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Cash and Treasury Management Glossary

Treasury is a constantly developing profession full of specialist terminology and various acronyms which can sometimes be intimidating for newer treasurers. Consult this glossary for a short explanation of the most frequently used terms in treasury. 


ABCP - Asset backed commercial paper: a commerical paper issued by corporations or financial institutions through a bankruptcy remote special purpose entity.

Account analysis: A statement, usually monthly, produced by a company’s bank that summarises the transaction activity, cash balance and charges on each account held.

Accounts payable (A/P): Ledger of balances owed by a company for purchases.

Accounts receivable (A/R): Ledger of balances owed to a company for sales.

Accreditation: Formal process of certifying a particular process or function usually linked to service quality (e.g. ISO 9001 accreditation).

ACH - Automated clearing house: capable of handling automated electronic domestic payments, usually used for low-value clearing systems (e.g. BACS in the UK and ECG/autopay in Hong Kong).

AFTA: ASEAN Free Trade Area.

Agency: A role in which a bank or trust institution manages assets in which the title remains with the owner.

APEC: Asia Pacific Economic Cooperation.

Arbitrage: The process of buying something in one market and then selling it in another for a risk-free profit. If dealers are able to profit from arbitrage they will do so. This usually means that true arbitrages only last for a short period of time.

Arm’s-length: Transactions occurring at free market rates. ASEAN: Association of South East Asian Nations.

ASEAN - Association of Southeast Asian Nations: a political and economic organisation of ten Southeast Asian countries. Indonesia, Malaysia, the Philippines, Singapore, and Thailand, Brunei, Cambodia, Laos, Myanmar (Burma), and Vietnam are members.

ASP - Application service provider: an ASP provides customers with application hosting and related services over the Internet that would otherwise have to be located and supported in-house.

Asset: Something that you own, in financial markets an investment is an asset.

Authentication: A software security device that creates a check sum using a confidential algorithm attached to the message. It is tested to ensure no changes have been made to any message components in transit. Used when a message is not secret and does not require encryption.

Auto-invest: A method of cash concentration where balances in operating accounts are swept to an interest-bearing account for overnight investment purposes.

Available funds: Funds that are available for withdrawal.


B2B - Business-to-business: e-commerce conducted between two or more businesses.

B2C - Business-to-consumer: e-commerce conducted between a business and consumers.

Back value: The adjustment to the posted value date of a transaction debited or credited to an account, with the effect of providing a debit or credit item with an earlier value date.

BACS - Bankers Automated Clearing Service: BACS Limited is a company established to operate the UK’s automated clearing house (see ACH), handling lower-value bulk clearing for both GBP credits and direct debits on behalf of the 17 major banks and building societies. Banks sponsor corporate customers into BACS.

BADT - Bank accounts debit tax: imposed on debit transactions made to accounts with a cheque book facility (other than exempt accounts held with banks) in all states and territories in Australia.

Bahtnet: The Bangkok-based interbank settlement system under the control of the Bank of Thailand. (See ACH.)

Bankers’ acceptances: A time or sight draft drawn on a commercial bank by a borrower, usually in connection with a commercial transaction. The borrower is liable for payment, as is the bank, which is the primary obligor, to pay the draft at its face amount on the maturity date. Used primarily to finance the export, import, shipment or storage of goods.

Basel II: The new accord proposed by the Basel Committee for Banking Supervision calls for minimum capital requirements, supervisory review and market discipline in the industry to replace the current accord set in 1998.

Basis point: The unit that represents the minimum interest rate change of 0.01%.

Benchmark: A measure against which the investment policy or performace of a fund manager can be compared.

BCC - Belgian Coordination Centre: a treasury (or other operational centre) established in Belgium under specific law 187 granting tax benefits for providing international coordination activities. It is similar to the IFSC in the Republic of Ireland.

Bilateral netting: A system in which purchases between two subsidiaries in the same group are netted against each other, periodically (typically monthly) and only the net difference is transferred.

BIS: The Bank for International Settlements, located in Basel, Switzerland, has evolved into an important international monetary institution, and provides a forum in which central bankers meet and consult on a monthly basis. As an independent financial organisation, the BIS performs a variety of banking, trustee and agent functions, primarily with central banks.

Bolero: Bolero was created under the stewardship of SWIFT and the TT Club – and has wide participation of financial institutions and logistic service providers. Bolero allows all members of a trade chain to communicate electronically using the same platform.

Bond: Security issued by a borrower to a lender, covering short- or long-term debt at a variable or fixed interest rate.


Cap: A contract between a borrower and a lender whereby the borrower is assured that he or she will not have to pay more than a specified maximum interest rate on borrowed funds.

Capital market: A market in which long-term capital is raised.

Cash concentration: A facility by which balances of several accounts are physically aggregated through a funds transfer mechanism. Funds actually move between accounts. Cash concentration types include: zero balance accounts (ZBA); target balance accounts; and auto-invest accounts.

Cash flow forecasting: Identifying and/or forecasting known future cash receipts and obligations, and calculating cash balances for each future date in order to cover shortfalls and invest surpluses.

Cash management: The effective forecasting, monitoring and management of liquid resources by:

  • maximising access to liquidity and minimising deficit positions at optimal cost;
  • controlling cash flow on a cross-border basis;
  • optimising funding/investments of cash/debt; and
  • controlling/minimising risk.

Cash pooling: The notional offsetting of multiple balances for the purposes of calculating interest on the net balance. In contrast to cash concentration (see cash management above), there is no actual movement of funds. Interest is debited/credited to a designated master or header account, although some corporations/banks will reallocate interest rates. Single currency cash pooling is most common although cross-currency and cross-border pooling is offered by some banks.

Central bank reporting: A requirement in many countries to report cross- border and currency transactions to the local monetary authority. This can be done by transaction or summary, and is often done by banks on behalf of their customers.

Centralised (treasury): A structure in which a group treasury has responsibility for all treasury activities. Operating companies maintain limited treasury responsibility locally, usually for commercial reasons.

Certificate of deposit (CD): A form of time deposit at a bank or savings institution; a time deposit cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs are often in negotiable form, meaning they can be sold or transferred among holders before maturity.

CHAPS - Clearing House Automated Payments System: the London- based credit transfer/settlement system designed to handle high- value electronic interbank payment traffic on an online real-time gross settlement basis. Payments are secure (through authentication and encryption) and settlement, with same-day value, is unconditionally guaranteed. CHAPS is SWIFT-compatible and transactions are irrevocable at the time they enter the system.

CHATS - Clearing House Automated Transfer System: the Hong Kong SAR-based settlement system under the control of the Hong Kong Association of Banks. CHATS operates on an RTGS basis.

CHIPS - Clearing House Interbank Payments System: a New York- based settlement system.

Cleared balance: The funds in a customer’s account that are available for withdrawal by the customer.

Clearing cycle: The time taken for transfer instructions to pass between bank branches and clearing centres to enable payment.

Clearing house: An institution where mutual claims are settled between accounts of member depository institutions. Clearing houses among banks have traditionally been organised for cheque-clearing purposes, but more recently have cleared other types of settlements, including electronic funds transfers.

CLS - Continuous Linked Settlement: an industry initiative that aims to significantly reduce foreign exchange settlement risk through simultaneous exchange of net currency values.

Collar: A floating rate debt contract that establishes a maximum and minimum interest rate to be paid by the borrower.

Collateral: A security utilised in order to reduce the credit risk that a party is taking when it enters into a transaction. Increasingly over the counter (OTC), derivative transactions are being collateralised.

Commercial paper (CP): A relatively low-risk short-term unsecured form of borrowing. Normally the maturity does not exceed 365 days. It can be issued by a bank or a corporate under a CP programme. The programme will have several dealers. The dealers are responsible for selling the paper to end investors on behalf of the issuer. CP is tradable and this means that investors can liquidate it before maturity if required. The return to the investor largely depends on the maturity and the credit rating of the CP. Many CP programmes are rated by rating agencies.

Commissionaire structure: A structure in which overseas subsidiaries act as sales and distribution agents for a parent or reinvoicing centre. The subsidiary is paid a commission on sales that are invoiced by the parent directly to the end purchaser. Cash is normally collected by the “agent” and transferred to the parent in full or after deducting a commission.

Confirmation matching (system): The confirmation and matching of transactions (normally treasury) usually through an external, independent system, but it may also be done by an internal independent system or an internal treasury management system. Standing data such as the bank’s contact, name and address will be matched with the transaction details. The system will then automatically match the corporation’s transaction details with the bank’s record. The system will require a pre-defined level of authorisation to produce the confirmation, which will not require manual signature.

Convertible security: A bond or preferred stock that the holder can convert into new stock instead of obtaining repayment.

Corporate treasury associations: Finance and Treasury Association Ltd (Australia); Hong Kong Association of Corporate Treasurers (HK); Malaysian Association of Corporate Treasurers (MACT); New Zealand Society of Corporate Treasurers (NZSCT); Association of Corporate Treasurers (Singapore); Association of Corporate Treasurers (UK); and Treasury Management Association (US).

Correspondent bank: A bank that acts as an agent for another bank, generally in a region in which it does not have a suitable presence itself.

Counterparty: The other party participating in a financial transaction or aggreement. Every transaction must have a counterparty in order for the transaction to go through, for example - every buyer of an asset must be paired up with a seller that is willing to sell and vice versa.

Counterparty risk: The risk to each party of a contract that the counterparty will not live up to its contractual obligations. In most financial contracts, counterparty risk is known as default risk.

Cover: The term used to describe funds in the currency of a payment transferred between banks to support (cover) a payment order.

Credit risk: The possibility that the issuer of a bond will default by failing to repay principal and interest in full or in a timely manner.

CRM - Customer relationship management: CRM encompasses methodologies, software and usually Internet capabilities that help an enterprise manage customer relationships in an organised way.

Cut-off time: Latest time of day at which a transaction can occur to ensure standard settlement is achieved (e.g. value today).


Daylight overdraft: An intra-business-day customer overdraft creating a temporary exposure to the bank providing the facility.

DPO - Days payable outstanding: the number of days on average a company takes to pay its accounts payable.

DSO - Days sales outstanding: the number of days on average a company takes to collect its accounts receivable.

Debenture: An unsecured long-term loan taken by a company, usually with a maturity of 15 years or more. Debentures are marketable securities.

Debit card: A card that resembles a credit card but which debits a transaction account (cheque account) with the transfers occurring contemporaneously with the customers’ purchases. A debit card may be machine-readable, allowing for the activation of an automated teller machine or other automated payment equipment.

Decentralised (treasury): A structure where day-to-day treasury activities are managed at the operating company level, rather than at the group level. In practice, there is usually a split of responsibilities between the group treasury and the operating units.

Delivery versus payment (DVP): The standard method of settling securities transactions whereby delivery of the security is made on the same day as the payment.

Demand deposit: A deposit payable on demand.

Deposit reconciliation: A service that enables deposits from multiple locations, being credited to a single corporate account, to be identified and reported. Also known as branch consolidation services.

Derivatives: Instruments that are valued according to the expected price movements of underlying assets, which may be commodities, currencies or securities.

DES-based security: Data encryption standard used to secure data transmitted electronically.

Digital signature: A digital signature can be used to authenticate the identity of the sender of an electronic message. The signature will be different for each message or document being signed.

Direct debit: A means of authorising recurring payments (e.g. mortgage or insurance payments) to be drawn on an account.

Double taxation agreement: A treaty between two countries to ensure that residents are not doubly taxed on the same source of income in more than one country.

Draft: An instrument drawn on a bank that cannot be dishonoured due to lack of funds (e.g. it is guaranteed). Drafts can be negotiable or non- negotiable.


E-Banking - Electronic banking: an application supplied by a bank to support the transmission of information, payments, advice, etc. by electronic means to or from a customer.

E-Cheque: An electronic version of a paper cheque that uses the same legal and business protocols associated with traditional paper cheques and can be used in similar transactions.

E-Commerce - Electronic commerce: the exchange of business information from one organisation to another in an electronic format in some mutually agreed standard.

E-Procurement: This is the automated buying and selling of goods and services between qualified corporate users over the Internet.

EAI - Enterprise application integration: technologies designed to help integrate the different data and business processes among networked applications in an organisation.

EBPP - Electronic bill presentment and payment: the invoicing and payment process for consumers in B2C applications.

EDI - Electronic data interchange: any system used to exchange business data electronically that avoids manual re-keying and eliminates paperwork.

EDIFACT: EDI for administration, commerce and transport. It is the standard adopted by the United Nations for business messages, and is managed by SWIFT.

EFT - Electronic funds transfer: a payment in which the payer sends a payment instruction to a bank by electronic means. The payment is then made automatically by the bank using SWIFT or a similar domestic system. Fixed format counterparty lists are often used to speed up regular payments.

EFTPOS: Electronic funds transfer at point of sale.

EIPP - Electronic invoice presentment and payment: the invoicing and payment process between businesses in B2B applications.

EMU: European Monetary Union.

Encryption: A process that “scrambles” a message so that it cannot be read by someone who may intercept it.

Enterprise-wide systems: Systems that span an entire organisation, providing end-to-end functionality.

ERP: Enterprise resource planning systems are accounting-oriented information systems for identifying and planning the business-wide resources needed to handle all aspects of customer orders. ERPs are designed to automate the business processes of medium and large- sized businesses.

Entrusted loans: Loans for which funds have been provided by a third party, who bears the repayment risk, and the lender acts only as an administering party and receives a handling fee. Also known as entrust loans.

Escrow: This is a mode of settlement for a trade that requires the keeping of monies in trust by a third-party intermediary (a bank).

Escrow accounts: Accounts in which conditions apply restricting access to the funds. For example, funds will be left to accumulate to pay taxes or insurance on mortgaged property.

Exchange control: Regulation requiring a level of prior approval for cross-border transactions. Such approval may be delegated to major banks to simplify the process.


Factoring: A finance technique in which a business sells invoiced receivables at a discount to a bank or finance house (the factor) or to an internal finance company. The factor may or may not accept the incumbent credit risk.

FDI: Foreign direct investment.

Federal Open Market Committee (FOMC): In the US, a 12-member committee consisting of the seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank presidents. The committee sets objectives for the growth of money and credit that are implemented through purchases and sales of US government securities in the open market. The FOMC also establishes policy relating to system operations in the foreign exchange markets.

Federal Reserve System (Fed): The Fed is the focal point for domestic US funds movement. For cheque clearing, the Fed receives cheque deposits from depository institutions and then clears the cheque back to the drawer bank. The Fed operates FEDWIRE and is the main operator of the ACH system that clears electronic payments.

FEDI - Financial EDI: the standard EDIFACT formats for communicating financial information are:

  • payext – payment instruction (including remittance advice);
  • creadv – credit advice;
  • payord – payment instruction;
  • paymul – multiple payment instructions;
  • bansta – bank statement information;
  • remadv – remittance advice; and
  • dirdeb – direct debit instruction.

The electronic transmission of payments and payment-related information in standard formats between company trading partners and/or their banks. FEDI includes electronic format for invoices, initiation of payments, lockbox deposit reports and remittance information sent either directly to a trading partner or processed through a financial or communications intermediary.

FEDWIRE: A nationwide US electronic payments system operated by the Fed for high-value low-volume same-day US dollar wire transfers. FEDWIRE payments are irrevocable.

Financial instruments (FIs): Formal financial documents such as options, futures and other financial contracts, usually used for speculative and hedging purposes and derived from other basic assets or rates such as stocks and currency rates.

Financial leverage: The ratio of long-term funds with a fixed interest charge, such as debentures, that comprise a company’s capital to its ordinary share capital.

Float: The elapsed time from the date an asset or liability is incurred until its final settlement (e.g. the money represented by cheques in transit between deposit and payment). Float can be broken down as follows:

  • billing float;
  • mail float;
  • internal processing float;
  • collection float (availability and presentation float); and
  • advice float.

Foreign currency account: An account held in a currency that is not the local currency in the country in which the account is held.

Foreign exchange transactions: Purchase or sale of the currency of one nation with that of another. Foreign exchange rates refer to the number of units of one currency needed to purchase one unit of another, or the value of one currency in terms of another.

Forward exchange: A type of foreign exchange transaction whereby a contract is made to exchange one currency for another at a fixed date in the future at a specified exchange rate. By buying or selling forward exchange, businesses protect themselves against a decrease in the value of a currency they plan to sell at a future date.

Futures: An agreement to buy or sell a particular commodity, currency or security for delivery at a fixed date in the future at a fixed price.


Gateway: A bank that is a full member of a clearing system and which acts as the point of access for non-member banks to submit and receive payments.

Gilt: Bonds that are issued by the British government and generally considered low-risk.

Giro systems: Centralised payments systems, common in Europe, generally operated by the postal service using direct debits and credits. In many cases a term analogous to ACH. An international giro network exists for payments between national giros.

Good value: This is the availability of funds for use (e.g. a deposited cheque only provides good value once it has cleared and the funds may be withdrawn).

The Greeks: The Greeks are used to explain the risks associated with option positions. Sometimes specifically referred to as delta, gamma, vega, theta and rho, are sensitivities to certain inputs used to determine the change in the resulting output. These can then be used to determine hedging strategies. The delta is an equivalent underlying position that gives you the same risks as the option position itself. The gamma is how the delta changes when the underlying price moves. The theta describes the time decay of an option. The vega describes the effect of changes in the implied volatility on the value of the option. Rho is the option's sensitivity to changes in interest rates.

Group treasury: The finance function with overall responsibility for treasury activities within a group of companies, including any regional or in-country treasury operations. Responsibilities will vary depending on whether the treasury function is centralised or decentralised.

GYK: Japan’s Gaitame yen settlement system – for paying yen- denominated international payments. (See ACH.)


Hedging: The use of techniques or instruments to reduce existing exposure to price, interest rate and/or foreign currency movements. The effectiveness of a hedge is measured in terms of the residual gain or loss that results from a rate, price or currency movement after taking account of any hedging.

Hedge fund: A company that has been incorporated with the purpose of actively trading in financial markets in order to make profit. They obtain capital from investors who pay a fee which is often linked to the performance of the fund. Hedge funds frequently use leverage in order to increase their exposure to market risk.

Herstatt risk: The risk of loss in the capital value of a currency transaction, where one side of the bargain is completed, but completion on the other side is delayed.


IMF: International Monetary Fund.

Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. In an attempt to keep the excessive growth of prices to a minimum, central banks attempt to stop severe inflation, along with severe deflation.

In-house bank: An internal treasury function that acts as a main counterparty for other group companies (e.g. FX and funding).

Interbank market: The part of a money market in which banks lend to each other and to large financial institutions, usually for very short periods and often overnight.

Interest rate risk: The risk that arises for bond owners from fluctuating interest rates such as the risk that a bond's yield will rise (as its price falls) after it has been purchased. The level of this risk depends on how sensitive its price is to interest rate changes in the market. 

Interest rate swap: The exchange between counterparties of a fixed interest rate and floating interest rate in a single currency.

Interface, host-to-host: The method of establishing a connection between two or more computing environments. Host-to-host interface popularly refers to a process wherein mainframe computers exchange data to each other. Such environments are typically used for global and high-volume applications, and often require customisation to be able to interface with other systems.

Intranet: A closed network based on Internet protocols belonging to an organisation, usually a corporation, accessible only by the organisation’s members, employees or others with authorisation. Like the Internet itself, intranets are used to share information and intranet web sites look and act just like those on the Internet.

Invitation to tender (ITT): Cash management industry standard terminology for the document prepared by a company and issued to one or more banks detailing their cash management requirements. (See also RFI and RFP).

ISDN: Integrated speech and data network – operated by telecommunications companies for rapid transmission of data.


LAN: Local area network (linking computers).

Leading and lagging: A tax-efficient technique enabling cash-rich companies in a group to “lead” intercompany settlements to those companies in a deficit position to avoid using short-term borrowing facilities. Conversely, cash-poor companies may “lag” payments to companies in the group that have a positive cash flow position.

Liability: Something owed by one party to another. In financial markets a liability would exist if you borrow money.

LIBOR: London interbank offered rate (also HIBOR, Hong Kong interbank offered rate; JIBOR, Jakarta interbank offered rate, etc.). The interest rate quoted by banks for lending to other prime banks. It varies constantly and is the recognised basis for calculating a floating interest rate, usually agreed as LIBOR plus a spread. LIBOR rates are quoted for a number of currencies. London interbank bid (LIBID) is the rate at which the banks will take deposits.

Lifting charges: Transaction costs associated with the movement of funds calculated as a percentage of the transaction value (particularly prevalent in Germany).

Liquidity: The availability of liquid assets which ensure that a company can meet its financial obligations. Companies achieve this in a number of ways including financing, mobilisation of cash and cash investment. Can also mean the amount of short term liquid assets a bank holds against its liabilities to ensure that it will not be insolvent.

Liquidity risk: The risk that an entity may not have the funds available to meet its cash flow needs and will be unable to meet its debt obligations.

Lockbox: A collection service in which a post office box is maintained in the name of a customer but operated by a bank. Cheques and, increasingly, trade documents or payment instructions, are deposited in the “lockbox”, collected by the bank, and processed by staff at the bank. Customers receive details of the items deposited in electronic or hard copy format. Services include retail and wholesale, domestic and international lockbox.


M-Commerce - Mobile commerce: electronic commerce conducted between mobile applications.

MEPS - MAS Electronic Payments System: the high-value real-time gross settlement system used in Singapore.

MICR - Magnetic ink character recognition: used in the machine reading of a special print in magnetic ink using a magnetic head. MICR is commonly used to read the bank information printed on the bottom of cheques.

MIS - Management information system: used to provide banking information to clients, allowing them to monitor their cash position.

Money market: The short-term (less than one year) liquid market for high-quality instruments. In free jurisdictions, instruments are available in domestic and euro-market form, so characteristics may be different.

Money market fund (MMF): A well rated, highly diversified pooled investment vehicle whose assets mainly comprise of short term (less than one year) securities representing high-quality, liquid debt and monetary instruments.

Multibank reporting/payments: Electronic banking facility in which the proprietary electronic banking system of one bank is available for delivering or receiving messages to/from third-party banks.

Multicurrency account: An account that allows for the transfer of payments (including cheques drawn) in any readily convertible currency to and from designated account.

Multilateral netting: A system in which trade obligations among participating subsidiaries of a group are netted so that each participant pays or receives only the net amount of its inter-company sales and purchase.


Net present value (NPV): The value of a project’s cash flows discounted at the weighted average cost of capital or an appropriate discount rate.

Net worth: The book value of a company’s common stock, surplus and retained surplus.

Netting: A system that reduces the number of cross-border payments/ foreign exchange transactions among units of a company either through the elimination or consolidation of individual funds flow. There are two types of netting: bilateral and multibilateral.

Nostro account: A bank account conducted with a bank in another country in the currency of that country.


OECD: Organisation for Economic Cooperation and Development.

Off balance sheet: Financing that is not shown as a liability in a company’s balance sheet.

Offshore financial services centre: An environment permitting the establishment of financial operations (e.g. treasuries, finance companies) where regulations are usually freer than normal and taxes on income are lower (e.g. International Financial Service Centre, Ireland; BCC, Belgium; Offshore Banking Centre Labuan, Malaysia).

OHQ - Operational headquarters: the structure under which regional coordination centres and management centres are established in Singapore and Malaysia.

Operational risk: The risk of loss that is a result of an inadequate or a failed internal process, people or system. It can also arise as a result of external events.

Option: An option provides the holder with the right, but not the obligation, to buy or sell an underlying bond, equity, currency, or commodity, or to receive a payment based on the movement of such underlying interest. The holder of the option pays a premium for this right.

Overdraft: A negative balance on a current account. Certain countries do not allow overdrafts (e.g. the US). Others distinguish between casual overdrafts (penal pricing) and arranged/advised overdrafts (planned pricing).

Overlay: An additional layer of bank accounts between operating company local accounts and group treasury established with a global cash management bank to facilitate central cash management for a group of companies. There are a number of different ways to structure overlay accounts.

Over the counter (OTC): Trading done directly between two parties, without any supervision of an exchange. Sometimes referred to as off-exchange.


Per mille charge: Transaction charge by banks to their most credit- worthy customers. A benchmark rate for lending.

PKI - Public key infrastructure: PKI enables the users of public networks such as the Internet to communicate with each other in a secure manner.

PVP - Payment versus payment: a standard method of simultaneous settlement in foreign exchange markets.

Portals: In a B2B context, portals may be commonly described as electronic meeting places, or exchanges, for companies to transact business, access information, and interact with the various participants in the community. Portals may be generalist in nature, or they may exist to fulfil a particular set of needs. Horizontal portals typically serve the functional needs of a broader community, whereas vertical portals cater to the specialised needs of a particular industry.

Purchased option: A hedging tool whereby a company pays an upfront premium for the right bu not the obligation to transact at a specified rate.


Quantitative easing (QE): A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. In an effort to promote increased lending and liquidity, quantitative easing increases the money supply by flooding financial institutions with capital.


Reconciliation, automated: Corporates are increasingly concerned about automating the reconciliation process, such that all outstanding transactions are reconciled in a straight-through processing (STP) manner and on an intra-day basis. As a result, discrepancies may be identified as early as possible for the sales force to follow up with clients, eventually leading to a faster application of cash. As a number of cash and treasury professionals are being measured by metrics such as days sales outstanding, they are particularly keen to hasten cash application wherever possible.

Reinvoicing centre: A centre established as a focal point for inter-group and third-party currency sales. It acts as a principal by being invoiced in the seller’s currency, and reinvoicing the buyer in its home currency, thus centralising foreign exchange management/exposure.

Repo - Repurchase agreement: an agreement between two parties whereby a borrower will sell a security to an investor with an agreement to buy the security back at an agreed date and price to provide the investor with a return. Reverse repo is the same transaction from the opposite viewpoint. Tri-party repo is a transaction for which post-trade processing, that is collateral selection, payment and settlement, custody and management during the life of the transaction, is outsourced by the two parties to a third-party agent.

Request for information (RFI): A document prepared by a company addressed to one or more banks, to solicit details of cash management service capabilities. Often used as a means of pre-qualifying or pre- selecting banks to whom the formal RFP or ITT will be sent.

Request for proposal (RFP): A document prepared by a company, usually detailed, addressed to one or more banks, to solicit a formal response for cash management services.

Reserve requirement: An obligation on a bank or other financial intermediary to maintain a specified proportion of total assets in liquid form. These can be designed to ensure solvency of banks or they can be used as a device for helping limit the creation of credit.

Resident/non-resident: In cash management terms, there is an important distinction in the status of the account holder, therefore the account. Governments often apply different rules to each.

RosettaNet: A consortium of leading electronic components, information technology and semiconductor manufacturing companies working to create, implement and promote industry-wide, open e-business process standards. Its aim is to establish a common e-business language to align processes between supply-chain partners on a global basis. (See

RTC: Regional treasury centre.

RTGS - Real-time gross settlement: a method of payment settlement that eliminates the threat of settlement risk (often known as Herstatt risk) between two parties and its knock-on effect to other banks by the provision of immediate good value on payments in and out (separately).


Same-day value: A value date equal to the date on which a transaction is initiated.

SCM - Supply chain management: the management of goods, information and finances as they move from supplier to manufacturer, and to the distributor and end user.

Secondary market: A market in which existing securities are traded, as opposed to a primary market, in which securities are sold for the first time.

Senior debt: Debt that must be paid off before others in the case of bankruptcy.

Settlement assurance: In an e-commerce environment, deals may be struck at a faster pace with increasing anonymity among buyers. This makes the certainty of payment an even more important issue. Banks that find ways to guarantee a larger portion of the payment and, at the same time, reduce the “payment up front” obligation of buyers will perform better.

Settlement date: The date on which a security transaction is completed by actual exchange of securities for cash.

Smart card: A microcomputer embedded within a conventional bank card used as a security device on controlling payments via electronic banking and clearing systems.

Spot: The exchange of one currency for another, at the agreed current rate of exchange of one currency, normally for payment and receipt of the funds in two working days.

Spread: The extra interest charge above the standard or risk-free rate to compensate for extra risk.

SSC - Shared service centre: a single unit providing common services to a number of subsidiaries. This may be a domestic arrangement or an international/regional one. The SSC performs a broad range of finance activities, including domestic and cross-border payables and receivables. Treasury may also be incorporated into such a structure. (See in-house bank.)

Standing order: A written payment instruction passed to the bank by the payer. These instructions are for repetitive payments of the same value. Payments will only cease upon instruction from the payer to the bank.

STP - Straight-through processing: a process (usually payments) that is completed electronically without any manual intervention.

Subordinated debt: Debt over which senior debt takes priority; in bankruptcy, subordinated debt-holders receive payment only after senior debt is paid off in full.

Swap: An agreement between two businesses to exchange commodities, payments or other financial products to reduce the risk of volatile market conditions.

Sweeping: See cash concentration.

SWIFT - Society for Worldwide Interbank Financial Telecommunication: a cooperative organisation established and owned by member banks to facilitate the transfer of information and payments/advice instructions between each other via a global data network. Standard formats are:

  • MT103 – payment instruction (customer);
  • MT202 – payment instruction (bank);
  • MT210 – advice of funds/pre-advice (customer);
  • MT940 – detailed bank statement information; and
  • MT950 – summary bank statement information.

Syndicated loan: A loan made available by a group of banks in pre- defined proportions under the same credit facility in order to share the risk in a large transaction.

Systemic risk: The risk that a specific large counterparty (such as a country), a certain market or a settlement system should experience a crisis and that there will be widespread spillover into the financial markets as a whole.


Target balance: A method of cash concentration where collection and disbursement sub-accounts are swept to/from a master (concentration) account leaving a target (residual) balance at the sub-account level and an aggregated balance at the master account – also known as compensating or cap accounts.

Thick client solutions: Proprietary solutions that are generally delivered through third-party (bank) software installed at a client’s office. The software and related database are located at the client’s site and file updates and new information are delivered via CD-ROM or downloaded from the provider’s web site.

Thin client solutions: Typically delivered via the Internet. A thin client refers to a network computer, a low-cost computing device that works in a server-centric computing environment. Thin clients do not require state-of-the-art, powerful processors and large amounts of memory as actual software and information reside at a remote location.

Transaction exposure: The income statement exposure to a change in foreign exchange rates between the time a transaction is booked and the time it is settled.

Treasury bill: A short-term UK or US government security, yielding no interest but issued at a discount on its redemption price. Treasury bills offer investors very liquid, high quality investment opportunities.


Value date: The value date on which the payer is debited and the payee is credited (although these may differ if there is a float). A compensation characteristic of international cash management.

Value at Risk - (VaR): an estimate of the maximum that a company can lose in a defined period under normal market conditions. It is generally based on correlation of currency rate, security price and commodity price movements.

VOIP - Voice over Internet protocol: the use of the Internet for making telephone calls.


WAP - Wireless application protocol: a technology that allows portable wireless devices to access the Internet and communicate with each other.

Warrant: Option to purchase or sell (normally the former) an underlying instrument at a given price and time.

White-labelling: The outsourcing of an institution’s services to a third party, which then onsells the services to its own clients, using its own brand.

Withholding tax (WHT): Tax on payments that is deducted by the payer at source and paid directly to the relevant revenue authority. Typically on interest, dividend and royalty flows, tax is for the account of beneficiary. WHT rates vary country by country.

Working capital: A company’s investment in short-term assets such as cash, inventories, marketable securities and accounts receivable.


Zengin System: The Japanese nationwide domestic funds transfer system – automated, with the payee being credited on the same day, although bank settlement occurs the following day.

Zero balance accounts (ZBA): A method of cash concentration whereby collection and disbursement sub-accounts are swept to or from a “header” or master account to leave a zero balance at the sub-account level and an aggregated balance on the master account.