Bank Glossary - E
- Early stage financing
- Venture capital financing instrument. Financing is provided
in the early development stage of a company and is
generally used to finance a business concept up to the
start of production and marketing.
- Earnings per share
- Key figure determined according to IAS which expresses a
company's net income after tax (including minority
interests in profit) in relation to the average number of
ordinary shares. Apart from basic earnings per share,
diluted earnings per share must also be shown if
Subscription rights granted have led or could lead to an
increase in the total number of shares (dilution).
- EBRD
- Abbreviation for 'European Bank for
Reconstruction and Development'
- EC card
- Card issued by credit institutions for the withdrawal of
cash at financial institutions and for cashless payments to
the industry and commerce and to service companies in
Europe and in certain countries outside Europe and
bordering on the Mediterranean, either in conjunction with
Eurocheques or purely electronically,
using the PIN at
EC cashpoints,
or at electronic cash terminals or EDC
terminals. Use of the EC card forms the basis of a
settlement/payment guarantee for transactions with the
PIN or for Eurocheques if these are issued in
national currency up to a maximum of DM 400 or up to the
sum of the guarantee.
- EC cashpoint
- Cashpoints, identified by the blue and red EC symbol, at
which cash can be withdrawn in the respective national
currency, even from other financial institutions, in
Germany, throughout Europe and in certain countries
outside Europe and bordering on the Mediterranean, using
the EC card or a Bank customer card in conjunction with
the PIN.
- ECB
- Abbreviation for European Central Bank
- ECI
- Abbreviation for European Currency Institute
- ECP
- Abbreviation for Euro Commercial Paper
- ECSDA
- Abbreviation for European Central Securities
Depositories Association
- ECU
- Abbreviation for European Currency Unit. ECU (if nec. as
supplement to dictionary def.) The composition of the ECU
has remained unchanged since the Maastricht Treaty was
ratified, i.e. the currencies of the three countries which
acceded in 1995, Austria, Sweden and Finland, are no
longer included in the ECU basket. With the beginning of
monetary union the ECU will be converted to the EURO at
a ratio of 1:1.
- EDC
- Abbreviation for 'Electronic Debit Card';
(Electronic cash)
- EEMU
- Abbreviation for European Economic and Monetary
Union
- EIB
- Abbreviation for European Investment Bank
- Electronic banking
- Services offered by banks to their private and business
customers, using computerised support to record, process
and transport data, automatically or without vouchers, and
subsequently to make them available once again after
suitable preparation (Telebanking).
- Electronic cash
- Cashless electronic payment procedure in trade and
commerce on the basis of the EC card (without the
Eurocheque counterfoil) or bank customer card with the
PIN. The sum paid is then
debited, without voucher, from
the personal account. In Europe, this payment service is
offered by the financial services sector under the
designation 'EDC = Electronic Debit Card'. Electronic
cash/EDC payments are guaranteed for the payee.
- Electronic payment transactions
- Payment orders, voucher-less where appropriate, are
recorded in their entirety on electronic media and handled
as part of the accounting transactions between the credit
institutions in the voucher-less data medium exchange
procedure (Cashless payment transactions).
- Electronic purse
- New, cashless electronic payment procedure which the
German financial sector will be introducing under the
designation 'Geldkarte' ['Moneycard'], after a local field trial
from the end of 1996. The rechargeable electronic purse is
installed in a microprocessor chip, which is integrated in
the EC card or in another bank card. In particular, the
electronic purse is used for the cashless payment of
smaller amounts at automatic cashpoints. The electronic
purse is recharged by using the PIN at cashpoints or other
terminals, in principle by debiting the personal account.
- Electronic trading
- see Computerised stock exchange
- Eligibility as collateral
- Suitability of securities for use as collateral.
Eligibility for investment in premium reserve stock
Securities which are authorised for investment of the
premium reserve stock to be set up by the insurance
companies.
- Eligible for trust investment
- A ward is an under-age person (minor) who is under the
care of a guardian. Under the provisions of §§ 1806 et seq
of the German Civil Code, the capital assets of the ward,
managed by the guardian, must be invested in particularly
secure ('gilt-edged') stocks. As a general rule, the
investment takes the form of fixed-interest securities which
have been expressly designated as eligible for trust
investment by the legislature.
- Employee savings allowance
- Under the provisions of the [German] Formation of Wealth
Act, employees are entitled, under certain conditions, to an
employee savings allowance for capital-forming payments;
(Capital-forming savings agreement). In principle, the
taxable annual income for single persons should not
exceed DM 27,000 and DM 54,000 for married couples.
The State then allocates supplementary allowances,
equivalent to 10%, for forms of savings such as capital
investment (securities) savings and building society
savings. Application for the savings allowance is made on
the annual tax declaration.
- Employees' shares
- Offered by the management of a joint-stock company to
their employees, usually at a preferential price and
frequently under favourable conditions of payment. The sale
of employees' shares is normally subject to a period of
non-negotiability (up to 5 years).
- EMS
- Abbreviation for European Monetary System
- EMU
- Abbreviation for European Monetary Union
- Endorsement
- Notation concerning the transfer of rights to bills of
exchange. The beneficiary from a bill of exchange, issuer
or payee of a bill of exchange declares by virtue of the
endorsement that, upon maturity, the purchaser should pay
the sum payable under a bill of exchange to the new
creditor of the bill of exchange and not to the beneficiary.
- Equity
- As defined by the BIZ: equity, subject to banking
supervision, in accordance with the Basle Equity
Convention of 1988, for internationally-active credit
institutions. It consists of core capital (principally share
capital and reserves), together with supplementary capital
(in particular special dividend right capital, lower-priority
accounts payable, undisclosed reserves and revaluation
reserves in quoted securities, such as debenture bonds,
shares, holdings).
- Equity method
- Valuation method for holdings in companies whose
business policy can be significantly influenced (associated
companies) and where the pro rata share of the company's
net income/loss for the year is reflected in the book value
of the holding. For distributions the value is reduced by the
pro rata amount.
- Equity share
- Share which entitles the holder to claim all the rights
laid down in the [German] Corporation Act. The opposite of
equity share is preference share.
- ESCB
- Abbreviation for European System of Central
Banks
- Eurex
- Abbr. for European Exchange
- EURIBOR
- Abbr. for European Interbank Offered Rate
- Euro
- The name of the future common European currency. A
Council order, which is expected to come into force on 1
January 1999, will form the statutory framework for the use
of the Euro. The third stage of economic and monetary
union will irrevocably establish the conversion rates
between the currencies of the participating countries and
the Euro. From this point on the Euro will be an
independent currency, and the official ECU basket will
cease to exist. One consequence of the Council order will
be that the national currencies and the Euro will continue
to be merely different designations for what in the
economic sense is one and the same currency. As of 2002
the European Central Bank is expected to issue bank
notes and coins in Euros. The coin of the new currency will
be the cent.
- Euro bank transfer
- Standardised procedure for the bank transfer of sums of
money in DM, in the currency of the destination country or
in ECU's, up to DM 5,000 or the corresponding
counter-value in foreign currency in another Member State
of the European Union (EU) of the European Free Trade
Area (EFTA). The payee always receives the payment in
the currency of the destination country. The ordering party
can determine whether the basically fixed charge imposed
abroad should be invoiced to the payee or whether he
himself should accept these costs in the form of a
lump-sum payment.
- European Central Securities
Depositories Association (ECSDA)
- Association of 13 European Central Securities.
Depositories, CSDs. The association intends to collaborate
to build up a Europe-wide infrastructure for the provision of
securities as collateral for the European Central
Bank's lending operations with banks. Further plans involve
building and setting up mutual account connections among
CSDs for the cross-border settlement of securities
transactions.
- Euro Commercial Paper (ECP)
- Commercial paper issued and traded on international
money markets (Euro-money markets).
ECP's are floated as discounted or interest-bearing securities.
As a general rule, the terms are 2 to 365 days and, in the
case of DM commercial papers, 7 days to 2 years.
- Euro Libor
- Abbr. for European London interbank
offered rate
- Euro Traveller's Cheque
- Brand name for a traveller's cheque sold nationally by
many credit institutions and accepted worldwide. Euro
Traveller's Cheques are available in Deutschmarks, US
dollars and many other currencies, as well as in ECU's
(European Currency Unit). ETC's are issued by the Thomas
Cook Group.
- Euro-money market (Eurodollar
market)
- A market, established in 1957, for limited-term dollar loans,
generally with short repayment periods. Trading is in US
dollars as well as other convertible currencies and is
conducted between banks outside the USA (not only
European banks but also foreign subsidiaries of American
banks, as well as Canada and Japan). The principal market
is London. In addition, there is the Euro-capital market, the
market for eurobonds, local authority
bonds and mortgage bonds.
- Eurobonds
- Bond issues which are issued by an international
Consortium (of banks) and are placed simultaneously in
several countries. The shares are usually payable in the
major currencies: US dollars, Deutschmarks, Yen, Pounds
sterling. Issuers include countries, international institutions
and major companies.
- EUROCARD
- Credit card issued by credit institutions. In Germany, and
through cooperation with MasterCard, it is used as a
means of cashless payment between more than 12 million
contracting companies. At banks and at cashpoints - in
conjunction with the corresponding PIN - it also provides a
facility for withdrawing cash. The transactions are debited
collectively from the cardholder once a month. Prior to this,
the cardholder receives a detailed statement of
transactions. In Germany, transactions in foreign currency
are converted into DM. Usually, the EUROCARD
incorporates public transport accident insurance cover. The
EUROCARD GOLD card provides extended insurance
cover and, in many cases, an additional travelling and
event-related service.
- Eurocheque
- Special form of the widely-used bearer cheque (in Europe,
in particular, it is the usual form), which is characterised by
an internationally-standardised format, standard colours
and the blue-and-red EC symbol printed on the left-hand
side. The use of Eurocheques in conjunction with the EC
card has the advantage that, in Europe and in certain
countries bordering the Mediterranean, encashment of the
cheque is guaranteed, up to a set value in the particular
country.
- Euroclear
- Clearing system (Clearing), set up in 1968 by the Morgan
Guaranty Trust Co. in Brussels, for international securities
transactions. With over 2,700 associates in 70 counties
and more than 60,000 listed securities (in 1994), Euroclear
is the largest clearing system in the world for international
securities.
- Euronote facilities
- Euronote facilities are financial innovations at whose core
lie agreements between one or more banks on the one
hand and a capital acquirer on the other; according to
these agreements the capital acquirer can procure capital
for himself over a period of five to seven years through the
revolving placement of Euronotes on the Euromarket up to
a ceiling. It is essential for this construction that the banks
involved (underwriters) undertake to purchase the
Euronotes at the contractually agreed rate of interest or
alternatively provide book credits (backup or standby
facilities), if the capital acquirer does not succeed in
selling his Euronotes on the market. Since the Euronotes
themselves only have a duration of several months, they
must be offered again by the debtor - according to
requirements -once this period has expired (= Revolving
Underwriting Facilities - RUFs or Note Issuance Facilities -
NIFs).
- Euronotes
- Short-dated money market papers issued on the
Euromarket by parties other than banks and whose interest
rate is linked to a money-market rate of interest reference
rate. This gives - in contrast to the Euro Commercial Paper
- a maturity standardization of approximately one, three or
six to twelve months.
- European Bank for Reconstruction and
Development (EBRD)
- The 'European Bank for Reconstruction and Development',
also known as the 'East European Bank', 'European Bank'
or 'Eastern Bank', supports the process of reform in the
democratic countries of eastern Europe by means of
financial aid. Here priority is given to the sectors of energy,
transport, telecommunications, housing and environmental
protection. Smaller businesses are also encouraged
indirectly. The bank encourages reforms in the financial
sector in an advisory capacity. The EC countries account
for 51% of the equity capital of 10bn ECU; of this Germany,
France, the United Kingdom and Italy each hold 8.5%. The
United States hold 10%, and Japan 8.5 %; east European
recipient countries own 13.5%. The Bank, which was
established in London in 1990, works closely with other
multinational organizations.
- European Central Bank (ECB)
- The ECB was formed immediately following the decision on
the starting date for the third stage of European
Monetary Union (EMU). The members of the Board of the ECB are
appointed by the governments of the Member States of the
EMU. Under the terms of the Maastricht Treaty, the priority
objective of the ECB is to guarantee the price stability of
the new 'Europa' currency. In addition to implementing
monetary policy, the ECB is also responsible for
encouraging the smooth handling of payment transactions,
for managing the currency reserves transferred to it by the
Member States and for performing important advisory
functions.
- European Commission
- It is responsible for applying the statutory regulations of the
EU. As an executive body it is in charge of implementing
Community policy. In some areas it has extensive powers
(e.g. with regard to competition policy), and in other cases
it operates on behalf of the European Council. The
Commission has the important right to initiate legislation
concerning proposals for the further development of the EU.
- European Council
- The European Council provides a forum for the heads of
government of the Member States. The European Council
establishes the political objectives for the development of
the European Union and is the EU's central
decision-making body.
- European Currency Institute (ECI)
- Founded on 1 January 1994 as the forerunner of the
European Central Bank (ECB). Since November
1994, its permanent location has been Frankfurt am Main. The task
of the ECI is to prepare for entry into the third stage of the
European Monetary Union (EMU). Until then, the
goal of the ECI is to complete the technical and organisational
preparations for the EMU.
- European Currency Unit (ECU)
- The ECU was created in 1979, with the establishment of
the European currency system, as the official unit of
account for the European Community. It is composed of
the various currencies of the EC. It is also referred to as a
basket of currencies, which is regularly adjusted and
redefined as the EC expands. A decisive factor in the
evaluation is the contribution made by each Member State
to the Gross Domestic Product of the Community (at
present 1 ECU = DM 1.89).
- European Economic and Monetary
Union (EEMU)
- In December 1991, the European Council of Ministers
concluded the 'Treaty of the European Union' in Maastricht.
The economic objective of this agreement is to create a
European Economic and Monetary Union by the end of this
century. Economic integration, with the European Single
Market as the nucleus, is already virtually complete. The
European Monetary Union plus a common currency
represents the goal and the conclusion of economic and
political integration in Europe.
- European Exchange (Eurex©)
- Cooperation of European futures and options exchanges
with a harmonized regulatory framework and standardized
products on a European trading platform. The German
futures and options exchange DTB and the Swiss futures
and options exchange SOFFEX operate under the umbrella
organization Eurex (EURopean EXchange).
- European Interbank Offered Rate
(EURIBOR)
- As a representative interest rate, EURIBOR is to replace
the national reference interest rates (e.g. FIBOR) of the
EMU member states from January 1, 1999. Where
numerous contracts exist, in particular for securities and
Derivatives, reference will increasingly be made to
reference interest rates. Up to 58 European banks, thereof
12 German and 6 international banks with branches in EEA
will report selling rates for one to twelve month loans, of
which an average rate is published. On this basis, the ECB will also publish an overnight rate.
- European Investment Bank (EIB)
- The European Investment Bank (EIB) is the EC bank for
long-term financing. The EIB was set up in 1958 by the
Treaty of Rome establishing the European Economic
Community; its articles of association form part of this
Treaty. The EIB is a non-profit-making organization. Its
main aim is to provide funds for investment projects
designed to aid the smooth and balanced development of
the Community. Its funds benefit mainly economically
weaker regions - even within developed countries such as
Germany. In addition the EIB has participated in the
financing of development projects in the 'Third World' and
eastern Europe which ended in the EC Co-operation
Agreement. Of the capital in excess of 57.6bn ECU (118bn
DM) subscribed by twelve EC members, less than one
tenth has been paid. The EIB obtains the vast majority of
its funds via bonds on the capital markets within and
outside the EC.
- European London interbank offered
rate (Euro Libor)
- From 1999, this rate will replace the ECU Libor calculated
by the British Bankers Association. The Euro Libor will
then be calculated daily by 16 London banks at around 11
a.m. In contrast, the EURIBOR is
largely based on interest
rates of banks domiciled in one of the EMU member
states.
- European Monetary System (EMS)
- The European Monetary System (EMS), which came into
force in March 1979, is the successor to the 'European
Currency Snake' of 1972. Its main aim is to create in
Europe a zone of relatively stable exchange rates and
reduce dependency on other currencies, e.g. the US dollar.
In this respect it also seen as a building block of European
unity (monetary union). Within the framework of the EMS
the issuing banks of the EC countries have undertaken to
restrict movements between their currencies to minor
deviations from the central rate. Changes in the central rate
(so-called 'realignments') are then made if the rates of
inflation of the participating countries have risen at different
rates. The ECU is used as an accounting unit
in the EMS.
- European Monetary Union (EMU)
- Under the terms of the Maastricht Treaty of December
1991, EMU should be implemented in three stages, in
accordance with a fixed timetable:
- European option
- Buying or selling option (Option trading) which can only
be exercised on the date of maturity. The opposite of the
European option is the American option.
- European System of Central Banks (ESCB)
- The European System of Central Banks (ESCB) consists
of the European Central Bank (ECB) and the
national central banks. The system is managed by two
decision-making bodies, the ECB Council and the
Executive Board. The primary aim of the ESCB is to
guarantee price stability. The main tasks of the system are
to establish and transpose the monetary policy of the
European currency area, maintain and administer the
currency reserves of the participating Member States and
carry out foreign exchange transactions, encourage the
smooth operation of payments systems in the European
currency area and contribute to the smooth transposition of
the measures taken by the competent authorities in the
field of supervision of banks and the stability of the financial
system. The ESCB has access to certain tools of
monetary policy to help in the provision of money and
credit in line with stability.
- Exchange rate
- Conversion ratio between two currencies. The two types of
exchange rate are the fixed exchange rates, linked to
restrictions on the import and export of capital, and flexible
exchange rates, which are independently dictated by
supply and demand on the currency markets; Foreign
currency.
- Exchange ratio
-
- (1) If a public limited company experiences an
'increase in share capital' the exchange ratio
provides information regarding how many old shares
a new (young) share can be based on.
- (2) In the case of warrants the exchange ratio
expresses how many units of the base value the
holder of an option can buy or sell when exercising
the option.
- Exchange-rate stability
- Convergence criterion for a Member State at which the
normal margins of the exchange-rate mechanism of the
EMS in the past two years before the convergence
inspection must be observed without the country's own
currency depreciating.
- Exchange Transaction Settlement System
(Börsengeschäftsabwicklung (BOEGA))
- BOSS-CUBE and Xetra
both maintain direct electronic interfaces with BOEGA,
thereby ensuring automatic
transmission of settlement data and documentation. The
contract notes produced daily within the BOEGA system
form the basis of banks' and securities firms' transaction
documentation.
- Exemption order (for capital gains)
- The effect of an exemption order is that investment income
can be credited, up to a figure of DM 6,000.00 or, in the
case of joint investments by married couples, up to a figure
of DM 12,000.00, without deduction of 30 % interest rebate
(interest rebate tax). In the case of dividends and similar
investment income, capital gains tax and corporation tax
are applied - provided that there is sufficient tax-free
allowance. The exemption order is usually placed by the
credit institution operating the account.
- Expenses
- In the case of securities, these principally take the form of
bank commission, broker's fees Broker's commission) and
limit and deposit fees. Outside expenses are principally
incurred when foreign securities are bought or sold.