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Tuesday, 23rd April 2024
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International trade and payments Back  
AIB Capital Markets present a glossary on terms used in international trade and payments.
Absorption Rate: The rate at which properties can be leased or sold in a given area.

Acceleration Clause: A provision that allows a lender to demand payment of the total outstanding balance or demand additional collateral under certain circumstances, such as failure to make payments, bankruptcy etc.

Accounts Payable: Money, which a company owes to vendors for products and services, purchased on credit. This item appears on the company’s balance sheet as a current liability, since the expectation is that the liability will be fulfilled in less than a year. Accounts Receivable Money, which is owed to a company by a customer for products and services, provided on credit. This is treated as a current asset on a balance sheet.

Accounts Receivable Financing: The selling of a company's accounts receivable, at a discount, to a factor, who then assumes the risk of the account debtors and receives cash as the debtors settle their accounts.

Actuals: An actual physical commodity, which is delivered at the completion of a contract, as opposed to a futures contract on that commodity.

Arbitrage: The simultaneous purchase and sale of identical or equivalent financial instruments or commodity futures in order to benefit from a discrepancy in their price relationship.

Avalize: The process by which a third party usually a bank guarantees the undertaking of the drawee to meet their responsibility under a Bill of Exchange.

Bills of Exchange: A general term for book bills, trade bills, note issuance facilities (NIF’s) and Promissory notes.

CFR (C&F or Cost and Freight): This is an INCO term and explains what the price quoted represents and the responsibility of the buyer and seller in relation to arranging for the various costs associated (e.g. insurance, freight, duties) with the shipment.

Cambist: An expert on exchange rates, or a foreign currency trade.

D/P (Documents against Payment) or CAD (Cash against Documents): This refers to shipping documents which are presented to a bank on a collection basis to be passed to the buyer (drawee) when payment is made.

Del Crede Agency: An agency, factor or broker who sells products and/or services for another party and guarantees that the buyer will pay for them.

Garbatrage: Term used to describe rising prices and volume throughout a sector due to the psychological impact of a major takeover within the sector.

Letter of Credit available by acceptance: A letter of Credit available at the counters of the issuing or nominated bank, by acceptance of a bill of exchange payable to the seller at a determinable future date.

NOW: Negotiable order of withdrawal. An interest bearing checking account at a bank or savings and loan.

Negative Carry: Condition in which the cost of borrowing money exceeds the return obtained from it. Usually implies a loss, except when tax advantages result.

Net-Off: To apply, one cashflow against another.

Non-Recourse Discounting: The purchase from the seller of accepted term Bills of Exchange at a discount to allow for the funding of the advance from the discount date until the maturity of the bills. When the discount is provided on a non-recourse basis the financing bank has no recourse to the seller in the event of non-payment by the buyer or the buyers’ bank.

Nostro Account: An account, held by a bank, with a bank in another country, usually in the currency of that foreign country.
Noting: Noting is a preliminary form of protesting a Bill of Exchange - that is - an initial official statement that the bill of exchange or promissory note has not been paid.

Seller's Points: In reference to a loan, seller’s points consist of a lump sum paid by the seller to the buyer’s creditor to reduce the cost of the loan to the buyer.v

Silent Confirmation: In a normal confirmed Letter of Credit, the issuing bank will request the advising bank to add its confirmation. A silent confirmation occurs when the issuing bank has not requested the advising bank to add its confirmation but the bank does so at the request of the seller.

Swift: A message writing system that connects worldwide participating banks. It is used primarily for the purpose of communicating payment information.

UCP: Uniform Customs and Practices for Documentary Credit developed by the International Chamber of Commerce as the rules that govern the operation of Letter of Credit transactions worldwide.

Wraparound: A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate between the rate charged on the old loan and the current market and interest rate.

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