at the price offered.

bill rate - The bill rate is the effective yield to maturity earned by the holder of a bill. The yield is usually expressed as a per annum rate.

billion - One thousand million.

BIS - Bank for International Settlements. An international organisation, based in Switzerland, which encourages co-operation among central banks and other agencies in pursuit of monetary and financial stability and provides banking facilities for central banks.

bond - In general terms, a bond is a statement of debt with a medium to long term to maturity at the time it is issued. The holder of a bond is a lender to the issuer. As such, the statement gives the issuer an obligation to provide the holder with an income payment and/or a stream of income payments over the life of the bond and to repay the principal. The risk that the issuer cannot fulfil their obligation varies from issuer to issuer and over time.

borrower - A person or entity that incurs a debt to a lender on agreed terms.

BPAY - BPAY is a payments clearing organisation owned by a group of retail banks. Individuals who hold accounts with a BPAY participating financial institution can pay billing organisations which participate in BPAY, using account transfers initiated by phone or internet. The transfers may be from savings, cheque or credit card accounts.

Bps - Basis points. A basis point is 1/100^th of 1 per cent or 0.01 per cent. The term is used in money and securities markets to define differences in interest or yield.

broad money - The widest definition of money published by the Reserve Bank of Australia (RBA). Broad money is defined as currency plus ADI deposits from the non-AFI private sector, plus other short-term liquid AFI liabilities held by the non-AFI private sector.

Bulletin - A quarterly publication by the Reserve Bank of Australia which contains feature articles and speeches.

business cycle - The period between peaks or troughs of macroeconomic activity.

Cat No - Catalogue number

CAC - Collective Action Clause. A clause in bond contracts that includes provisions allowing a qualified majority of lenders to amend key financial terms of the debt contract and bind a minority to accept these new terms.

CAC Act - Commonwealth Authorities and Companies Act 1997.

capital market - A market for medium to long-term financial instruments. Financial instruments traded in the capital market include shares, and bonds issued by the Australian Government, State governments, corporate borrowers and financial institutions.

card issuer - An institution that provides its customers with debit or credit cards.

cash accounting - Revenues and outlays recorded in an organisation's accounts when cash is collected or spent.

cash rate - Broadly defined, the term cash rate is used to denote the interest rate which financial institutions pay to borrow or charge to lend funds in the money market on an overnight basis. The Reserve Bank of Australia uses a narrower definition of the cash rate as an operational target for the implementation of monetary policy. The Reserve Bank of Australia's measure of the cash rate is the interest rate which authorised deposit-taking institutions (ADIs) pay or charge to borrow funds from or lend funds to other ADIs on an overnight unsecured basis. This measure is also known as the interbank overnight rate. The Reserve Bank of Australia calculates and publishes this cash rate each day on the basis of data collected directly from banks. This measure of the cash rate has been published by the Reserve Bank of Australia since June 1998.

cash rate target - As in most developed countries, the stance of monetary policy in Australia is expressed in terms of a target for an overnight interest rate. The rate used by the Reserve Bank of Australia is the cash rate (also known as the interbank overnight rate). When the Reserve Bank Board decides that a change in monetary policy should occur, it specifies a new target for the cash rate. A decision to ease policy is reflected in a new lower target for the cash rate, while a decision to tighten policy is reflected in a higher target.

CAT/CAPs - Credit Authorisation Terminals with capture functionality

CATs - Credit Authorisation Terminals

CD - Certificate of deposit

CECS - Consumer Electronic Clearing System operated by Australian Payments Clearing Association Limited (APCA).

central bank - A non-commercial bank, which may or may not be independent of government, which has some or all of the following functions: conduct monetary policy; oversee the stability of the financial system; issue banknotes; act as banker to the government; supervise financial institutions and regulate payments systems.

CFR - Council of Financial Regulators

CGFS - Committee on the Global Financial System. A committee of the BIS which seeks to support central banks in developing appropriate policy recommendations in relation to financial stability, intermediation and transparency.

CGS - Commonwealth Government securities. Include all securities issued by the Australian Government at tenders conducted by the AOFM (and by the Reserve Bank of Australia acting as agent for the Australian Government prior to 23 October 2006). They comprise Treasury bonds, Treasury notes, Treasury indexed bonds and, previously, Treasury adjustable rate bonds. These securities are issued either by tender or syndication.

charge card - A charge card is a card whose holder has been granted a non-revolving credit line enabling the holder to make purchases and possibly make cash advances. A charge card does not offer extended credit; the full amount of any debt incurred must be settled at the end of a specified period.

CHESS - Clearing House Electronic Sub-register System. CHESS is a settlement system for Australian equities operated by ASX Settlement.

Clearing - The process of transmitting, reconciling and in some cases confirming payment instructions prior to settlement; it may include netting of instructions and the calculation of final positions for settlement.

CLERP - Corporate Law Economic Reform Program

Close-out netting - An arrangement to settle all contracted but not yet due liabilities to, and claims on, an institution by a single payment, immediately upon the occurrence of one of a list of defined events such as the appointment of a liquidator to that institution.

CLS - Continuous Linked Settlement. A process enabling simultaneous foreign exchange settlement across the globe, eliminating the settlement risk caused by delays arising from time-zone differences.

CLS Bank - CLS Bank is a multi-currency bank, regulated by the Federal Reserve Bank of New York, which uses central bank funds to simultaneously settle cross-currency transactions in real time through a process known as Continuous Linked Settlement (CLS).

Commonwealth Government Securities - Include all securities issued by the Australian Government at tenders conducted by the AOFM (and by the Reserve Bank of Australia acting as agent for the Australian Government prior to 23 October 2006). They comprise Treasury bonds, Treasury notes, Treasury indexed bonds and, previously, Treasury adjustable rate bonds. These securities are issued either by tender or syndication.

Compendium of Standards - The Compendium is an initiative of the Financial Stability Forum and a joint product of the standard-setting bodies represented on the Forum. It highlights 12 core standards and around 60 others relevant for sound financial systems. The Compendium is updated on an ongoing basis. The 12 core standards cover matters such as monetary and fiscal transparency, corporate governance and prudential supervision.

counterfeit - A representation of currency intended to deceive recipients.

CPI - Consumer Price Index. A general measure of price inflation for the household sector compiled and published by the Australian Bureau of Statistics.

CPSS - Committee on Payment and Settlement Systems

credit card - A credit card is a card whose holder has been granted a revolving credit line. The card enables the holder to make purchases and/or cash advances up to a pre-arranged limit. The credit granted can be settled in full by the end of a specified period or in part, with the balance taken as extended credit. Interest may be charged on the transaction amounts from the date of each transaction or only on the extended credit where the credit granted has not been settled in full.

credit risk/exposure - The risk that a counterparty will not settle an obligation for full value, either when due or thereafter. In 'exchange-for-value' systems, the risk is generally defined to include replacement risk (the risk of having to replace a contract at a potentially unfavourable price) and principal risk.

CRVS - Cheque Reconciliation and Verification System.

CSIRO - Commonwealth Scientific and Industrial Research Organisation

CUBS - Credit Unions and Building Societies

debit card - A debit card is a card that enables the holder to access funds in a deposit account at an authorised deposit-taking institution.

DEEWR - Department of Education, Employment and Workplace Relations [an Australian Government Department which is referenced on this website as the acronym 'DEEWR']

Deferred Net Settlement System - A settlement system in which each participant settles (typically by means of a single payment or receipt) its net position which results from the payments made and received by it, at some defined time after payments have been made.

denomination - The face value of a currency item: may be banknotes or coin.

depreciation - A fall in the value of an asset. In foreign-exchange terms, it is a relative decrease in the value of one currency compared to another.

deregulation - The progressive removal of controls on entry and operations, intended to enhance competition, and raise the productivity of the major entities in the industry concerned.

derivative - A financial contract whose value is based on, or derived from, another financial instrument (such as a bond or share) or a market index (such as the Share Price Index). Examples of derivatives include futures, forwards, swaps and options.

Designation - The formal notification of action taken to exercise powers conferred by legislation.

direct debit - A pre-authorised debit on the payer's bank account initiated by the recipient (payee).

direct entry credit - A pre-planned credit from one account to another.

direct entry payment - A direct debit or credit.

DOFD - Department of Finance and Deregulation [an Australian Government Department which is referenced on this website in its shortened form 'Finance', or acronym 'DOFD']

domestic government securities - Domestically issued government securities comprising Commonwealth Government securities (CGS) and securities, known as semi-government securities, issued by the central borrowing authorities of the State and Territory governments.

DvP - Delivery-versus-Payment

ECU - European currency unit

EEO - Equal Employment Opportunity

EFT - Electronic funds transfer

EFTPOB - Electronic Funds Transfer at Point of Bank

eftpos - electronic funds transfer at point of sale. The eftpos system is a domestic debit card system managed by eftpos Payments Australia Limited.

EMEAP - Executives' Meeting of East Asia-Pacific Central Banks. EMEAP is a co-operative forum of eleven central banks and monetary authorities in the East Asia and Pacific region comprising the Reserve Bank of Australia, the People's Bank of China, the Hong Kong Monetary Authority, Bank Indonesia, the Bank of Japan, the Bank of Korea, Bank Negara Malaysia, the Reserve Bank of New Zealand, Bangko Sentral ng Pilipinas, the Monetary Authority of Singapore and the Bank of Thailand.

EMH - Efficient markets hypothesis. The view that security or stock prices reflect all available information and it is impossible for an investor to consistently 'beat the market'.

equity market - A market where investors buy and sell securities providing ownership of a company's shares.

ESA - Exchange Settlement Account. An account held at the RBA by financial institutions to settle financial obligations arising from the clearing of payments.

exchange rates - The price of one currency expressed in terms of another currency. Any exchange rate can be quoted two ways, e.g. Australian dollars per US dollar (USD/AUD) or US dollars per Australian dollar (AUD/USD). The convention for the Australian dollar is that it is quoted as the foreign currency price of the Australian dollar. This is sometimes referred to as the 'Indirect' method of quoting.

Exchange Settlement Account - An account held at the Reserve Bank of Australia by financial institutions to settle financial obligations arising from the clearing of payments.

FASB - US Financial Accounting Standards Board.

FCA - Financial Corporations Act 1974

FCGF - Finance companies and general financiers

Finance - Department of Finance and Deregulation [an Australian Government Department which is referenced on this website in its shortened form 'Finance', or acronym 'DOFD']

financial (fiscal) year - The 12-month period decided upon for financial measurement. In Australia it is usually from 1 July, to 30 June in the following year.

financial aggregates - A Reserve Bank of Australia data series specifying measures of the supply of money and credit. It includes some or all of: currency on issue; current deposits with banks; other deposits of the private non-bank sector with banks; borrowings from the private sector by non-bank depository corporations; and credit (loans, advances and bills discounted to the private sector).

financial conglomerates - Financial institutions which undertake several activities such as banking, stock broking, insurance and funds management.

financial disturbance - An event or incident, which causes a significant loss of confidence by depositors or investors in a financial institution or a disruption to financial markets.

financial institution - A company whose primary function is to intermediate between lenders and borrowers in the economy.

financial markets - A generic term for the markets in which financial instruments are traded. Financial instruments have no intrinsic value of themselves. They represent a claim over real assets or a future income stream. The four main financial markets are the foreign exchange market, the fixed interest or bond market, the share or equity market and the derivatives market.

financial sector - The sector of the economy that comprises financial institutions and financial markets.

Financial Stability Board (formerly Financial Stability Forum) - Financial Stability Board. The Financial Stability Board (FSB) was formed in April 2009 as the re-establishment of the Financial Stability Forum (FSF), which had existed since 1999. The FSB has a mandate to assess the vulnerabilities affecting the financial system, identify and oversee action to address them, and promote co-operation and information sharing among authorities responsible for financial stability. Its membership comprises the original FSF members, G20 countries not already included in the FSF, Spain, and a number of international groupings of regulators and supervisors, and committees of central bank experts.

Financial Stability Review - The Reserve Bank issues a Financial Stability Review half-yearly. These reviews assess the current condition of the financial system and potential risks to financial stability, and survey policy developments designed to improve financial stability.

financial system architecture - The structure of financial system regulation, supervision and intermediation. Since the Asian crisis in the late 1990s, the architecture work program has focused on crisis prevention, management and resolution.

fiscal transparency - The facility which enables investors and other interested parties to satisfy themselves as to the nature and quality of the decision process pursued by policy-makers in government or the corporate entity concerned. One of the 12 key standards identified by the Financial Stability Forum as the minimum required for good practice in sound financial systems. Fiscal transparency strengthens accountability of the government and decreases the risk of maintaining unsustainable policies.

floating exchange rate - Exchange rates determined by market forces based on the demand for and supply of a currency.

FMA Act - Financial Management and Accountability Act 1997

FOI - Freedom of Information

foreign-currency liquidity - The capacity to exchange foreign currency for domestic currency without significantly moving the exchange rate. The extent to which a foreign currency may be traded readily without causing a significant movement in price.

Four Pillars Policy - An Australian Government policy that there should be no fewer than four major banks to maintain appropriate levels of competition in the banking sector.

FSAP - Financial Sector Assessment Program. A joint International Monetary Fund (IMF) and World Bank program, seeking to identify the strengths and vulnerabilities of countries' financial systems, and to determine how key sources of risks are being managed. For developing countries, assessments are used to ascertain developmental and technical assistance needs, and to help prioritise policy responses. For developed countries, FSAP assessments are conducted solely by the IMF and do not cover developmental issues.

FSB (formerly FSF) - Financial Stability Board. The Financial Stability Board (FSB) was formed in April 2009 as the re-establishment of the Financial Stability Forum (FSF), which had existed since 1999. The FSB has a mandate to assess the vulnerabilities affecting the financial system, identify and oversee action to address them, and promote co-operation and information sharing among authorities responsible for financial stability. Its membership comprises the original FSF members, G20 countries not already included in the FSF, Spain, and a number of international groupings of regulators and supervisors, and committees of central bank experts.

FX - Foreign exchange

G20 - Group of Twenty countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK and USA; plus representatives of the European Union, IMF and World Bank. The G20 is a forum for international economic co-operation. Members meet at a variety of levels to broaden the dialogue on key economic and financial policy issues and to promote co-operation to achieve strong, sustainable, and balanced economic growth.

G7 - Group of Seven countries: Canada, France, Germany, Italy, Japan, UK and USA. The G7 deals with issues of primary interest to developed economies.

G8 - Group of Eight countries: G7 countries and Russia.

GDES - Government Direct Entry Service. The Government Direct Entry Service (GDES) is a Reserve Bank of Australia proprietary system which processes a large volume of Australian Government payments. Direct credit and direct debit transactions are received electronically via direct communication links or RBAnet. Transactions are processed through the GDES system and distributed to financial institutions via APCA's Common Payments Network.

GDP - Gross Domestic Product. A key measure of the value of economic production in the economy. GDP is determined in one of three ways: the value of goods and services produced less the cost of production; the sum of incomes generated by production; the sum of final expenditure on goods and services produced plus exports minus imports. An average of the three approaches may be calculated and is also referred to as GDP.

Government EasyPay - Government EasyPay is a telephone and Internet collection service available to Australian Government agencies.

GPF - Government Partnership Fund

GST - Goods and Services Tax

HAC Rule - Honour All Cards Rule

HILDA Survey - The Household, Income and Labour Dynamics in Australia (HILDA) Survey is a household-based panel study which began in 2001. It collects information about economic and subjective well-being, labour market dynamics and family dynamics. Interviews are conducted annually with all available adult members of each household in the sample and members are followed over time. The HILDA Survey was initiated and is funded by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute).

HLI - Highly leveraged institution, in which debt represents a high proportion of aggregate liabilities and capital represents a low proportion. The most well known are also called hedge funds. Hedge funds are typically pooled investment vehicles that are privately organised and administered by professional investment managers.

HVCS - High-value Clearing System operated by Australian Payments Clearing Association Limited (APCA).

IAIS - International Association of Insurance Supervisors.

IASB - International Accounting Standards Board.

IMF - International Monetary Fund. The IMF is an international organisation of 188 member countries, established to promote international monetary co-operation, exchange stability, and orderly exchange arrangements; foster economic growth and high levels of employment; and provide temporary financial assistance to countries to help ease balance of payments adjustments.

Index of Commodity Prices - A Reserve Bank of Australia-compiled index (based 2008/09=100) which provides a measure of price movements in rural and non-rural (including base metals) commodities in Australian Dollars (AUD), Special Drawing Rights (SDR) and United States Dollars (USD).

indicative mid rates - The daily schedule of annual returns expressed as a percentage of the prices of specific fixed-coupon bonds, capital-indexed bonds and Treasury notes issued by the Australian Government. They are averages of buy/sell rates reported by bond dealers surveyed by the Reserve Bank of Australia at 4.30 pm AEST.

inflation - A measure of the change (increase) in the general level of prices.

inflation target - A tool to guide monetary policy expressed as a preferred range or figure for the rate of increase in prices over a period. In Australia, the inflation target is between 2 and 3 per cent per annum on average over the course of the business cycle.

insolvency - A situation where an entity has insufficient assets to cover the value of its liabilities, resulting in an inability to meet its financial obligations as they fall due.

interbank overnight rate - The interbank overnight rate (also known as the cash rate) is the interest rate which banks pay or charge to borrow funds from or lend funds to other banks on an overnight unsecured basis. The Reserve Bank of Australia uses this rate as an operational target for the implementation of monetary policy. The Reserve Bank of Australia calculates and publishes this rate each day on the basis of data collected directly from banks. The interbank overnight rate has been published by the Reserve Bank of Australia since June 1998.

interchange fee - A fee paid between card issuers and acquirers when cardholders make transactions.

interest rate - The term used to describe the cost of borrowing money or the return to the owner of the funds which are invested or lent out. It is usually expressed as a percent per annum of the amount of money borrowed, lent or invested.

international reserves - Holdings by a central bank of foreign exchange and gold.

IOSCO - International Organization of Securities Commissions. An international organisation whose members co-operate to promote high standards of regulation in order to protect investors and ensure that markets are fair, efficient and transparent.

labour market - A collective term for employment, unemployment, participation rates and wages.

LCIR - Loan Consolidation and Investment Reserve

lender - A person or institution which provides loans on agreed terms to borrowers.

lending and credit aggregates - Reserve Bank of Australia measures of lending and credit made available to the private non-finance sector (including public trading enterprises) or, the government sector by those financial intermediaries whose liabilities are included in broad money. Broad money is defined as currency plus bank current deposits of the private non-bank sector, plus all other bank deposits of the private non-bank sector plus borrowings from the private sector by non-bank financial intermediaries (NBFIs), less the latter's holdings of currency and bank deposits.

LIBOR - The London Inter-Bank Offered Rate (LIBOR) is a reference rate based on the interest rates at which banks offer to transact with each other on an unsecured basis in the London market. The LIBOR reflects quotes by a panel of banks for maturities of up to 12 months for the Australian dollar, Canadian dollar, Danish krone, euro, Japanese yen, New Zealand dollar, Swedish krona, Swiss franc, UK Pound sterling, and the US dollar. The reference rates are set at 11.00 am London time.

liquidity - The capacity to sell an asset quickly without significantly affecting the price of that asset. Liquidity is also sometimes used to refer to assets that are highly liquid.

liquidity management - Activities within a financial institution to ensure that holdings of liquid assets (e.g. cash, bank deposits and other financial assets) are sufficient to meet its obligations as they fall due, including unexpected transactions.

LVR - Loan-to-valuation ratio

macroeconomy - The economy looked at as a whole or in terms of major components measured by aggregates such as gross domestic product, the balance of payments and related links, in the context of the national economy. This contrasts with microeconomics which focuses upon specific firms or industries.

margin loans - Loans which are made to investors to purchase financial assets, usually equities or units in managed funds. These assets are used as security for the margin loan. Margin loan clients are required to keep the ratio of borrowings to the value of underlying security below a pre-arranged level. When the ratio goes above this level, lenders will make a margin call, requiring the borrower to either repay some of the loan or provide additional security to support the loan.

margin payment - A payment made to meet a margin call, to cover an adverse movement in the price of physical assets, such as equities or units in managed funds, or derivatives, such as futures, options or swap contracts.

MMC - Money Market Corporation

monetary aggregates - A series of measures of the values of currency on issue, current deposits with banks, other deposits with banks, plus borrowings from the private sector by non-bank financial institutions (NBFIs) less currency and bank deposits by NBFIs. Components consist of: 'M1' defined as currency plus bank current deposits from the private non-bank sector; 'M3' defined as M1 plus all other authorised deposit-taking institution (ADI) deposits from the private non-AFI sector, plus certificates of deposit issued by banks, less ADI deposits held with one another; 'Broad money' defined as M3 plus other short-term liquid AFI liabilities held by the private sector, except those held by other AFIs ; 'Money base' defined as holdings of banknotes and coins by the private sector plus deposits of banks with the Reserve Bank of Australia (RBA) and other RBA liabilities to the private non-bank sector.

monetary policy - The setting of an appropriate level of the cash rate target by the Reserve Bank of Australia to maintain the rate of inflation in Australia between 2 and 3 per cent per annum on average over the business cycle.

money market - The market which deals in short-term discount securities such as Treasury notes, bank bills and promissory notes. Major participants in this market include the Reserve Bank of Australia, banks, superannuation funds, insurance companies, investment trusts, investment banks, building societies and large corporates.

Moody's - An international statistical rating organisation and data provider.

MOU - Memorandum of Understanding. A statement specifying agreement relative to responsibilities and authorities on matters on common interest. For example MOUs exist between the Reserve Bank of Australia and the Australian Prudential Regulation Authority (APRA), and with the Australian Securities and Investments Commission (ASIC).

NASDAQ - National Association of Securities Dealers Automated Quotation. A US stock price index for companies listed on the NASDAQ exchange. Typically, these companies are in high technology-based sectors.

NBFIs - Non-bank financial institutions

Net interest margin - A measure of the difference between a bank's interest earnings and interest expenses, expressed as a proportion of their interest-earning assets.

Net interest spread - A measure of the difference between a bank's average rate of interest-bearing assets and its average rate of interest-bearing liabilities.

NGF - National Guarantee Fund

NNPDC - National Note Processing and Distribution Centre. The primary functions of the NNPDC, which operates out of Note Printing Australia Limited, are: the despatch to banks of new and/or reissuable quality banknotes; the receipt from banks of unfit, surplus fit banknotes post peak periods and other banknotes required for quality control/authentication assessment; the processing and destruction of unfit and mutilated banknotes; the processing of banknotes required for assessment and the storage of banknotes awaiting despatch to banks.

Nominal interest rate - The nominal interest rate refers to the cost of borrowing money before adjustment for inflation i.e. it includes compensation for the expected erosion of the value of the borrowed funds due to inflation. It is the cost visible to the borrower, and is composed of the real interest rate plus inflation.

non-tradables - Non-tradables refers to things that are not readily exported or imported, like medical services, housing and haircuts. As such, their prices are largely determined domestically. By comparison, tradable items are things whose prices are largely determined on the world market like oil, motor vehicles and clothing. As such, the prices of tradable items are heavily influenced by exchange rate movements, whereas the prices of non-tradables largely reflect domestic factors.

NPA - Note Printing Australia Limited. Wholly owned subsidiary of Reserve Bank of Australia. Based at Craigieburn, Victoria, NPA prints banknotes for Australia and some other countries on polymer substrate.

nsa - not seasonally adjusted

numismatics - Numismatics is generally defined as the collecting of coins, commemorative or military medals and, more recently, the collecting of banknotes.

OECD - Organisation for Economic Co-operation and Development. Regarded as representing industrial market countries. It seeks to encourage economic growth, high employment and financial stability among member countries and contribute to the economic development of less-advanced members and non-member countries.

OFC - Offshore financial centre

offer - Price offered to buyers.

official reserve assets (RBA) - The Reserve Bank of Australia's holdings of foreign exchange, Special Drawing Rights, Australia's shareholding in the International Monetary Fund (IMF) and gold.

OH&S - Occupational Health and Safety

OIS - Overnight indexed swap, a bilaterally traded, or over-the-counter (OTC), derivative in which one party agrees to pay the other party a fixed interest rate in exchange for receiving the average cash rate recorded over the term of the swap.

OPA - Official Public Account

ORA - Official reserve assets

OTC - over-the-counter

overnight loans - Loans, which are recallable, repayable or renegotiable the next day, usually by 11.00 am.

PAIF - Pan-Asian Bond Index Fund. A component of the second stage of EMEAP's Asian Bond Fund initiative (ABF). The PAIF is an exchange-traded fund listed on the Hong Kong Stock Exchange and cross-listed on the Tokyo Stock Exchange. The PAIF tracks the performance of the Markit iBoxx ABF Pan-Asia index and invests in domestic currency-denominated government and quasi-government bonds issued in eight of the eleven EMEAP economies (i.e. excluding Australia, Japan and New Zealand).

PAYE - Pay as you earn

PAYG - Pay as you go

PDS - Payment Delivery System

PIBA - Primary Industry Bank of Australia

Pillar 1 - The New Basel Capital Accord, issued by the Basel Committee on Banking Supervision, aims to improve the flexibility and risk sensitivity of the existing Accord. The New Accord consists of three mutually reinforcing pillars. Pillar 1 sets out the framework for revised minimum capital requirements, building-in rewards for stronger and more accurate risk management.

Pillar 2 - The New Basel Capital Accord, issued by the Basel Committee on Banking Supervision, aims to improve the flexibility and risk sensitivity of the existing Accord. The New Accord consists of three mutually reinforcing pillars. Pillar 2 proposes procedures for supervisory review of an institution's capital adequacy and internal risk assessment process.

Pillar 3 - The New Basel Capital Accord, issued by the Basel Committee on Banking Supervision, aims to improve the flexibility and risk sensitivity of the existing Accord. The New Accord consists of three mutually reinforcing pillars. Pillar 3 recommends requirements aimed at enhancing market discipline through effective disclosure of information to market participants.

PIN - Personal Identification Number

polymer substrate - The polymer (polypropylene) sheeting on which Australian and a range of other countries' banknotes are printed.

PSB - Payments System Board. Created in 1998, within the Reserve Bank of Australia (RBA). The PSB is responsible for determining the RBA's payments system policy so as to best contribute to: controlling risk in the financial system; promoting the efficiency of the payments system; and promoting competition in the market for payment services, consistent with the overall stability of the financial system. Powers to carry out the PSB's policies are vested in the RBA.

PvP - Payment-versus-Payment

QTC - Queensland Treasury Corporation

RBA - Reserve Bank of Australia. Australia's central bank, the body corporate successor to the Commonwealth Bank established in 1912; created under its new name by the Reserve Bank Act 1959.

RBAnet - An internet-based desktop banking package developed by the Reserve Bank of Australia (RBA) to facilitate secure exchange of banking information between the RBA and its banking customers.

RBA Repos - An intra-day repurchase agreement between an Exchange settlement account (ESA) holder and the Reserve Bank of Australia that is undertaken unilaterally by the ESA holder through the Austraclear System.

RBRF - Reserve Bank Reserve Fund. A general reserve which provides for events which are contingent and non-foreseeable, including to cover exceptional losses on the RBA's holdings of domestic and foreign securities that cannot be absorbed by its other resources; the RBRF also provides for potential losses from fraud and other non-insured losses. Amounts set aside for this reserve are determined by the Treasurer after consultation with the Board.

RDP - Research Discussion Paper. One of a series which makes the results of current economic research within the Reserve Bank of Australia (RBA) available to the public. Papers present preliminary results of research to encourage discussion and comment. The contents represent views of the authors and not necessarily those of the RBA.

Real interest rate - The real interest rate refers to the cost of borrowing money (i.e. the nominal interest rate) net of inflation. It takes account of the fact that part of the nominal interest that borrowers pay to lenders represents compensation for anticipated inflation. The remaining 'real' component better reflects the economic cost of borrowing and the return to lending.

Red Book - Reference works on the payment systems and other financial market infrastructures of various countries. As Australia is a member of the Bank of International Settlement's Committee on Payment and Settlement Systems, the description of Australia's systems is included in a publication entitled Payment, Clearing and Settlement Systems in the CPSS countries. Previously Australia produced a stand alone country Red Book.

repo - Repurchase agreement. The vehicle whereby most Reserve Bank of Australia (RBA) domestic market operations are conducted. Repurchase agreements (usually called 'repos') involve the sale or purchase of securities with an undertaking to reverse the transaction at an agreed date in the future and at an agreed price. Repos provide flexibility in that they allow the RBA to inject liquidity on one day and withdraw it on another with a single transaction.

Reports on the Observance of Standards and Codes (ROSC) - IMF staff, in conjunction with the relevant authorities of the respective countries, have embarked on a series of Reports on the Observance of Standards and Codes (ROSC). These reports summarise the extent to which countries observe certain internationally recognised standards, focusing primarily on the areas of direct operational concern to the IMF. The World Bank has begun to prepare ROSCs in the areas of corporate governance and accounting and auditing, and is developing a template to begin assessments of insolvency and creditor rights.

repurchase agreement - The vehicle whereby most Reserve Bank of Australia (RBA) domestic market operations are conducted. Repurchase agreements (usually called 'repos') involve the sale or purchase of securities with an undertaking to reverse the transaction at an agreed date in the future and at an agreed price. Repos provide flexibility in that they allow the RBA to inject liquidity on one day and withdraw it on another with a single transaction.

Reserve Bank of Australia Bulletin - A quarterly publication by the Reserve Bank of Australia which contains feature articles and speeches.

Reserve Bank Registry of Inscribed Stock - Registry of holders of Commonwealth Government Securities comprising Treasury bonds and Treasury notes.

RFC - Registered Financial Corporation

RITS - The Reserve Bank Information and Transfer System (RITS) was established in August 1991 and is operated by the Reserve Bank of Australia. RITS is Australia's Real-Time Gross Settlement (RTGS) system, which plays a central role in the Australian payments clearing and settlement system. RITS is the means by which Exchange Settlement Accounts are accessed and membership is compulsory for all Australian-licensed banks and participants in the Reserve Bank's domestic market operations.

RMBS - Residential mortgage-backed securities

RP - Repurchase Agreement. The vehicle whereby most Reserve Bank of Australia (RBA) domestic market operations are conducted. Repurchase agreements (usually called 'repos') involve the sale or purchase of securities with an undertaking to reverse the transaction at an agreed date in the future and at an agreed price. Repos provide flexibility in that they allow the RBA to inject liquidity on one day and withdraw it on another with a single transaction.

RTGS - Real-time gross settlement. A payment system in which processing and settlement take place in real time (continuously).

S&P - Standard and Poor's. An international statistical rating organisation and data provider.

sa - Seasonally adjusted. The process of seeking to eliminate seasonal patterns in a time series.

SAFA - South Australian Government Financing Authority

SCCI - Specialised Credit Card Institution

SDR - Special Drawing Right. Used as an international reserve asset to settle transactions between countries and help balance international liquidity. The value of the SDR is calculated by the International Monetary Fund (IMF) on the basis of a weighted basket of four currencies: US dollar; euro; Japanese yen; and UK pound. The IMF publishes the value of the SDR each day in terms of US dollars and the Reserve Bank of Australia provides an equivalent value in Australian Dollars.

securities - A financial instrument which represents a claim over real assets or a future income stream. Such instruments are usually tradeable. Examples of securities include bonds, bills of exchange, promissory notes, certificates of deposit and shares.

securitisation - Asset securitisation is the process of converting a pool of illiquid assets, such as residential mortgages, into tradeable securities.

settlement - The discharge of obligations arising from fund transfers between two or more parties.

smart card - Also known as a chip card or IC (integrated circuit) card. A card containing one or more computer chips or integrated circuits for identification, data storage or special-purpose processing used to validate personal identification numbers (PINs), authorise purchases, verify account balances and store personal records.

SOLA - Statement of Liabilities and Assets. The weekly Reserve Bank of Australia balance sheet published each Friday, as at close of business the previous Wednesday.

solvency - The capacity of an entity to meet its financial obligations as they fall due. Solvency may be expressed as maintaining positive net-tangible assets.

solvent institutions - Institutions that maintain solvency (i.e. they can meet their financial obligations as they fall due).

Statement of Liabilities and Assets - The weekly Reserve Bank of Australia balance sheet published each Friday, as at close of business the previous Wednesday.

Statement on Monetary Policy - The Reserve Bank of Australia (RBA) issues a Statement on Monetary Policy four times a year. These statements assess current economic conditions and the prospects for inflation and output growth. These statements have replaced the Semi-Annual Statements on Monetary Policy and the Quarterly Reports on the Economy and Financial Markets, which were previously issued by the RBA.

STMM - Short-term Money Market

Sub-prime mortgage - While there is no precise definition of sub-prime mortgages, in the United States, they are typically loans made to borrowers with impaired credit histories, which might include one or more payment defaults, a previous loan foreclosure, or bankruptcy.

SWIFT - Society for Worldwide Interbank Financial Telecommunication. A co-operative organisation that operates a network for the exchange of payment and other financial messages between financial institutions.

SWIFT PDS - SWIFT Payment Delivery System

systemic risk - The risk that the failure of one participant in a payments system, or in financial markets generally, to meet its required obligations when due will cause other participants or financial institutions to be unable to meet their obligations (including settlement obligations in a transfer system) when due. Such a failure may cause significant liquidity or credit problems and, as a result, might threaten the stability of financial markets.

systemic risks - Events which may jeopardise financial system stability and cause harm to the real economy. For example, the Y2K problem was regarded as such a risk. They may include the risk that the failure of one participant in a payments system, or in financial markets generally, to meet their required obligations when due, will cause other participants or financial institutions to be unable to meet their obligations (including settlement obligations in a transfer system) when due. Such a failure may cause significant liquidity or credit problems.

systemic stability - The Reserve Bank of Australia has a general and longstanding responsibility for safeguarding the stability of the Australian financial system. In broad terms, financial system stability equates to smoothly functioning financial markets and the absence of financial disturbances that may threaten the health of the economy more broadly. The RBA can use its balance sheet to support a sound financial institution facing liquidity difficulties, should system stability be at risk.

TASCORP - Tasmanian Public Finance Corporation

TCorp - New South Wales Treasury Corporation

TCV - Treasury Corporation of Victoria

tradables - Tradable items are things whose prices are largely determined on the world market like oil, motor vehicles and clothing. As such, the prices of tradable items are heavily influenced by exchange rate movements. By comparison, non-tradables refers to things that are not readily exported or imported, like medical services, housing and haircuts. As such, their prices are largely determined domestically.

Treasury adjustable rate bonds - Commonwealth Government securities with an adjustable interest/coupon rate, periodically reset according to movements in the Australian Bank Bill Swap Reference Rate. These securities are no longer issued by the Commonwealth Government.

Treasury capital-indexed bonds - Commonwealth Government securities with a payment stream that increases by an indexation factor reflecting changes in the rate of inflation. Indexing occurs on the principal value of the investment.

Treasury fixed-coupon bonds - Commonwealth Government securities with fixed maturity dates and twice-yearly interest or coupon payments. Coupon payments are fixed for the life of the bond at its first issue.

Treasury notes - Commonwealth Government Securities with a short term to maturity, issued at a discount to their face value with the difference (or discount) representing the return on the note. They are used primarily to meet the Government's need for within-year finance.

TWI - Trade-weighted index. The TWI is the weighted average value of the Australian dollar in relation to the currencies of Australia's trading partners. The base level was set at 100 in May 1970. The TWI is calculated daily at 4 pm.

US$ - US dollar

USD - US dollar

WATC - Western Australian Treasury Corporation

weighted average issue yield - The weighted average of successful yields at auction of Commonwealth Government securities. Yields are weighted by the share of the total amount sold that is allocated to each successful bidder.

WST - Wholesale Sales Tax. WST was superseded by the Goods and Services Tax introduced on 1 July 2000.

Y2K - Year 2000. The Year 2000 problem was the possibility that financial institutions' computer systems would fail on 1 January 2000 and spark a loss of public confidence in individual institutions or at worst, in the financial system as a whole. In the event, the arrival of Y2K was virtually incident-free.

Year-average growth - The rate of change between the year and the previous year, where the year is typically a calendar year or a financial year. For example ‘year-average growth 2011/12’ means the percentage change between the financial year 2010/11 and the financial year 2011/12. It can also be referred to as ‘growth in the year’.

Year-ended growth - The rate of change between the period and the equivalent period in the previous year, where the period is typically a month or a quarter. For example ‘year-ended growth June 2012’ means the percentage change between June 2011 and June 2012. It can also be referred to as ‘growth over the year’ or ‘through-the-year growth’.

yield - The expected rate of return expressed as a percentage of the net outlay or net proceeds of an investment, not of its face value.