AAccount agreementAn agreement which you sign and which lists your rights and responsibilities and the bank's rights and responsibilities for the bank account.
Accounts payableMoney owed by a business for goods and services received.
Accounts receivableMoney owed to a business by purchasers of goods and/or services.
Affinity CardA credit card (usually Visa or MasterCard) that has a promotion arrangement with an affiliated organization (often a charity or non-profit group). The logo of the group appears on the card and the group usually gets a percentage of the sales made on the card.
AngelsPrivate individuals with capital to invest in business enterprises.
AssetsThings that you own which have value in financial terms.
Automated Banking Machines (ABMs)Terminals that allow customers to perform many everyday banking tasks, e.g., deposits, withdrawals, bill payments and transfers between accounts.
BBalanceThe amount of money in your account.
Balance sheetShows the assets and liabilities (legal responsibility of your company) at any particular time. The assets on a balance sheet will always equal the liabilities plus the owner’s equity.
Bank ActFederal legislation governing how banks operate in Canada. The Bank Act was first passed in 1871 and is updated periodically -- usually every five years. The last major revision was completed in 2006.
Bank CardA card issued by a financial institution that identifies the holder as a customer of the institution and allows access to accounts through an ABM; also, a credit or debit card issued by a financial institution.
Bank for International Settlements (BIS)The BIS is an international body that promotes the co-operation of central banks, fulfils the function of a central banks' bank and acts as a clearing and settlement agent. It acts as a forum for discussion of international monetary policy and conducts research into international banking developments.
Bank of CanadaThe country's central bank, which formulates and implements monetary policy. As the federal government's fiscal agent, it also helps carry out the government's borrowing program, provides banking services for the government and other clients and ensures that the need for bank notes across the country is met.
Bank of Canada RateThe minimum rate at which the Bank of Canada extends short-term advances to members of the Canadian Payments Association. By announcing the rate at which it is willing to lend overnight, the Bank of Canada influences market participants’ expectations about very short-term interest rates. The Bank of Canada Rate affects less than 1% of all bank funding. See our backgrounder for more information about banks and interest rates.
Bank RateThe interest rate paid by major financial institutions if they borrow from the Bank of Canada. The Bank Rate influences the rates of interest major financial institutions charge and pay their customers.
Blank chequeA cheque that does not have a dollar amount written on it.
BondsOffered by governments and corporations, bonds are investments in which you lend a sum of money to the issuer for a set amount of time at a fixed rate of interest.
Bull and Bear MarketsWhen stock prices are increasing and it’s a healthy market, this is known as a bull market. When stock prices are decreasing, it’s a bear market.
Business CycleThe ups and downs of the economy that follow a cyclical pattern over the course of time.
Business Development Bank of Canada (BDC)A crown corporation that helps establish and develop Canadian businesses, especially small and medium-sized ones. BDC provides financial and management services similar to those found in the banking industry.
CCanada Deposit Insurance Corporation (CDIC)A crown corporation that provides deposit insurance against the loss of deposits made with member financial institutions.
Canada Education Savings GrantProgram recently introduced by the federal government whereby it will invest, in the form of grants, along-side parents who save for their children's education through RESPs. The government will top up contributions made to an RESP by 20% up to a yearly maximum of $400 per beneficiary.
Canada Savings Bonds (CSBs)A secure way for Canadians to save. The bonds, which are a form of debt issued by the Canadian government, are cashable, with proper identification, at any time at most Canadian financial institutions.
Canadian Bankers Association (CBA)Professional industry association that provides information, research, advocacy, education and operational support services primarily to the banking industry.
Canadian Depository for Securities Limited (CDS)Agency responsible for the automatic processing and clearing of all securities transactions in Canada.
Canadian Payments Association (CPA)This association, which is composed of several financial institutions and the Bank of Canada, operates a national clearing system for financial institution payments.
Capital Adequacy RatioA ratio of total capital divided by risk-weighted assets and risk-weighted off-balance sheet items. A bank is expected to meet a minimum capital ratio of 8.0% unless a higher ratio has been specifically prescribed by the Superintendent of Financial Institutions.
Capital Gain or LossThe difference between the price you paid for an investment and the price at which you sell (in other words, the profit or loss you make). Investments that earn capital gains or losses include equity and growth funds.
Capital investmentsMoney used to purchase permanent fixed assets for a business, such as machinery, land or buildings as opposed to day-to-day operating expenses.
Cash flow forecastAn estimate of when and how much money will be received and paid out of a business. It usually records cash flow on a month-by-month basis for a period of two years.
ChequeA written order from a financial institution for payment of a certain amount of money.
Cheque bookA book with blank cheques. The cheques may be personalized or non-personalized.
Cheque registerA book with space for you to note the details of every transaction in your chequing or combination account.
Clearing and SettlementThe process whereby banks collect or pay out for items drawn on or paid into accounts in their institution. This process enables banks to accept each other's cheques and bank drafts for deposit. The Canadian Payments Association operates Canada's clearing system.
Co-Branded CardAn alliance between a card issuer and a large non-deposit taking corporation which offers discounts/rewards to cardholders for using the card which bears the corporation's name.
CollateralProperty (real, personal or otherwise) pledged as security for a loan. Also, any supplementary promise of payment, such as a guarantee.
Combination account
An account that is part savings and part chequing. You may write cheques and you will be paid interest if you have enough money in the account.
Commercial BankingCommercial banking centres serve small- and medium-sized businesses such as franchising, leasing and cash management services.
CompoundingRefers to earning income on your income. For example, on fixed income investments that pay interest over time at periodic intervals, compounding means making interest on your initial investment and also on the interest as it builds up (i.e., earning interest on your interest).
Consumer Price IndexAn index that measures movements in the average price of products and services typically consumed by Canadian families.
ContributionAn amount of money you put into a savings/investment plan.
Corporate BankingBanking services for large firms.
Correspondent BankIn a country where a bank does not have offices, it will often make arrangements with another bank to act as its agent in that country. The correspondent bank carries out financial transactions, such as making payments on behalf of the first bank in the foreign country.
Credit CardsCredit cards such as Visa and MasterCard allow the holder to charge purchases rather than pay cash. Generally, no interest is charged as long as the monthly statement is paid in full by the due date.
Credit RiskThe risk of loss one assumes under a financial contract that a borrower or a counterparty to a loan or other credit-related contract may default or fail to perform its obligations.
DDebitAnother name for withdrawal of funds from your account.
Debit cardAnother name for a bank card that allows you to access your deposit accounts electronically. You can use it at banking machines or to pay for purchases at retailers using the direct payment service.
DebtMoney owed.
Debt IssuesThe issuance of bonds or other forms of debt on the public markets.
Debt/equity ratioA comparison of debt and equity used to measure the health of a business.
DeflationAn actual decline in the general level of prices in the economy.
Demand LoanA loan that must be repaid in full, on demand.
DemographicsCharacteristics of the population that influence consumption of products and services. They include age, sex, race, family size, level of education, occupation, income and location of residence.
DepositMoney put into an account. The deposit may be in the form of cash, cheque or electronic transaction.
Deposit InsuranceThe Canada Deposit Insurance Corporation insures depositors' funds to a maximum of $60,000 per depositor, per institution, with some exceptions, in the event of the failure of a federal financial institution. Deposits in some provincial financial institutions are also covered.
DepreciationYou can deduct a specified amount of the purchase price of business equipment, for tax purposes, to calculate your company’s taxable income. Your accountant can provide details.
DepressionA prolonged downturn in the economy and level of business activity.
DerivativesFinancial contracts whose value is derived from the value of some underlying asset, rate or index. Derivatives are used as risk-management tools by governments and corporations to reduce exposure to risk, mainly related to fluctuations in foreign-exchange and interest rates. Derivative instruments include swaps, options, futures and forward contracts and are used by banks in two principal activities: sales/trading and asset/liability management.
Direct DebitA means of authorizing recurring payments (e.g., mortgage payments, insurance premiums) to be drawn on an account.
Direct depositIf you receive money on a regular basis (i.e. from a job, pension, allowance), your employer, the government or person paying the allowance can deposit the money directly into your account.
Direct Deposit/Direct Fund Transfers (DFT)A means of authorizing payment made by governments or companies to be deposited directly into a recipient's bank account. It is used mainly for deposits of a recurring nature such as salary, pensions and interest payments.
DisinflationA reduction in the rate of inflation either as a result of government policy or of declining economic activity.
DividendsCompany earnings that may be paid out to shareholders according to the number of shares or stocks they hold. Dividends can be earned on stocks and certain mutual funds.
Documentary CreditWritten undertaking by a bank on behalf of an importer authorizing an exporter to draw funds from a bank up to a specified amount under specific terms and conditions. They are used to facilitate international trade. In the United States these instruments are called commercial letters of credit.
Domestic BanksBanks owned by Canadians.
EEconomic GrowthThe rate of change in output from one year to the next.
Economic IndicatorsStatistics that help determine how the economy is faring. They include the Consumer Price Index, housing starts, and unemployment rates, among others.
EFT/POSElectronic funds transfer (EFT) at the point of sale (POS). A payment option which allows consumers to pay for purchases by transferring funds directly from their accounts to a merchant's accounts.
Electronic Data Interchange (EDI)EDI is a system that companies use to exchange business information electronically, virtually eliminating paperwork.
Electronic Funds Transfer (EFT)A system that transfers funds through electronic messages instead of by traditional means, such as cash or cheques.
Employment Equity ActA federal statute that requires employers with 100 or more employees to eliminate any practices in the workplace discriminating against four designated groups of people who have historically been disadvantaged in the labour market: women; people who, by reason of race or colour, are members of visible minority groups; aboriginal peoples; and persons with disabilities.
EndorseTo sign the back of a cheque in order to cash it.
EntrepreneurA person who starts and manages a business.
EquityThe value of a business after all debts and other claims are settled. Also the amount of cash a business owner invests in a business and/or the difference between the price for which a property could be sold and the total debts registered against it.
ExportsProducts and services produced in Canada and sold in other countries.
FFinance CanadaFederal department responsible for Canada's economic performance and regulation of financial institutions.
Fiscal DeficitWhen the government spends more money than it receives in revenue over the course of one year.
Fiscal PolicyThe use of government spending and taxation policies to influence the economy.
Fiscal SurplusWhen the government receives more in revenue than it spends over the course of the year.
Fixed assetsAssets like machinery, land, buildings, or property used in operating a business that will not be consumed or converted into cash during the current accounting period.
Fixed expensesFixed business costs that do not change with the volume of business, such as rent for business premises, insurance payments, utilities, etc.
Fixed-Return Instruments or VehiclesInstruments that pay a fixed rate of interest for an agreed-upon length of time such as term deposits, Treasury bills and Guaranteed Investment Certificates.
Foreign CurrencyPaper money and coins from other countries.
Foreign ExchangeVarious instruments used to settle payments for transactions between individuals or organizations using different currencies (e.g., notes, cheques, etc.).
Foreign Exchange RateThe value of a nation’s currency in terms of another nation’s currency.
Four PillarsA term used to describe the main types of financial institutions: banking, trust, insurance and securities.
FranchiseThe right to sell products or services under a corporate name or trade mark (established by someone else). This right is usually purchased for cash in addition to a royalty fee on, or a percentage of, all sales.
FuturesContracts to buy something in the future at a price agreed upon in advance. They first developed in the agriculture commodity markets but often involve foreign exchange, Eurodollar deposits and government bonds.
GGross Domestic ProductThe total value of all the goods and services produced by the Canadian economy in a single year.
Gross National ProductThe value of all goods and services accruing to Canadians in a given year. It equals Gross Domestic Product, plus income of Canadians from foreign production, less income from Canadian production earned by non-residents (such as interest and dividends paid to foreign lenders).
Gross profit marginThe difference between the sales your business generates and the costs you pay out for goods.
Guaranteed Investment CertificateAn investment in which you deposit money, over a fixed period of time, and are paid a set rate of interest.
HHome BankingA way to access bank accounts by phone and/or Internet. Typically customers can transfer funds, pay bills and make account inquiries.
IImportsGoods and services produced in other countries and sold in Canada.
Income StatementAlso known as the profit & loss statement or P&L, enables you to calculate your company’s pretax profits by subtracting total expenses from total revenues.
Income-splittingA financial strategy for tax purposes. Splitting income refers to the process of shifting income from the hands of one family member to another, who is in a lower tax bracket and will therefore pay tax at a lower rate. This helps reduce your family’s overall tax burden.
InflationA rise in the average level of prices in the economy.
Institute of Canadian Bankers (ICB)Educational institute that provides career-oriented education and training programs to financial-services professionals.
InteracCanada's largest shared network of ABMs. It allows cardholders to access their accounts from any ABM on the network regardless of which financial institution owns the machine.
Interac AssociationThe organization responsible for the development and operations of the Inter-Member Network (IMN), a national payment network that allows Canadians to access money through Automated Banking Machines and Point-of-Sale terminals across Canada.
Interac Direct PaymentCanada's national debit service for purchasing of goods and services. At the point of sale, the customer swipes his/her card in a card reader, enters a personal identification number (PIN) and the amount paid is deducted from either his/her chequing or savings accounts.
InterestThe amount paid or earned for the use of money.
Interest rateThe percentage used to calculate the interest to be paid.
International BankingThe area of banking business that includes the operation of bank branches and subsidiaries located outside Canada, the supervision of correspondent banking relationships, foreign exchange trading and trade finance.
International Chamber of Commerce (ICC)A world business organization that brings business people and experts together to formulate policies in such areas as banking, taxation and the environment.
International Organization for Standardization (ISO)An international organization created to promote standardization around the world.
InventoryStock on hand in the form of goods ready for sale. Also includes raw material in the process of being manufactured or completed for sale.
InvestmentSomething you put your money into in order to make money.
Investment BankingBank operations that manage a bank's funding position, as well as its holdings of Treasury bills, bonds and preferred and common stock.
Investment IncomeThis is income earned on investments you make. Investment income includes interest, dividends and capital gains.
LLarge Value Transfer System (LVTS)System being created by the Canadian Payments Association to settle large value payments at the central bank on a same-day basis.
LeaseAn agreement to rent for a period of time at an agreed price.
LIBORLondon Inter-Bank Offer Rate. The interest rate that London banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market and applies to very large loans borrowed for anywhere from one day to five years. The LIBOR is the world's most widely used benchmark for short-term interest rates. It is the rate at which the world's most preferred borrowers are able to borrow money. Countries that rely on the LIBOR for a reference rate include the United States, Canada, Switzerland and the UK.
Line of CreditAn agreement negotiated between a borrower and a lender establishing the maximum amount of money a borrower may draw. The agreement also sets out other conditions, e.g., how and when money is to be repaid.
Long-term liabilitiesMoney that you owe over a period longer than 12 months, such as mortgages, bank loans and other obligations.
MMacroeconomicsLooking at the economy as a whole, particularly the interaction of its various components with one another.
MicroeconomicsLooking at the individual parts of the economy, with emphasis given to the market process and how it works.
Minimum monthly balanceThe least amount of money that has been in a bank account during the whole month.
Monetary PolicyThe ability of the Bank of Canada to influence the economy through changes in short-term interest rates and the money supply.
Money LaunderingPopular term used to describe the process whereby criminals conceal illicitly acquired funds by converting them into seemingly legitimate income. While the term refers to the proceeds of organized crime generally, it is now most often associated with financial activities of drug dealers who seek to launder the large amounts of cash generated from the sale of narcotics.
Money MarketsThe part of the capital market where government Treasury bills, commercial paper, bankers' acceptances and other short-term obligations are bought and sold.
Mutual FundAn investment product in which your money is pooled with the money of many other investors. A professional manager(s) uses the pooled money to buy a portfolio of investments or securities, and monitors each of the investments on an ongoing basis. There are many varieties of mutual funds, each with specific objectives. By investing in a mutual fund, you purchase units of that fund. The value of your units can go up or down depending on the type and performance of the mutual fund.
NN.S.F. ChequeN.S.F. means Not Sufficient Funds. If a cheque is returned for this reason, it means that there was not enough money in your bank account to cover the amount of the cheque. There is a fee to you if this situation occurs.
Net Interest MarginNet interest income (the difference between interest income and interest expense) as a percentage of average total assets.
NettingThe offsetting with a counterparty or counterparties of financial obligations or payments one is owed with those one is entitled to receive. Netting is also used as a risk management tool to help counterparties, thus reducing the costs arising out of payment settlements.
North American Free Trade Agreement (NAFTA)An agreement among the United States, Canada and Mexico that allows for freer trade between the three countries.
OOffice of the Superintendent of Financial Institutions (OSFI)Created by the Office of the Superintendent of Financial Institutions Act, OSFI regulates banks and other federally authorized financial institutions in Canada.
On-Us ItemPayment that is deposited at the same financial institution on which it was drawn or written, e.g., a cheque that was written by one customer of a bank and deposited by the recipient at another branch of the same bank, or a withdrawal that is made by a customer at his or her own financial institution. These items are not cleared between institutions and therefore are generally not represented in statistics of payments exchanged between financial institutions in the clearings.
Operating LoanA loan intended for short-term financing, supplying cash flow support or to cover day-to-day operating expenses.
OptionA formal contract which grants the holder of the option the right to buy or sell a certian quantity of an underlying interest or asset at a stipulated price within a specific period of time.
PPassbookA book in which all the transactions in a bank account are noted. This book may list the transaction codes and the customer's responsibilities.
PayeeThe name of the person to whom the money in a cheque is to go.
Personal Consumption SpendingWhat households collectively spend on goods and services.
Personal Disposable IncomePersonal income minus personal income tax payments. Also called “take-home pay.”
Personal Identification Number (PIN)A unique number or pass code entered by a customer when using an Automated Banking Machine (ABM) or Interac Direct Payment, that gives the customer access to his or her account.
Personal SavingsThe difference between personal disposable income and personal consumption spending.
Personalized chequeA cheque which has your name and account number printed on it.
PortfolioA collection of investments.
Prime Rate/Prime Lending RateThe rate of interest charged on loans by banks to their most creditworthy customers.
Provision for Credit LossesThe amount deducted from income equal to the amount by which a bank adjusts its loan balances to reflect anticipated losses on them.
RRatioComparison of two figures used to evaluate business performance, such as debt/equity ratio and return on investment.
Real propertyReal estate, including land and buildings.
RecessionWhen the Gross Domestic Product declines for at least two consecutive three-month periods.
ReconciliationChecking all bank account papers to make sure that the bank's records and your records agree.
Registered Education Savings PlanEducation savings plans that grow tax free until a child is ready to pursue a post-secondary education, at which time the money is withdrawn to help finance the costs.
Registered Retirement Savings Plan (RRSP)A savings plan introduced by the federal government to encourage Canadians to save money for retirement. The investment and the interest earned on it is sheltered: it will not be taxed as long as it is left in the plan.
Retail BankingThose activities and services that a bank provides for individual customers such as savings accounts, personal loans, cheque cashing and RRSPs.
Retained earningsAll the profits or losses that you’ve accumulated from prior years and from this year’s income statement, less dividends paid to you.
ReturnAny increase in value or in income you earn on an investment.
SSchedule I BanksSchedule I banks are domestic banks and are authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation.
Schedule II BanksSchedule II banks are foreign bank subsidiaries authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canada Deposit and Insurance Corporation. Foreign bank subsidiaries are controlled by eligible foreign institutions.
Schedule IIISchedule III banks are foreign bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada. These branches have certain restrictions.
Seasonal UnemploymentThe loss of jobs due to changes in the climate and other conditions. Forestry, fishing and construction are affected by climate, while retailing is affected by seasons and holidays. For instance, at Christmas, retail employment is higher than in January.
SecuritiesInvestments such as stocks and bonds.
Securities/Investment DealerOne who acts as the agent for another party to buy and sell securities and other investments; also an underwriter.
Service chargeA fee paid for using a service.
Settlement PointsRegional collection points in the clearing and settlement system operated by the Canadian Payments Association. Settlement points forward each bank's regional balance to the Bank of Canada in Ottawa at the end of each day to allow the central bank to adjust the banks' balances with the central bank.
Short-term liabilitiesMoney that you have to pay in less than 12 months, including wages, short-term loans, taxes, credit card balances and long-term loans.
Small and Medium-sized enterprises (SMEs)There are many definitions for this term. Banks define small businesses as those having authorized credit limits of $500,000 or less, while medium-sized businesses have authorization levels of up to $1 million.
Smart CardA card with an imbedded computer chip which stores more information, performs more functions and is more secure than a credit card or debit card.
Social Insurance Number (SIN)Every person who has an income or pays taxes must apply for this number, which is assigned by the Government of Canada. You must, by law, provide this number to financial institutions with which you have an interest-bearing deposit account.
Society for Worldwide Interbank Financial Telecommunication (SWIFT)A co-operative owned by the international banking community that operates a global data processing system for the transmission of financial messages.
Specialized Financing EntityA term in the Bank Act referring to an investment vehicle via which banks are permitted to make venture capital investments.
SpreadThe difference between the interest rate charged to borrowers and the interest rate paid to depositors.
StagflationA period of time in which both the unemployment rate and the rate of inflation are relatively high.
StatementA computer printout which lists all the transactions in a bank account for a period of time. Statements are usually given once a month.
StocksTraded on a stock exchange, these are shares in a company. Essentially, you purchase shares in exchange for owning a part of that company.
SwapAn agreement between two businesses to exchange commodities, payments or other financial products to reduce the risk of volatile market conditions or to obtain a better price or rate. For example, interest rate swaps, where floating rate interest is exchanged for fixed rate interest, protects a corporation against rises in rates or allows it to take advantage of a better rate. A cross-currency swap enables two parties to enter into an agreement in which one exchanges its currency for the other's to meet their separate requirements.
Syndicated LoansLoans to a company backed by a group of banks in order to share the risk in a large transaction among several financial institutions. There is usually a lead bank and several participating banks.
TTax-shelteredA tax shelter is a savings/investment plan which offers significant tax savings.
TermThe maximum time allotted for a loan to be repaid.
Term DepositAn investment product in which you deposit a fixed sum of money for a set period of time and are paid interest.
Term LoanA loan intended for medium-term or long-term financing to supply cash to purchase fixed assets such as machinery, land or buildings or to renovate business premises.
TransactionAction in a bank account. It may be a deposit, withdrawal, debit card payment, service charge or interest payment.
Travellers' chequesThese are a safe way to carry large amounts of money if you are going on a trip. They are considered to be the same as cash, but can be replaced if they are lost or stolen. You can buy them at your bank for a small fee. If you have a special service package, you may not have to pay this fee.
Treasury Bills (T-Bills)Short-term government obligations that are payable to the bearer and sold on a discount basis; the difference between a T-bill's market or discounted price and its face or redemption value is effectively interest if the T-bill is held to maturity.
UUnemployment rateThe percentage of the labour force that is not employed but currently seeking work.
VVariable expensesCosts of doing business that vary with the volume of business, such as advertising costs, manufacturing costs and bad debts.
Venture CapitalCommonly refers to funds that are invested by a third party in a start-up business either as equity or as a form of secondary debt.
WWithdrawalMoney taken out of an account. The withdrawal may be in cash, by cheque or debit card, or by automatic withdrawal.
