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Capital Markets Key Concepts

Key Concepts

Key Concepts provide you with definitions of buzzwords appearing in the media to ensure that you are up to speed with the current finance conversation. Produced in snapshot, glossary form, Key Concepts direct you to additional material to increase your knowledge and satisfy your interest.

  • Asset Protection Schemes
    An asset protection scheme (APS) is a state-backed insurance scheme designed to protect banks that are exposed to significant levels of non-performing loans. The government generally charges a fee for the cover that it is providing. The idea is based upon the premise that an institution saddled with bad debts will be reluctant to make fresh loans, potentially leading to a credit crunch.The United Kingdom introduced just such a scheme in February...
  • Banking Crisis
    In 2008, a combination of past bad lending decisions and too much exposure to badly performing, complex mortgage-backed investments pushed many of the world’s biggest banks to the brink of collapse as heavy losses decimated their capital bases.As the first symptoms of the global credit crunch began to emerge in 2006 as sub-prime, or higher-risk, US mortgage borrowers increasingly struggled to meet their repayments, the seeds of the global...
  • Basel II
    Basel II refers to a comprehensive and internationally agreed set of minimum standards for financial institutions designed to ensure that they have enough cash reserves to cover the risks involved in their operations.Agreed in June 2004, the Basel II framework aims to improve on the original 1980s Basel capital adequacy standards by promoting a more flexible, forward-looking view, with the aim of guiding banks to consider present and future...
  • Capital Adequacy
    Capital adequacy provides regulators with a means of establishing whether banks and other financial institutions have sufficient capital to keep them out of difficulty. Regulators use a Capital Adequacy Ratio (CAR), a ratio of a bank’s capital to its assets, to assess risk. The two most important measures of capital adequacy are those specified by the Basel Committee of the Bank for International Settlements. The Basel Capital Accord, which came...
  • Credit Crunch
    The term “credit crunch” was once the preserve of economists and financial gurus. But it has been used so widely since mid-2007 that it was added to the 11th edition of the Concise Oxford English Dictionary (OED), which defines credit crunch as “a severe shortage of money or credit.” It is a financial crisis caused by financial institutions being too risk-averse to lend to businesses, consumers, or each other.The current crunch was sparked by...

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