Select Committee on European Union Forty-Fifth Report

Appendix 5 Glossary of Terms

Basel CommitteeBasel Committee on Banking Supervision. This Committee is part of the Bank for International Settlements
BondA debt instrument issued by a borrower and promised a specified stream of payments to the purchaser, usually regular interest payments plus a final repayment of principal. Bonds are exchanged on open markets including, in the absence of capital controls, internationally, providing a mechanism for international capital mobility.
Capital Adequacy DirectiveDirective that designates the amount of capital that a firm has to hold to be allowed to operate
CESRCommittee of European Securities Regulators comprising of senior representatives of national regulatory agencies designated by Member States
Clearance systemAn arrangement among financial institutions for carrying out the transactions among them, including cancelling out offsetting credits and debits on the same account
ComitologySecondary EU legislation
Debt SecuritiesIOUs created through loan-type transactions-commercial paper, bank CDs, bills, bonds, and other instruments
DerivativesContracts such as options and futures whose price is derived from the price of an underlying financial asset
DG Internal MarketEuropean Commission department responsible for EU internal market in financial services
EquityOwnership interest in a firm. Also, the residual value of a futures trading account, assuming its liquidation is at the going trade price. In a brokerage account, equity equals the value of the account's securities minus any debit balance in a margin account
European Securities Committee Committee in charge of adopting technical implementation of FSAP framework principles. The Committee comprises of a representative from the Commission as chair and Member State nominees from Economic and Finance ministries
EurosecTerm often used to describe the possible future single European financial regulator
FESE Federation of European Securities Exchanges
FSAP Commission Communication of May 1999 listing 42 measures for a single market in financial services
GAAP Generally Accepted Accounting Principles
Giovannini GroupCommittee set up in 1996 to advise the Commission on how to harmonise euro denominated financial markets
IASInternational Accounting Standards
IFRS International Financial Reporting Standards
IIMGInter-institutional Monitoring Group responsible for reporting bi-annually on the implementation of the Lamfalussy process. The group consists of six experts from the Commission, the Council and the European Parliament.
ISD Investment Services Directive
Lamfalussy Process Tiered decision-making process for EU legislation on financial services
LiabilityA financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation
LiquidityA high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease. Antithesis of illiquidity.
Retail marketMarket the deals with financial services for individual and institutional customers as opposed to dealers and brokers.
RiskOften defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset.
Risk-based capital ratioBank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset
Sarbanes-Oxley ActUS Act of law on corporate governance passed in reaction to the Enron scandal
Securities and commodities exchangesExchanges on which securities, options, and futures contracts are traded by members for their own accounts and for the accounts of customers.
SettlementWhen payment is made for a trade
UNICEUnion of European Employers' Organisations
Wholesale marketMarket the deals with financial services for dealers and brokers.

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