A Guide: Banking

A glossary of terms used:

Annual Percentage Rate (APR): The interest payable on what you've borrowed is added up along with other charges (e.g. arrangement fees) and then expressed as an annual rate of charge. The APR helps you compare the true cost of borrowing, for example for a mortgage. The APR takes into account all fees and charges applied to the mortgage as well as the monthly payments over the life of the loan.

Branch: A subsidiary of a main legal entity i.e. a bank with its head office in London may have branches in Manchester, Spain and Gibraltar.

Credit: A deferred payment, cash loan, or any other form of financial accommodation.

Cash Price: The money consideration for a transaction for the purchase of goods or the supply of a service by a consumer that is not financed by credit

Collecting Repayments: In respect of a money lending agreement, the collection of repayments in respect of the agreement at a place other than a business premises of the moneylender.

Consumer: A natural person acting outside his trade, business or profession.

Contract of Guarantee: One in which a person acting as guarantor agrees to take responsibility for the loan should the original applicant be unwilling or unable to make the payments.

Credit Agreement: An agreement whereby a creditor grants or promises to grant to a consumer a credit in the form of a deferred payment, a cash loan or other similar financial accommodation.

Credit Card: A card issued by a credit institution or other person to an individual by means of which goods, services or cash may be obtained by the individual on credit and amounts in respect of the goods, services or cash may be charged to the credit card account of the individual maintained by the credit institution or other person.

Creditor: A person who grants credit under a credit agreement in the course of his trade, business or profession.

HNWI: An abbreviation used for ‘High Net Worth Individual’.

Home Member State: The Member State in which a bank has been authorised.

Host Member State: The Member State in which a bank has a branch or in which it provides services. House. Includes any building or part of a building used or suitable for use as a dwelling (a place were you live and sleep).

KYC. Stands for ‘Know Your Customer’: It is a term used regularly amongst bankers and regulators. It is a regulatory requirement for banks and building societies to have sufficient information on a client, in order to know what type of business the institution is expected to receive from that particular client. Once the account is opened, credit institutions will need to be able to recognise any transactions that could be considered as suspicious, and therefore the rationale behind requiring an indication of how the account is expected to operate with details of the anticipated sources and destinations of funds and the amounts involved.

LTV: A lending risk ratio calculated by dividing the total amount for the mortgage or loan by the appraised value of the property. Money-lending agreement means a credit agreement into which a moneylender enters, or offers to enter, with a consumer.

Money market: A collective term for the many markets in which funds that are loaned for short periods to businesses or to governments are bought and sold.

Mortgagee: The lender who arranges mortgage financing, collects the loan payments, and takes a security interest in the property financed.

Mortgagor: The borrower in a mortgage contract who mortgages the property in exchange for a loan and gives the title to the property to the mortgagee. Mortgage lender is usually a credit institution making housing loans.

The Base Rate: Is the interest rate set by the Bank of England for lending to other banks.

Total cost of credit: The total cost of the credit to the consumer being all the costs, comprising interest, collection and all other charges, which the consumer has to pay for the credit exclusive of any sum payable as a penalty or as compensation or damages for breach of the agreement.