محمد علي محمد القضاة
30-10-2003, 11:28 PM
Calculation of interest (احتساب الفائدة)and brokerage in the sterling deposit market (London, market conventions ) :
(Interest); On CDs and deposits loan this is calculated on a daily basis on a 365-day year; interest on a deposit or loan is paid at maturity annually and at maturity, unless special arrangements are made at the time the deal is concluded; On secured loans the discount houses and Stock Exchange money brokers do not pay interest at intervals of less than 28 days. The current general practice is to calculate at the close of business on the penultimate working day of each calendar month and to pay the interest thereon on the last working day of the month. (Brokerage) All brokerage is calculated on a daily basis on a 365-day year and brokerage statements are submitted monthly .
Calculation of interest (احتساب الفائدة)in a leap year(السنة الكبيسة) (London, market conventions ) :
The calculation of interest in a leap year depends upon whether interest falls to be calculated on a daily or an annual basis. The position may differ as between temporary and longer-term loans. (Temporary loans) Because temporary loans may be pain in less than one year(but may, of course, be continued for more than a year) interest on temporary money is almost which includes 29 February automatically incorporates that day in the calculation; in calculating the appropriate amount of interest the number of days of a leap year which ensures that full value is given for the ‘extra’ day. Examples: Assume last pervious interest payment 1 February (up to and including 31 January) and date of payment 1 April (in a leap year). Duration of loan for final interest calculation = 29 days (February) + 31 days (March) = 60 days. Calculation of interest would be [p*(r/100)*( 60/365) = ] . Assume on intermediate interest payments. Loan placed 1 March and called for payment 1 March the following year (leap year). Total period up to and including 29 February = 366 days. Calculation of interest would be [p*(r/100)*(366/365) = ]. This is in line with banking practice regarding interest on deposits which is calculated on a daily basis and no conflict therefore arises. (Longer-term loans) The following procedure for the calculation of interest on loans which cannot be repaid in less than one year (except under a TSB or building society stress clause) was agreed between the BBA and the Chartered Institute of Public Finance and Accountancy on 12 December 1978: (a) Fixed interest; The total amount of interest to be paid on a longer-term loan a fixed interest should be calculated on the basis of the number of complete calendar years running from the firs day of the loan with each day of any remaining period bearing interest as for 1/365 of a year. Normal practice for the calculation of interest in leap years is to disregard 29 February if it falls within one of the complete calendar years. Only when it falls within the remaining period is it counted as an additional day with the divisor remaining a 365. Example: 3 ½ year loan, maturing on 30 June of a leap year. First 3 years’ interest: [p*(r/100)*3 =]. Final 6 months’ interest: [p*(r/100)*(182/365) =]. Certain banks, however, require additional payment of interest for 29 February in all cases and it was therefore agreed that:; both the original offer or bid, and the agent’s confirmation, must state specifically if such payment is to be made; and the ********ation must incorporate the appropriate phraseology. Interest on longer term loans should be paid half-year on the half-year anniversary of the loan or on other prescribed dates and at maturity To calculate half yearly interest payment the accepted market formula is: [p*(r/100)*(d/365)=].Where d = actual number of days. Although with the agreement of both parties the following is sometimes used: [p*(r/100)*(1/2)=]. (b) Floating rate: Interest on variable rate loans, or roll-overs, which are taken for a fixed number of years with the rate of interest adjusted on specific dates, should be calculated in the same manner as for temporary loans .
Call Report (البيان الشهري) :
Informal name for Report of Condition and Income .
CAMELB & COM Rating (England) : {C}Capital Adequacy;{A} Assets Quality; {M} Market Risk;{E} Earnings Performance;{L} Liabilities; {B} Business;{C} Internal Controls; {O} Organization;{M} Management .
CAMELS Rating (USA) :
Definition A numerical composite rating is assigned to a bank at the end of the safety and soundness examination. In characterizes the level of risk in a given financial institution and identifies the level of supervision which the central bank should provide. Each component is assigned a rating 1 to 5.
Components CAMELS is an acronym for the six key performance components used to determine the composite rating: {C}Capital Adequacy;{A} Assets Quality; {M} Management; {E} Earnings Performance;{L} Liquidity ; {S} Sensitivity to Market Risk.
Note The sixth component rating, the “S” factor - Sensitivity to Market Risk, was implemented in the revised rating system effective January 1,1997.
Rating Scale The composite rating given to a financial institution is a number, a composite of the ratings of six key components that make up the CAMELS: {1} Strong peformance {2} Satisfactory performance {3} Flawed performance {4} Unsatisfactory performance {5} Critically deficient performance.
Note The composite rating is not a simple average of the five key components. It is a judgment based on the overall importance and seriousness of conditions discovered during the examination.
Campus(حرم الجامعة) :
The land on which the buildings of a college or university are located .
Capital (راس المال):
In banking, the funds invested in (as opposed to deposited in) a bank .
Capital (راس المال):
Calculate the institution\'s capital level taking into account estimated potential loss classifications determined in the asset quality evaluation. Then, capital adequacy is evaluated in relation to: CBJ capital adequacy requirements; overall financial condition of the bank; level and trend of classified and/or non-performing assets; level and quality of off-balance-sheet items; balance sheet composition; growth experience and prospects; and the quality of management. In addition, consideration is given to retention of earnings in light of capital needs; reasonableness of dividends; access to new sources of capital and other potential sources of financial assistance; and plans for maintaining or improving capital and/or the correction of any capital deficiencies. Lastly, assess the overall risk to the institution resulting from activities conducted in subsidiaries or affiliates of the institution or its holding company .
Capital base (قاعدة راس المال):
The capital base used as the basis for monitoring large exposures should be calculated according to the method as that used in the calculation of the risk asset ratio .
Capital Flows (تدفق راس المال) :
In the past decade, capital flows surged within the Asian region and globally. According to IMF statistics, average annual net capital inflows to developing countries exceeded US$ 150 billion in 1990-96, and more than 40% of which actually came to Asia. In the last two years we saw even more capital inflows to the region, recording a net total of US$ 107 billion in 1996 and a similar growth rate in the first half of 1997. In some Asian economies, net inflows have averaged 5-8% of GDP over long periods, with over half of such capital flows in the form of foreign direct investment. Capital movements help growth through a more global efficient allocation of resources and bring new knowledge and technology to emerging economies. The global competition in external trade has emerged with newly industrialized and export-oriented economies with cheap labor, such as China, India, Latin American and Eastern Europe. The failure of central planning has brought at least three billion new workers and consumers into the global market. Asian central banks are now holding about 40% of the world’s foreign exchange reserves. Five of the top six foreign exchange holders in the world are now Asians. Capital inflows will increase the deposit base of domestic banks which may be channeled through credit mistakes into fueling domestic asset price bubbles. There are two implica. First, asset price inflation eventually feeds into domestic inflation and erodes external competitiveness. Second, Excessive lending concentration into less productive assets, either real estate or over-investment in infrastructure and production capacity, exposes the financial institutions to huge risks.
Capital Market ( سوق رأس المال ):
The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded. (Compare money market) .
Cash( النقــــد ):
Currency plus coin .
Cash correspondents(المراسلين) :
Banks (or similar institutions) used the SSS to make or receive payments .
Cash deposit risk (مخاطر الإيداع النقدي) :
The credit risk associated with the holding of funds with an intermediary for the purpose of settling securities transactions .
Cash memorandum account (مذكرة الحساب النقدي) :
Records kept by the SSS of the funds due to be paid to or received by participants in conjunction with their securities settlement; the records are for information purposes only and do not represent legal claims or liabilities between the SSS and its participants .
Central securities depository (CSD)(مركز إيداع الأوراق المالية) :
An institution for holding securities which enables securities transaction to be processed by means of book entries. Physical securities may be immobilized by the depository or securities may be dematerialized (so that exist only as electronic records .
Central Bank (بنك مركزي):
Principal monetary authority of a nation, which performs several key functions, including issuing currency and regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States .
Certificate (شهادة):
The ******** which evidences the undertakings of an issuer of a security or financial instrument .
Chaining :
A method used in certain settlement systems for processing transfers. It involves the manipulation of the order in which transfers are processed to increase the number or value of transfers that may be settled with available securities and funds balances (or available credit lines) .
Characteristics of the financial regulation (مواصفات التنظيم المالي) :
Statutory responsibility for regulation is assigned to a Registrar of Investment Services (the Registrar) in terms of new legislation. The Registrar, in terms of the new legislation, determines and issues a set of principles (incorporation minimum standards) for the regulation of retail investment services in consultation with a Retail Investment Services Advisory Committee. Industry associations (product suppliers and investment service providers) and public-interest representatives are included in the membership of this Advisory Committee. The principles are translated into practical codes of conduct and other rules for the different industry segments by the Registrar in consultation with the Advisory Committee. These codes and rules determine the respective intensities of regulation and supervision as well as the regulatory and supervisory requirements such as, for example, the registration of insurance intermediaries. The rules are published in terms of enabling legislation for compliance by investment service providers in the different industry segments. Regulatory instruments, aimed at ensuring the proper market conduct of investment service providers, cover part or all of the following: registration in industry segments where this is practically achievable; code of market conduct; disclosure requirements; mechanisms for removing undesirable products or investment services from the market; and mechanisms for achieving compliance with rules or dealing with investor complaints and claims. Compliance is not monitored by the Registrar. Existing industry associations may, in terms of the rules, monitor the compliance of their members with the rules. However, in the absence of formal supervision, compliance is driven mainly by complains by investors and others and the application of sanctions for non-compliance with rules. The regulatory structure resulting from this model is simple and its main elements are designated Registrar, the Advisory Committee, the regulated investment service providers (and where they exist their associations) and entities for handling, and dealing with, complaints by investors .
Charter (النظام الأساسي):
Each bank shall have a charter that shall specify its corporate name and address; its purposes; the jurisdiction, creation, and authority of a Board of Directors; as well as the amount of its capital, the classes, numbers of nominal values of its shares, and the voting rights attaching to its shares. No amendment of the charter of a bank shall take effect without the prior written consent of the Central Bank .
Check Clearing (مقاصة الشيكات) :
The movement of a check from the depository institution at which it was deposited back to the institution on which it was written , the movement of funds in the opposite direction, and the corresponding credit and debit to the involved accounts. The Federal Reserve operates a nationwide check-clearing system .
Check Truncation(أتمتة بيانات الشيك بين البنوك) :
Practice of holding a paper check at the bank at which it was deposited (or at an intermediary bank ) and electronically forwarding the essential information on the check to the bank on which it was written .
Clearance(تصفية حساب، تسوية حساب) :
The term {clearance} has two meanings in the securities markets. It may mean the process of calculating the mutual obligations of market participants, usually on a net basis, for the exchange of securities and money. It may also signify the process of transferring securities on the settlement date, and in this sense the term {clearing system} is sometimes used to refer to securities settlement systems. In this disclosure framework, the term is used only in the first sense .
Clearing (مقاصة) :
General term that may refer to check clearing or to the process of matching trades between the sellers and buyers of securities and other financial instruments and contracts .
Closely related counterparties (ذوي الصلة):
A group of closely related counterparties exists where: unless it can be shown otherwise, two or more individual counterparties constitute a single risk because one of them has , directly or indirectly, control over the other or others: or individual counterparties are connected in such a way that the financial soundness of any of them may affect the financial soundness of the other or others or the same factors may affect the financial soundness of both or all of them .
Collateral (الضمانة):
An asset or third-party commitment that is accepted by the collateral taker to secure an obligation of the collateral provider vis-a-vis the collateral taker .
College (كلية) :
An institution of higher learning that offers undergraduate programs, usually of four-year duration, which lead to the bachelor’s degree in the arts or sciences (BA. or BS.). The term “college” is also used in a general sense to refer to a post-secondary institution .
Commercial Bank (بنك تجاري):
Bank that offers a broad range of deposit accounts, including checking , savings, and time deposits, and extends loans to individuals and businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities. (Also compare savings bank) .
Commercial paper (ورقة تجارية) :
Short-term, unsecured promissory note issued by a commercial firm, a financial company, or a foreign government .
Community or junior college (كلية مجتمع متوسطة):
An institution of higher learning that offers programs of up to two years’ duration leading to the associate degree in the arts or sciences (A.A. or A.S.) or to a technical degree. Credits earned at a community or junior college are usually transferable to a four-year institution with programs leading to a bachelor’s degree. Students on a two-year program prepare for semi-professional or technical employment. Community and junior colleges usually require a secondary-schoodiploma, or its equivalent, for admission .
Consumer Advisory Council(مجلس المستهلكين الاستشاري) :
Statutory group composed of thirty members who represent the interests of a broad range of consumers and creditors. The council meets with the Board of Governors three times a year on matters concerning consumers and the consumer protection laws administered by the Board .
Confirmation (تثبيت، تصديق على):
The process by which a market participant notifies its customers of the details of a trade and allows the customer to positively affirm or question the trade .
Connected counterparty (ذوي الصلة):
Parties connected to the reporting bank comprise: group undertaking (including subsidiaries) and related companies; associated companies; directors, controllers and their associates; non-group companies with which the reporting bank\'’ directors and controllers are associated .
Control (السيطرة) :
Control is defined as the relationship between a parent undertaking and a subsidiary or a similar relationship between any natural or legal person and an undertaking .
Controls in an information technology environment (الرقابة في بيئة تكنولوجيا المعلومات
I-The information held in electronic form within an institution\'s information systems is a valuable asset that needs to be protected against unauthorized access and disclosure . It is the responsibility of management to understand the extent to which an institution relies upon
electronic information, assess the value of that information and establish an appropriate system of control.
II-The types of risk most often associated with the use of information technology in financial systems may be classified as follows :
1-Fraud and Theft:
Access to information and systems can create opportunities for the manipulation of data in order to create or conceal significant financial loss . Additionally, information can be stolen, even without its physical removal or awareness of the fact, which may lead to loss of competitive advantage. Such unauthorized activity can be committed by persons with or without legitimate access rights.
2-Errors :
Although they most frequently occur during the manual inputting of data and the development of amendment of software, errors can be introduced at every stage in the life cycle of an information system .
3-Interruption:
The components of electronic systems are vulnerable to interruption and failure, without adequate contingency arrangements this can lead to serious operational difficulty and / or financial loss.
4-Misinformation:
Problems may emerge in systems that have been poorly specified or inaccurately developed . These might become immediately evident, but can also pass undetected for a period during which they could undermine the veracity of supposedly sound information. An institution\'s electronic systems, or their consequences are often apparent at many points external
to the organization. Unreliable, unfriendly and insecure systems can damage an institutions business credibility. In addition , failure of an institution\'s electronic systems might result in a breach of contract and legal liability, and / or a breach of regulatory requirements.
III-Controls need to be established that fall within
three categories:
1-Preventive:
Measures designed to eliminate or reduce the incidence or probability of fraud , errors and systems interruption ;
2-Detective:
Measures designed to detect that adverse incidents have occurred as quickly as possible before unacceptable damage is done;
3-Contingency:
Measures designed to facilitate recovery from adverse incidents as quickly as possible with minimum cost and damage to the business ;
V-Particular consideration should be given to control implications in the following areas when establishing an electronic information systems environment :
1-Organization and structure of the resources used to manage and support an institution\'s electronic information and systems ;
2-The appropriateness of strategic planning for electronic information systems and its compatibility with, and support of, wider business strategy and planning;
3-Systems development life cycle, which should include standards and procedures designed to ensure that well controlled systems are delivered
4-********ation of electronic systems ,their design, operation and use ;
5-Change control procedures , covering both planned modifications and emergency amendments;
6-Operation, maintenance and support of electronic systems ;
7-Physical security of computerized facilities, in order to prevent unauthorized access and provide protection against environmental hazards (fire, flood, power loss etc.) ;
8-Logical access control procedures, designed to prevent unauthorized access to electronic systems and data, detect attempted violations and
maintain audit trails ;
9-Network security, in particular the control of remote access to electronic systems and data, transmission integrity and overall confidentiality;
10-Personal computer security, where the standards of control associated with larger systems are harder to maintain .Particular hazards include the
illegal copying of software which can , inter alia, increase the risk of exposure to computer viruses and their attendant dangers ;
11-Standby systems , recovery management procedures and the arrangements for making copies of important electronic files .
12-Business interruption planning, which should address the way in which business critical electronic systems are to be maintained in the
event of fire , flood , power failure or other physical damage . It might also be appropriate to consider the provision of other resources,
egstaff , accommodation , in order to take a wider business perspective ; Plans should be agreed, ********ed and regularly tested .
V-It is also important that management is aware of its responsibility to promote and maintain a climate of security awareness and vigilance throughout the organization . In particular, it should give consideration to:
1-It security education and training , designed to make all relevant staff aware of the need for, and their role in supporting , good it security
practice and the importance of protecting company assets ;
2-It security policy , standards , procedures and responsibilities, designed to ensure that arrangements are adequate and appropriate .
Control objectives (أهداف رقابية) :
Each institution should address the following control objectives: organization structure; monitoring procedures; segregation of duties; authorization and approval; completeness and accuracy; safeguarding assets; and personnel .
Consolidated supervision (الرقابة الشاملة):
This supervisory approach focuses on the parent holding company. In order to determine whether the group as a whole has adequate capital, the assets and liabilities of individual companies are consolidated; capital requirements are applied to the consolidated entity at the parent company level; and the result is compared with the parent’s (or group’s) capital .
Consolidated supervision’s Checklist of principles (أسئلة اختبار توفر الرقابة الشاملة الرقابة الشاملة):
A- Powers to exercise global oversight
1- Does the home country supervisor have adequate powers to enable it to obtain the information needed to exercise consolidated supervision, for example:
· does the bank in question have its own routine for collecting and validating financial information from all its foreign affiliates, as well as for evaluating and controlling its risks on a global basis?
· does the home supervisor receive regular financial information relating both to the whole of the group, and the material entities in the group (including the head office0 individually?
· is the home supervisor able to verify that information (e.g. through inspection, auditors’ reports or information received from the host authority)?
· is there access to information on intra-group transactions, not only with downward affiliates but also if appropriate with sister companies or non-bank affiliates?
· does the home supervisor have the power to prohibit corporate structures that deliberately impede consolidated supervision?
B- Exercise of consolidated sup
2- Which of the following procedures does the home country supervisor have in place to demonstrate its ability to capably perform consolidated supervision:
· adequate control of authorization both at the entry stage and on changes of ownership?
· adequate prudential standards for capital, credit concentrations, asset quality (i.e. provisioning or classification requirements), liquidity, market risk, management controls, etc?
· off-site capability, i.e. systems for statistical reporting of risks on a consolidated basis and the ability to verify or to have the reports verified?
· the capability to inspect or examine entities in foreign locations?
· arrangements for a frequent dialogue with the management of the supervised entity?
· a track record of taking effective remedial action when problems arise?
Consolidated supervision purpose is essentially threefold (غايات الرقابة الشاملة):
1. to support the principle that no banking operation, wherever located, should escape supervision altogether;
2. to prevent double-leveraging of capital; and
3. to ensure that all the risks incurred by a banking group, no matter where they are booked, are evaluated and controlled on a global basis .
Contagion (عدوى، تأثير مؤذي):
Psychological contagion - where problems in one part of a group are transferred to other parts by market reluctance to deal with a tainted group - is difficult for supervisors to guard against. However, contagion resulting from the existence of extensive intra-group exposures can , in principle, be contained.
Corporate bond (اسناد القرض):
Interest -bearing or discounted debt obligation issued by a private corporation rather than by a government agency .
Correspondent bank (البنك المراسل):
Bank that accepts the deposits of, and performs services for, another bank (called a respondent bank); in most cases, the two banks are in different cities.
Convertible currency (عملة قابلة للتحويل) :
A currency that may be readily exchanged for other currencies .
Core principle for effective banking supervision (Developed by the Basle Committee in September, 1997 which will be endorsed not late than October, 1998)(مقررات لجنة بأزل حول الرقابة في حدودها الدنيا 22/09/97) :
Preconditions for Effective Banking Supervision
1. An effective system of banking supervision will have clear responsibilities and objectives for each agency involved in the supervision of banking organizations. Each such agency should possess operational independence and adequate resources. A suitable legal framework for banking supervision is also necessary, including provisions relating to authorization of banking organizations and their ongoing supervision; powers to address compliance with laws as well as safety and soundness concerns; and legal protection for supervisors. Arrangements for sharing information between supervisors and protecting the confidentiality of such information should be in place .
Licensing and Structure
2. The permissible activities of institutions that are licensed and subject to supervision as banks must be clearly defined, and the use of the word “bank” in names should be controlled as far as possible.
1. The licensing authority must have the right to set criteria and reject applications for establishments that do not meet the standards set. The licensing process, at a minimum, should consist of an assessment of the banking organization’s ownership structure, directors and senior management, its operating plan and internal controls, and its projected financial condition, including its capital base; where the proposed owner or parent organization is a foreign bank, the prior consent of its home country supervisor should be obtained.
2. Banking supervisors must have the authority to review and reject any proposals to transfer significant ownership or controlling interests in existing banks to other parties.
3. Banking supervisors must have the authority to establish criteria for reviewing major acquisitions or investments by a bank and ensuring that corporate affiliations or structures do not expose the bank to undue risks or hinder effective supervision.
Prudential Regulations and Requirements
6- Banking supervisors must set prudent and appropriate minimum capital adequacy requirements for all banks. Such requirements should reflect the risks that the undertake, and must define the components of capital, bearing in mind their ability to absorb. At least for internationally active banks, these requirements must not be less than those established in the Basle Capital Accord and its amendments.
1. An essential part of any supervisory system is the evaluation of a bank’s policies, practices and procedures related to the granting of loans and making of investments and the ongoing management of the loan and investment portfolios.
2. Banking supervisors must be satisfied that banks establish and adhere to adequate policies, practices and procedures for evaluating the quality of assets and the adequacy of loan loss provisions and loan loss reserves.
3. Banking supervisors must be satisfied that banks have management information systems that enable management to identify concentrations within the portfolio and supervisors must set prudential limits to restrict bank exposures to single borrowers or groups of related borrowers.
4. In order to prevent abuses arising from connected lending, banking supervisors must have in place requirements that banks lend to related companies and individuals on an arm’s-length basis, that such extensions of credit are effectively monitored, and that other appropriate steps are taken to control or mitigate the risks.
5. Banking supervisors must be satisfied that banks have adequate policies and procedures for identifying, monitoring and controlling country risk and transfer risk in their international lending and investment activities, and for maintaining appropriate reserves against such risks.
6. Banking supervisors must be satisfied that banks have in place systems that accurately measure, monitor and adequately control market risks; supervisors should have to impose specific limits and/or a specific capital charge on market risk exposures, if warranted.
7. Banking supervisors must be satisfied that banks have in place a comprehensive risk management process (including appropriate board and senior management oversight) to identify, measure and control all other material risks and, where appropriate, to hold capital against these risks.
14- Banking supervisors must determine that banks have in place internal controls that are adequate for the nature and scale of their business. These should include clear arrangements for delegating authority and responsibility; separation of the functions that involve committing the bank, paying away its funds, and accounting for its assets and liabilities; reconciliation of these processes; safeguarding its assets; and appropriate independent internal or external audit and compliance functions to test adherence to these controls as well as applicable laws and regulations.
15- Banking supervisors must determine that banks have adequate policies, practices and procedures in place, including strict “know-your-customer” rules, that promote high ethical and professional standards in the financial sector and prevent the bank being used, intentionally or unintentionally, by criminal elements.
Methods of Ongoing Banking Supervision
16. An effective banking supervisory system should consist of some form of both on-site and off-site supervision.
1. Banking supervisors must have regular contact with bank management and thorough understanding of the institution’s operations.
2. Banking supervisors must have a means of collecting, reviewing and analyzing prudential reports and statistical returns from banks on a solo and consolidated basis.
3. Banking supervisors must have a means of independent validation of supervisory information either through on-site examinations or use of external auditors.
20- An essential element of banking supervision is the ability of the supervisors to supervise the banking group on a consolidated basis.
Information Requirements
21. Banking supervisors must be satisfied that each bank maintains adequate records drawn up in accowith consistent accounting policies and practices that enable the supervisor to obtain a true and fair view of the financial condition of the bank and the profitability of its business and that the bank publishes on a regular basis financial statements that fairly reflect its condition.
Formal Powers of Supervisors
22. Banking supervisors must have at their disposal adequate supervisory measures to bring about timely corrective action when banks fail to meet prudential requirements (such as minimum capital adequacy ratios), when there are regulatory violations, or where depositors are threatened in any other way. In extreme circumstances, this should include the ability to revoke the banking license or recommend its revocation.
Cross- border Banking
23. Banking supervisors must practice global consolidated supervision over their internationally-active banking organizations, adequately monitoring and applying appropriate prudential norms to all aspects of the business conducted by these banking organizations worldwide, primarily at their foreign branches, joint ventures and subsidiaries.
1. A key component of consolidated supervision is establishing contact and information exchange with the various other supervisors involved, primarily host country supervisory authorities.
2. Banking supervisors must require the local operations of foreign banks to be conducted to the same high standards as are required of domestic institutions and must have powers to share information needed by the home country supervisors of those banks for the purpose of carrying out consolidated supervision .
Counterparty (أحد أطراف المعاملة) :
One party to a trade . the identity of a counterparty will be the borrower (customer), the person quaranteed, the issuer of a security in the case of a security held or the party with whom a contract was made in the case of a derivatives contract .
Course (مساق) :
Regularly scheduled class sessions of one to five (or more) hours per week during a term. A degree program is made up of a specified number of required and elective courses offered by an institution are usually assigned a name and a number (such as Mathematics 101) for identification purposes .
Credit aggregate (الائتمان المتراكم) :
A term sometimes used instead of debt aggregate.
Credit (الائتمان):
Means any commitment to disburse a sum of money in exchange for a right to repayment of the amount disbursed and outstanding and to payment of interest or other charges on such amounts, any extension of the due date of a debt, any guarantee issued, and any commitment to acquire a debt security or other right to payment of a sum of money .
Credits (علامات، متطلبات دخول كلية):
Units institutions use to record the completion of courses of instruction (with passing or higher grades) that are required for an academic degree. The catalog of a college or university defines the amounts and kinds of credits that are required for its degrees and states the value in terms of degree credit—or “credit hours” or “credit points”—of each course offered .
Credit ********ation (توثيق الائتمان):
Means, with respect to an agreement entered into by a bank with any other person for the provision of credit: Reasonably current financial statements of the borrower and any guarantor of the borrower’s indebtedness; A de******ion of any collateral over which the lender has any mortgage or charge as security for the due payment of the indebtedness to it and an appraisal of its value; A statement of the terms of the terms of the credit, including the principal amount, rate of interest, schedule of repayment, and the borrower’s objective or purpose for borrowing; and The signature of each person who authorized the credit on behalf of the lender .
Credit risk(المخاطر الائتمانية) :
The risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. Credit risk includes replacement cost risk, principal risk and cash deposit risk . Lending or investments ultimately must be against sound profits that generate long-term returns higher than the borrowing rate or prospective dividends. Undue exuberance on the part of investors, when price-earning ratios grow beyond fundamentals, or on the part of bankers who failed to assess the impact of high interest rates on collateral or cash flows, would expose both the investor and the lender to asset losses .
Credit union (مؤسسات ائتمان خاصة بالأعضاء ) :
Financial cooperative organization of individuals who have a common bond, such as place of employment or residence or membership in a labor union. Credit unions accept deposits from members, pay interest ( in the form of dividends) on the deposits out of earnings, and use their funds mainly to provide consumer installment loans to members .
Criteria for Authorization(شروط الترخيص) (BANK OF ENGLAND):
Schedule 3 of the1987 Banking Act sets out clear criteria with which an institution must comply in order to receive authorization from the Bank of England. These include, for example, that the institution\'s business be conducted with integrity and skill, that directors and managers be fit and proper persons and that business be carried out in a prudent manner, requiring adequate capital, adequate liquidity, adequate provisions, adequate accounting and other records and adequate control systems.
Cross-border settlement (التسويات عبر الحدود) :
A settlement that takes place in a country other than the country in which one trade counterparty or both are located .
Cross settlement system (نظام التسويات المتتالي) :
A transfer system in which the settlement of funds or securities transfer instructions occurs individually (on an instruction -by-instruction basis) .
Currency (العملة الورقية):
Paper money
Currency mismatch risk (مخاطر عدم مواءمة العملة) :
Corporations who borrowed foreign currency funds to finance investments that do not generate sufficient foreign exchange to repay the debt run a currency mismatch .
Current ratio (working capital ratio ( (نسبة التداول/نسبة تداول رأس المال العامل : Current assets / Current liabilities, measures the company’s liquidity .
Custodian(الحافظ الآمين) :
An entity, often a bank , that safe keeps and administers securities for its customers and that may provide various other services, including clearance and settlement, cash management, foreign exchange and securities lending .
Custody-only link (الربط بين الأسواق):
A link between two SSSs which enables transactions in securities held in SSS1 to be settled using SSS2 (rather than SSS1) when the buyer and seller are both participants in SSS2. Custody-only links do not provide for the transfer of funds between SSS1 and SSS2 and cannot be used to settle transactions between a participant in SSS1 and a participant in SSS2 .
Custody risk(مخاطر الحفظ الأمين) :
The risk of loss of securities held in custody occasioned by the insolvency , negligence or fraudulent action of the custodian or of a sub-custodian .
Customer(العميل/ الزبون) :
A buyer, seller or holder of securities and financial instruments that does not participate directly in a system. A participant’s holdings in a system often include securities and financial instruments of which the participant’s customers are the beneficial owners .
(Interest); On CDs and deposits loan this is calculated on a daily basis on a 365-day year; interest on a deposit or loan is paid at maturity annually and at maturity, unless special arrangements are made at the time the deal is concluded; On secured loans the discount houses and Stock Exchange money brokers do not pay interest at intervals of less than 28 days. The current general practice is to calculate at the close of business on the penultimate working day of each calendar month and to pay the interest thereon on the last working day of the month. (Brokerage) All brokerage is calculated on a daily basis on a 365-day year and brokerage statements are submitted monthly .
Calculation of interest (احتساب الفائدة)in a leap year(السنة الكبيسة) (London, market conventions ) :
The calculation of interest in a leap year depends upon whether interest falls to be calculated on a daily or an annual basis. The position may differ as between temporary and longer-term loans. (Temporary loans) Because temporary loans may be pain in less than one year(but may, of course, be continued for more than a year) interest on temporary money is almost which includes 29 February automatically incorporates that day in the calculation; in calculating the appropriate amount of interest the number of days of a leap year which ensures that full value is given for the ‘extra’ day. Examples: Assume last pervious interest payment 1 February (up to and including 31 January) and date of payment 1 April (in a leap year). Duration of loan for final interest calculation = 29 days (February) + 31 days (March) = 60 days. Calculation of interest would be [p*(r/100)*( 60/365) = ] . Assume on intermediate interest payments. Loan placed 1 March and called for payment 1 March the following year (leap year). Total period up to and including 29 February = 366 days. Calculation of interest would be [p*(r/100)*(366/365) = ]. This is in line with banking practice regarding interest on deposits which is calculated on a daily basis and no conflict therefore arises. (Longer-term loans) The following procedure for the calculation of interest on loans which cannot be repaid in less than one year (except under a TSB or building society stress clause) was agreed between the BBA and the Chartered Institute of Public Finance and Accountancy on 12 December 1978: (a) Fixed interest; The total amount of interest to be paid on a longer-term loan a fixed interest should be calculated on the basis of the number of complete calendar years running from the firs day of the loan with each day of any remaining period bearing interest as for 1/365 of a year. Normal practice for the calculation of interest in leap years is to disregard 29 February if it falls within one of the complete calendar years. Only when it falls within the remaining period is it counted as an additional day with the divisor remaining a 365. Example: 3 ½ year loan, maturing on 30 June of a leap year. First 3 years’ interest: [p*(r/100)*3 =]. Final 6 months’ interest: [p*(r/100)*(182/365) =]. Certain banks, however, require additional payment of interest for 29 February in all cases and it was therefore agreed that:; both the original offer or bid, and the agent’s confirmation, must state specifically if such payment is to be made; and the ********ation must incorporate the appropriate phraseology. Interest on longer term loans should be paid half-year on the half-year anniversary of the loan or on other prescribed dates and at maturity To calculate half yearly interest payment the accepted market formula is: [p*(r/100)*(d/365)=].Where d = actual number of days. Although with the agreement of both parties the following is sometimes used: [p*(r/100)*(1/2)=]. (b) Floating rate: Interest on variable rate loans, or roll-overs, which are taken for a fixed number of years with the rate of interest adjusted on specific dates, should be calculated in the same manner as for temporary loans .
Call Report (البيان الشهري) :
Informal name for Report of Condition and Income .
CAMELB & COM Rating (England) : {C}Capital Adequacy;{A} Assets Quality; {M} Market Risk;{E} Earnings Performance;{L} Liabilities; {B} Business;{C} Internal Controls; {O} Organization;{M} Management .
CAMELS Rating (USA) :
Definition A numerical composite rating is assigned to a bank at the end of the safety and soundness examination. In characterizes the level of risk in a given financial institution and identifies the level of supervision which the central bank should provide. Each component is assigned a rating 1 to 5.
Components CAMELS is an acronym for the six key performance components used to determine the composite rating: {C}Capital Adequacy;{A} Assets Quality; {M} Management; {E} Earnings Performance;{L} Liquidity ; {S} Sensitivity to Market Risk.
Note The sixth component rating, the “S” factor - Sensitivity to Market Risk, was implemented in the revised rating system effective January 1,1997.
Rating Scale The composite rating given to a financial institution is a number, a composite of the ratings of six key components that make up the CAMELS: {1} Strong peformance {2} Satisfactory performance {3} Flawed performance {4} Unsatisfactory performance {5} Critically deficient performance.
Note The composite rating is not a simple average of the five key components. It is a judgment based on the overall importance and seriousness of conditions discovered during the examination.
Campus(حرم الجامعة) :
The land on which the buildings of a college or university are located .
Capital (راس المال):
In banking, the funds invested in (as opposed to deposited in) a bank .
Capital (راس المال):
Calculate the institution\'s capital level taking into account estimated potential loss classifications determined in the asset quality evaluation. Then, capital adequacy is evaluated in relation to: CBJ capital adequacy requirements; overall financial condition of the bank; level and trend of classified and/or non-performing assets; level and quality of off-balance-sheet items; balance sheet composition; growth experience and prospects; and the quality of management. In addition, consideration is given to retention of earnings in light of capital needs; reasonableness of dividends; access to new sources of capital and other potential sources of financial assistance; and plans for maintaining or improving capital and/or the correction of any capital deficiencies. Lastly, assess the overall risk to the institution resulting from activities conducted in subsidiaries or affiliates of the institution or its holding company .
Capital base (قاعدة راس المال):
The capital base used as the basis for monitoring large exposures should be calculated according to the method as that used in the calculation of the risk asset ratio .
Capital Flows (تدفق راس المال) :
In the past decade, capital flows surged within the Asian region and globally. According to IMF statistics, average annual net capital inflows to developing countries exceeded US$ 150 billion in 1990-96, and more than 40% of which actually came to Asia. In the last two years we saw even more capital inflows to the region, recording a net total of US$ 107 billion in 1996 and a similar growth rate in the first half of 1997. In some Asian economies, net inflows have averaged 5-8% of GDP over long periods, with over half of such capital flows in the form of foreign direct investment. Capital movements help growth through a more global efficient allocation of resources and bring new knowledge and technology to emerging economies. The global competition in external trade has emerged with newly industrialized and export-oriented economies with cheap labor, such as China, India, Latin American and Eastern Europe. The failure of central planning has brought at least three billion new workers and consumers into the global market. Asian central banks are now holding about 40% of the world’s foreign exchange reserves. Five of the top six foreign exchange holders in the world are now Asians. Capital inflows will increase the deposit base of domestic banks which may be channeled through credit mistakes into fueling domestic asset price bubbles. There are two implica. First, asset price inflation eventually feeds into domestic inflation and erodes external competitiveness. Second, Excessive lending concentration into less productive assets, either real estate or over-investment in infrastructure and production capacity, exposes the financial institutions to huge risks.
Capital Market ( سوق رأس المال ):
The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded. (Compare money market) .
Cash( النقــــد ):
Currency plus coin .
Cash correspondents(المراسلين) :
Banks (or similar institutions) used the SSS to make or receive payments .
Cash deposit risk (مخاطر الإيداع النقدي) :
The credit risk associated with the holding of funds with an intermediary for the purpose of settling securities transactions .
Cash memorandum account (مذكرة الحساب النقدي) :
Records kept by the SSS of the funds due to be paid to or received by participants in conjunction with their securities settlement; the records are for information purposes only and do not represent legal claims or liabilities between the SSS and its participants .
Central securities depository (CSD)(مركز إيداع الأوراق المالية) :
An institution for holding securities which enables securities transaction to be processed by means of book entries. Physical securities may be immobilized by the depository or securities may be dematerialized (so that exist only as electronic records .
Central Bank (بنك مركزي):
Principal monetary authority of a nation, which performs several key functions, including issuing currency and regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States .
Certificate (شهادة):
The ******** which evidences the undertakings of an issuer of a security or financial instrument .
Chaining :
A method used in certain settlement systems for processing transfers. It involves the manipulation of the order in which transfers are processed to increase the number or value of transfers that may be settled with available securities and funds balances (or available credit lines) .
Characteristics of the financial regulation (مواصفات التنظيم المالي) :
Statutory responsibility for regulation is assigned to a Registrar of Investment Services (the Registrar) in terms of new legislation. The Registrar, in terms of the new legislation, determines and issues a set of principles (incorporation minimum standards) for the regulation of retail investment services in consultation with a Retail Investment Services Advisory Committee. Industry associations (product suppliers and investment service providers) and public-interest representatives are included in the membership of this Advisory Committee. The principles are translated into practical codes of conduct and other rules for the different industry segments by the Registrar in consultation with the Advisory Committee. These codes and rules determine the respective intensities of regulation and supervision as well as the regulatory and supervisory requirements such as, for example, the registration of insurance intermediaries. The rules are published in terms of enabling legislation for compliance by investment service providers in the different industry segments. Regulatory instruments, aimed at ensuring the proper market conduct of investment service providers, cover part or all of the following: registration in industry segments where this is practically achievable; code of market conduct; disclosure requirements; mechanisms for removing undesirable products or investment services from the market; and mechanisms for achieving compliance with rules or dealing with investor complaints and claims. Compliance is not monitored by the Registrar. Existing industry associations may, in terms of the rules, monitor the compliance of their members with the rules. However, in the absence of formal supervision, compliance is driven mainly by complains by investors and others and the application of sanctions for non-compliance with rules. The regulatory structure resulting from this model is simple and its main elements are designated Registrar, the Advisory Committee, the regulated investment service providers (and where they exist their associations) and entities for handling, and dealing with, complaints by investors .
Charter (النظام الأساسي):
Each bank shall have a charter that shall specify its corporate name and address; its purposes; the jurisdiction, creation, and authority of a Board of Directors; as well as the amount of its capital, the classes, numbers of nominal values of its shares, and the voting rights attaching to its shares. No amendment of the charter of a bank shall take effect without the prior written consent of the Central Bank .
Check Clearing (مقاصة الشيكات) :
The movement of a check from the depository institution at which it was deposited back to the institution on which it was written , the movement of funds in the opposite direction, and the corresponding credit and debit to the involved accounts. The Federal Reserve operates a nationwide check-clearing system .
Check Truncation(أتمتة بيانات الشيك بين البنوك) :
Practice of holding a paper check at the bank at which it was deposited (or at an intermediary bank ) and electronically forwarding the essential information on the check to the bank on which it was written .
Clearance(تصفية حساب، تسوية حساب) :
The term {clearance} has two meanings in the securities markets. It may mean the process of calculating the mutual obligations of market participants, usually on a net basis, for the exchange of securities and money. It may also signify the process of transferring securities on the settlement date, and in this sense the term {clearing system} is sometimes used to refer to securities settlement systems. In this disclosure framework, the term is used only in the first sense .
Clearing (مقاصة) :
General term that may refer to check clearing or to the process of matching trades between the sellers and buyers of securities and other financial instruments and contracts .
Closely related counterparties (ذوي الصلة):
A group of closely related counterparties exists where: unless it can be shown otherwise, two or more individual counterparties constitute a single risk because one of them has , directly or indirectly, control over the other or others: or individual counterparties are connected in such a way that the financial soundness of any of them may affect the financial soundness of the other or others or the same factors may affect the financial soundness of both or all of them .
Collateral (الضمانة):
An asset or third-party commitment that is accepted by the collateral taker to secure an obligation of the collateral provider vis-a-vis the collateral taker .
College (كلية) :
An institution of higher learning that offers undergraduate programs, usually of four-year duration, which lead to the bachelor’s degree in the arts or sciences (BA. or BS.). The term “college” is also used in a general sense to refer to a post-secondary institution .
Commercial Bank (بنك تجاري):
Bank that offers a broad range of deposit accounts, including checking , savings, and time deposits, and extends loans to individuals and businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities. (Also compare savings bank) .
Commercial paper (ورقة تجارية) :
Short-term, unsecured promissory note issued by a commercial firm, a financial company, or a foreign government .
Community or junior college (كلية مجتمع متوسطة):
An institution of higher learning that offers programs of up to two years’ duration leading to the associate degree in the arts or sciences (A.A. or A.S.) or to a technical degree. Credits earned at a community or junior college are usually transferable to a four-year institution with programs leading to a bachelor’s degree. Students on a two-year program prepare for semi-professional or technical employment. Community and junior colleges usually require a secondary-schoodiploma, or its equivalent, for admission .
Consumer Advisory Council(مجلس المستهلكين الاستشاري) :
Statutory group composed of thirty members who represent the interests of a broad range of consumers and creditors. The council meets with the Board of Governors three times a year on matters concerning consumers and the consumer protection laws administered by the Board .
Confirmation (تثبيت، تصديق على):
The process by which a market participant notifies its customers of the details of a trade and allows the customer to positively affirm or question the trade .
Connected counterparty (ذوي الصلة):
Parties connected to the reporting bank comprise: group undertaking (including subsidiaries) and related companies; associated companies; directors, controllers and their associates; non-group companies with which the reporting bank\'’ directors and controllers are associated .
Control (السيطرة) :
Control is defined as the relationship between a parent undertaking and a subsidiary or a similar relationship between any natural or legal person and an undertaking .
Controls in an information technology environment (الرقابة في بيئة تكنولوجيا المعلومات
I-The information held in electronic form within an institution\'s information systems is a valuable asset that needs to be protected against unauthorized access and disclosure . It is the responsibility of management to understand the extent to which an institution relies upon
electronic information, assess the value of that information and establish an appropriate system of control.
II-The types of risk most often associated with the use of information technology in financial systems may be classified as follows :
1-Fraud and Theft:
Access to information and systems can create opportunities for the manipulation of data in order to create or conceal significant financial loss . Additionally, information can be stolen, even without its physical removal or awareness of the fact, which may lead to loss of competitive advantage. Such unauthorized activity can be committed by persons with or without legitimate access rights.
2-Errors :
Although they most frequently occur during the manual inputting of data and the development of amendment of software, errors can be introduced at every stage in the life cycle of an information system .
3-Interruption:
The components of electronic systems are vulnerable to interruption and failure, without adequate contingency arrangements this can lead to serious operational difficulty and / or financial loss.
4-Misinformation:
Problems may emerge in systems that have been poorly specified or inaccurately developed . These might become immediately evident, but can also pass undetected for a period during which they could undermine the veracity of supposedly sound information. An institution\'s electronic systems, or their consequences are often apparent at many points external
to the organization. Unreliable, unfriendly and insecure systems can damage an institutions business credibility. In addition , failure of an institution\'s electronic systems might result in a breach of contract and legal liability, and / or a breach of regulatory requirements.
III-Controls need to be established that fall within
three categories:
1-Preventive:
Measures designed to eliminate or reduce the incidence or probability of fraud , errors and systems interruption ;
2-Detective:
Measures designed to detect that adverse incidents have occurred as quickly as possible before unacceptable damage is done;
3-Contingency:
Measures designed to facilitate recovery from adverse incidents as quickly as possible with minimum cost and damage to the business ;
V-Particular consideration should be given to control implications in the following areas when establishing an electronic information systems environment :
1-Organization and structure of the resources used to manage and support an institution\'s electronic information and systems ;
2-The appropriateness of strategic planning for electronic information systems and its compatibility with, and support of, wider business strategy and planning;
3-Systems development life cycle, which should include standards and procedures designed to ensure that well controlled systems are delivered
4-********ation of electronic systems ,their design, operation and use ;
5-Change control procedures , covering both planned modifications and emergency amendments;
6-Operation, maintenance and support of electronic systems ;
7-Physical security of computerized facilities, in order to prevent unauthorized access and provide protection against environmental hazards (fire, flood, power loss etc.) ;
8-Logical access control procedures, designed to prevent unauthorized access to electronic systems and data, detect attempted violations and
maintain audit trails ;
9-Network security, in particular the control of remote access to electronic systems and data, transmission integrity and overall confidentiality;
10-Personal computer security, where the standards of control associated with larger systems are harder to maintain .Particular hazards include the
illegal copying of software which can , inter alia, increase the risk of exposure to computer viruses and their attendant dangers ;
11-Standby systems , recovery management procedures and the arrangements for making copies of important electronic files .
12-Business interruption planning, which should address the way in which business critical electronic systems are to be maintained in the
event of fire , flood , power failure or other physical damage . It might also be appropriate to consider the provision of other resources,
egstaff , accommodation , in order to take a wider business perspective ; Plans should be agreed, ********ed and regularly tested .
V-It is also important that management is aware of its responsibility to promote and maintain a climate of security awareness and vigilance throughout the organization . In particular, it should give consideration to:
1-It security education and training , designed to make all relevant staff aware of the need for, and their role in supporting , good it security
practice and the importance of protecting company assets ;
2-It security policy , standards , procedures and responsibilities, designed to ensure that arrangements are adequate and appropriate .
Control objectives (أهداف رقابية) :
Each institution should address the following control objectives: organization structure; monitoring procedures; segregation of duties; authorization and approval; completeness and accuracy; safeguarding assets; and personnel .
Consolidated supervision (الرقابة الشاملة):
This supervisory approach focuses on the parent holding company. In order to determine whether the group as a whole has adequate capital, the assets and liabilities of individual companies are consolidated; capital requirements are applied to the consolidated entity at the parent company level; and the result is compared with the parent’s (or group’s) capital .
Consolidated supervision’s Checklist of principles (أسئلة اختبار توفر الرقابة الشاملة الرقابة الشاملة):
A- Powers to exercise global oversight
1- Does the home country supervisor have adequate powers to enable it to obtain the information needed to exercise consolidated supervision, for example:
· does the bank in question have its own routine for collecting and validating financial information from all its foreign affiliates, as well as for evaluating and controlling its risks on a global basis?
· does the home supervisor receive regular financial information relating both to the whole of the group, and the material entities in the group (including the head office0 individually?
· is the home supervisor able to verify that information (e.g. through inspection, auditors’ reports or information received from the host authority)?
· is there access to information on intra-group transactions, not only with downward affiliates but also if appropriate with sister companies or non-bank affiliates?
· does the home supervisor have the power to prohibit corporate structures that deliberately impede consolidated supervision?
B- Exercise of consolidated sup
2- Which of the following procedures does the home country supervisor have in place to demonstrate its ability to capably perform consolidated supervision:
· adequate control of authorization both at the entry stage and on changes of ownership?
· adequate prudential standards for capital, credit concentrations, asset quality (i.e. provisioning or classification requirements), liquidity, market risk, management controls, etc?
· off-site capability, i.e. systems for statistical reporting of risks on a consolidated basis and the ability to verify or to have the reports verified?
· the capability to inspect or examine entities in foreign locations?
· arrangements for a frequent dialogue with the management of the supervised entity?
· a track record of taking effective remedial action when problems arise?
Consolidated supervision purpose is essentially threefold (غايات الرقابة الشاملة):
1. to support the principle that no banking operation, wherever located, should escape supervision altogether;
2. to prevent double-leveraging of capital; and
3. to ensure that all the risks incurred by a banking group, no matter where they are booked, are evaluated and controlled on a global basis .
Contagion (عدوى، تأثير مؤذي):
Psychological contagion - where problems in one part of a group are transferred to other parts by market reluctance to deal with a tainted group - is difficult for supervisors to guard against. However, contagion resulting from the existence of extensive intra-group exposures can , in principle, be contained.
Corporate bond (اسناد القرض):
Interest -bearing or discounted debt obligation issued by a private corporation rather than by a government agency .
Correspondent bank (البنك المراسل):
Bank that accepts the deposits of, and performs services for, another bank (called a respondent bank); in most cases, the two banks are in different cities.
Convertible currency (عملة قابلة للتحويل) :
A currency that may be readily exchanged for other currencies .
Core principle for effective banking supervision (Developed by the Basle Committee in September, 1997 which will be endorsed not late than October, 1998)(مقررات لجنة بأزل حول الرقابة في حدودها الدنيا 22/09/97) :
Preconditions for Effective Banking Supervision
1. An effective system of banking supervision will have clear responsibilities and objectives for each agency involved in the supervision of banking organizations. Each such agency should possess operational independence and adequate resources. A suitable legal framework for banking supervision is also necessary, including provisions relating to authorization of banking organizations and their ongoing supervision; powers to address compliance with laws as well as safety and soundness concerns; and legal protection for supervisors. Arrangements for sharing information between supervisors and protecting the confidentiality of such information should be in place .
Licensing and Structure
2. The permissible activities of institutions that are licensed and subject to supervision as banks must be clearly defined, and the use of the word “bank” in names should be controlled as far as possible.
1. The licensing authority must have the right to set criteria and reject applications for establishments that do not meet the standards set. The licensing process, at a minimum, should consist of an assessment of the banking organization’s ownership structure, directors and senior management, its operating plan and internal controls, and its projected financial condition, including its capital base; where the proposed owner or parent organization is a foreign bank, the prior consent of its home country supervisor should be obtained.
2. Banking supervisors must have the authority to review and reject any proposals to transfer significant ownership or controlling interests in existing banks to other parties.
3. Banking supervisors must have the authority to establish criteria for reviewing major acquisitions or investments by a bank and ensuring that corporate affiliations or structures do not expose the bank to undue risks or hinder effective supervision.
Prudential Regulations and Requirements
6- Banking supervisors must set prudent and appropriate minimum capital adequacy requirements for all banks. Such requirements should reflect the risks that the undertake, and must define the components of capital, bearing in mind their ability to absorb. At least for internationally active banks, these requirements must not be less than those established in the Basle Capital Accord and its amendments.
1. An essential part of any supervisory system is the evaluation of a bank’s policies, practices and procedures related to the granting of loans and making of investments and the ongoing management of the loan and investment portfolios.
2. Banking supervisors must be satisfied that banks establish and adhere to adequate policies, practices and procedures for evaluating the quality of assets and the adequacy of loan loss provisions and loan loss reserves.
3. Banking supervisors must be satisfied that banks have management information systems that enable management to identify concentrations within the portfolio and supervisors must set prudential limits to restrict bank exposures to single borrowers or groups of related borrowers.
4. In order to prevent abuses arising from connected lending, banking supervisors must have in place requirements that banks lend to related companies and individuals on an arm’s-length basis, that such extensions of credit are effectively monitored, and that other appropriate steps are taken to control or mitigate the risks.
5. Banking supervisors must be satisfied that banks have adequate policies and procedures for identifying, monitoring and controlling country risk and transfer risk in their international lending and investment activities, and for maintaining appropriate reserves against such risks.
6. Banking supervisors must be satisfied that banks have in place systems that accurately measure, monitor and adequately control market risks; supervisors should have to impose specific limits and/or a specific capital charge on market risk exposures, if warranted.
7. Banking supervisors must be satisfied that banks have in place a comprehensive risk management process (including appropriate board and senior management oversight) to identify, measure and control all other material risks and, where appropriate, to hold capital against these risks.
14- Banking supervisors must determine that banks have in place internal controls that are adequate for the nature and scale of their business. These should include clear arrangements for delegating authority and responsibility; separation of the functions that involve committing the bank, paying away its funds, and accounting for its assets and liabilities; reconciliation of these processes; safeguarding its assets; and appropriate independent internal or external audit and compliance functions to test adherence to these controls as well as applicable laws and regulations.
15- Banking supervisors must determine that banks have adequate policies, practices and procedures in place, including strict “know-your-customer” rules, that promote high ethical and professional standards in the financial sector and prevent the bank being used, intentionally or unintentionally, by criminal elements.
Methods of Ongoing Banking Supervision
16. An effective banking supervisory system should consist of some form of both on-site and off-site supervision.
1. Banking supervisors must have regular contact with bank management and thorough understanding of the institution’s operations.
2. Banking supervisors must have a means of collecting, reviewing and analyzing prudential reports and statistical returns from banks on a solo and consolidated basis.
3. Banking supervisors must have a means of independent validation of supervisory information either through on-site examinations or use of external auditors.
20- An essential element of banking supervision is the ability of the supervisors to supervise the banking group on a consolidated basis.
Information Requirements
21. Banking supervisors must be satisfied that each bank maintains adequate records drawn up in accowith consistent accounting policies and practices that enable the supervisor to obtain a true and fair view of the financial condition of the bank and the profitability of its business and that the bank publishes on a regular basis financial statements that fairly reflect its condition.
Formal Powers of Supervisors
22. Banking supervisors must have at their disposal adequate supervisory measures to bring about timely corrective action when banks fail to meet prudential requirements (such as minimum capital adequacy ratios), when there are regulatory violations, or where depositors are threatened in any other way. In extreme circumstances, this should include the ability to revoke the banking license or recommend its revocation.
Cross- border Banking
23. Banking supervisors must practice global consolidated supervision over their internationally-active banking organizations, adequately monitoring and applying appropriate prudential norms to all aspects of the business conducted by these banking organizations worldwide, primarily at their foreign branches, joint ventures and subsidiaries.
1. A key component of consolidated supervision is establishing contact and information exchange with the various other supervisors involved, primarily host country supervisory authorities.
2. Banking supervisors must require the local operations of foreign banks to be conducted to the same high standards as are required of domestic institutions and must have powers to share information needed by the home country supervisors of those banks for the purpose of carrying out consolidated supervision .
Counterparty (أحد أطراف المعاملة) :
One party to a trade . the identity of a counterparty will be the borrower (customer), the person quaranteed, the issuer of a security in the case of a security held or the party with whom a contract was made in the case of a derivatives contract .
Course (مساق) :
Regularly scheduled class sessions of one to five (or more) hours per week during a term. A degree program is made up of a specified number of required and elective courses offered by an institution are usually assigned a name and a number (such as Mathematics 101) for identification purposes .
Credit aggregate (الائتمان المتراكم) :
A term sometimes used instead of debt aggregate.
Credit (الائتمان):
Means any commitment to disburse a sum of money in exchange for a right to repayment of the amount disbursed and outstanding and to payment of interest or other charges on such amounts, any extension of the due date of a debt, any guarantee issued, and any commitment to acquire a debt security or other right to payment of a sum of money .
Credits (علامات، متطلبات دخول كلية):
Units institutions use to record the completion of courses of instruction (with passing or higher grades) that are required for an academic degree. The catalog of a college or university defines the amounts and kinds of credits that are required for its degrees and states the value in terms of degree credit—or “credit hours” or “credit points”—of each course offered .
Credit ********ation (توثيق الائتمان):
Means, with respect to an agreement entered into by a bank with any other person for the provision of credit: Reasonably current financial statements of the borrower and any guarantor of the borrower’s indebtedness; A de******ion of any collateral over which the lender has any mortgage or charge as security for the due payment of the indebtedness to it and an appraisal of its value; A statement of the terms of the terms of the credit, including the principal amount, rate of interest, schedule of repayment, and the borrower’s objective or purpose for borrowing; and The signature of each person who authorized the credit on behalf of the lender .
Credit risk(المخاطر الائتمانية) :
The risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. Credit risk includes replacement cost risk, principal risk and cash deposit risk . Lending or investments ultimately must be against sound profits that generate long-term returns higher than the borrowing rate or prospective dividends. Undue exuberance on the part of investors, when price-earning ratios grow beyond fundamentals, or on the part of bankers who failed to assess the impact of high interest rates on collateral or cash flows, would expose both the investor and the lender to asset losses .
Credit union (مؤسسات ائتمان خاصة بالأعضاء ) :
Financial cooperative organization of individuals who have a common bond, such as place of employment or residence or membership in a labor union. Credit unions accept deposits from members, pay interest ( in the form of dividends) on the deposits out of earnings, and use their funds mainly to provide consumer installment loans to members .
Criteria for Authorization(شروط الترخيص) (BANK OF ENGLAND):
Schedule 3 of the1987 Banking Act sets out clear criteria with which an institution must comply in order to receive authorization from the Bank of England. These include, for example, that the institution\'s business be conducted with integrity and skill, that directors and managers be fit and proper persons and that business be carried out in a prudent manner, requiring adequate capital, adequate liquidity, adequate provisions, adequate accounting and other records and adequate control systems.
Cross-border settlement (التسويات عبر الحدود) :
A settlement that takes place in a country other than the country in which one trade counterparty or both are located .
Cross settlement system (نظام التسويات المتتالي) :
A transfer system in which the settlement of funds or securities transfer instructions occurs individually (on an instruction -by-instruction basis) .
Currency (العملة الورقية):
Paper money
Currency mismatch risk (مخاطر عدم مواءمة العملة) :
Corporations who borrowed foreign currency funds to finance investments that do not generate sufficient foreign exchange to repay the debt run a currency mismatch .
Current ratio (working capital ratio ( (نسبة التداول/نسبة تداول رأس المال العامل : Current assets / Current liabilities, measures the company’s liquidity .
Custodian(الحافظ الآمين) :
An entity, often a bank , that safe keeps and administers securities for its customers and that may provide various other services, including clearance and settlement, cash management, foreign exchange and securities lending .
Custody-only link (الربط بين الأسواق):
A link between two SSSs which enables transactions in securities held in SSS1 to be settled using SSS2 (rather than SSS1) when the buyer and seller are both participants in SSS2. Custody-only links do not provide for the transfer of funds between SSS1 and SSS2 and cannot be used to settle transactions between a participant in SSS1 and a participant in SSS2 .
Custody risk(مخاطر الحفظ الأمين) :
The risk of loss of securities held in custody occasioned by the insolvency , negligence or fraudulent action of the custodian or of a sub-custodian .
Customer(العميل/ الزبون) :
A buyer, seller or holder of securities and financial instruments that does not participate directly in a system. A participant’s holdings in a system often include securities and financial instruments of which the participant’s customers are the beneficial owners .