Glossary of Investments and Banking Terms

Search through definitions of terms used throughout this site, by selecting the first letter of the word you are looking for.

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | R | S | T | W | Z

A

Alternate currency: A different currency to the one you initially deposited or invested in (in a Dual Currency Placement).

American Depositary Receipts: Certificates issued by US Banks that hold actual shares of a company's stock. Instead of investing in stock directly you could buy one of these certificates.

Asset classes: Groups of investment types that share similarities. The main asset classes are shares, bonds, cash, property and commodities.

Asset class categories: Each asset class investment can be broken down geographically, by industry, or size of company for example.

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B

Base currency: The currency you initially deposited or invested in (in a Dual Currency Placement).

Bond funds: Pooled Investments that buy bonds rather than buying shares.

Bonds: An investment where you lend money to a company or institution and they promise to repay that debt. Sometimes they offer fixed rates of interest (known as the coupon) to be repaid at an agreed time, in addition to the original sum (known as the principal). However, there is a wide range of bonds and some come with variable rates of interest and no maturity date.

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C

Capital growth: An increase in the market value of an asset, such as a share or property for example.

Channel Islands: A group of islands in the English Channel including Jersey, Guernsey, Alderney, Sark and Herm.

CHAPS funds transfers: Available to our UK and Jersey clients, CHAPS (Clearing House Automated Payment System) transfers can be made within the UK and offer same day guaranteed payment. A fee is usually charged.

Commodities: A product that is the same throughout the world such as oil, gold, coffee beans or rice. Because they have a value they can be traded.

Convertible bond: A bond issued by a company that can be converted into shares of that company in the future.

Corporate bond: A bond issued by a corporation or company.

Correspondent bank (also known as clearing bank): A bank which operates and does business on behalf of foreign banks.

Coupon: The interest payable on a bond. A bond with a 4% coupon, for example, pays 4% interest.

Credit rating: The credit worthiness of a company or person. The higher the rating the financially stronger they are deemed to be.

Creditor: A person or company that is owed money or services from another person or company.

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D

Derivatives: A financial contract or agreement that is based on the underlying value of a separate asset. For example a contract for the right to buy gold at a set price in the future is a derivative. You are not buying the underlying asset (the gold), but the right to buy it. And you can trade that right, or option.

Domicile: The country you are from.

Double tax treaties: Agreements between countries to prevent double taxation if you earn money in countries other than the country you are resident in for tax purposes.

Dual Currency Placement: (also known as dual currency deposit, dual currency investment): An investment where you can achieve a high rate of interest by taking advantage of currency fluctuations. You choose two currencies (base and alternate) and invest your money in one of them. The bank has the right to pay you back in whichever of the two it prefers (the weaker currency on maturity). In return for this right we pay you an attractive return.

Dynamic Currency Conversion (DCC): Some ATMs and retailers abroad (including shops and restaurants) offer a service called Dynamic Currency Conversion. This means that, when paying by card, you are given the option to pay in the local currency or having the transaction converted into your home currency then and there by the shop or restaurant. If you choose to pay in the local currency, your account will be debited using the exchange rate offered by your card company. If you choose to pay in your home currency, the retailer will set the exchange rate. Paying in local currency can be useful for knowing exactly how much will appear on your statement.

However, you should be aware that exchange rate used by the retailer may not be as competitive as the rate offered by your card company. If you are in any doubt, ask to pay the bill in the local currency. Remember to keep your receipts and check against your statement once you return to the UK.

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E

Emerging markets: Countries on the transition from developing to developed, such as China, Argentina, and Pakistan.

Equities: Equities offer a way of investing directly in companies by literally buying one or more shares in that business.

Exchange-Traded Funds: Pooled investment vehicles that track stock market indices – such as the FTSE 100 for example. Exchange-Traded Funds are traded on stock exchanges in the same way as individual stocks.

Expatriate: A person temporarily or permanently residing (living) in a country other than the one in which they were raised or have legal residence.

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F

Faster Payments: (FPS) is a UK banking initiative to reduce payment times between different UK banks' customer accounts from three working days using the long-established BACS system, to a few hours.

Fixed coupon bonds: A bond with a fixed or set rate of interest.

Floating rate bonds (also known as floating rate notes): Bonds with an interest rate that is variable and often tracks a variable rate, like the London Inter-bank Offered Rate (LIBOR), at an agreed margin. LIBOR is a variable rate that reflects the interest rates that banks charge each other.

FX: Foreign Exchange

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G

Gilts: Government bonds (not including emerging market government bonds).

Global Depository Receipts: Certificates issued by a depository bank which buys shares in foreign companies. They allow you to benefit from the movement of share values of companies in developing countries for example, without having to purchase the stock directly.

Government bonds: An investment where you lend money to a government and they promise to repay that debt at a fixed rate of interest (known as the coupon) to be repaid at an agreed time in addition to the original sum (known as the principal).

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H

Hedge funds: An investment fund open to wealthy investors that often uses hedging methods such as short-selling to either protect against losses, or in fact to increase risk and therefore increase potential return. Hedge funds are only suitable for sophisticated investors.

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I

Indices: Plural of index. A stock market index is a way of measuring a section of the stock market.

Inheritance tax: Taxes or duties that arise on the death of an individual, payable out of their estate or by their beneficiaries.

International brokerage: A facility that allows you to access equities, such as shares, and bonds across the world on different stock markets.

Investment Fund: also known as a Mutual Fund or collective investment schemes: A pooled investment that invests widely across securities and therefore spreads risk. Funds can invest in a particular sector, geographical area, risk weighting or asset class and they provide an easy way for investors to access the markets, while minimising risk exposure and trading costs.

ISA: (only for UK customers ) an individual savings account, a scheme allowing individuals to hold cash, shares, and unit trusts free of tax on dividends, interest, and capital gains; Citi UK offers UK residents a Stocks and Shares ISA (not Cash ISAs).

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J

Jurisdiction: A nation, state or country.

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K

KIID: A Key Investor Information Document (KIID) is a document which must be provided to anyone who invests in a fund which comes under the EU’s regulatory directive, UCITS IV. These are funds such as OEICS or Unit Trusts which are held directly in an ISA or Collective Investment Account, but not funds which are held in bonds or pensions. The KIID is produced by the fund manager, not Citi, and shows you details of the fund you are thinking of investing in.

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L

Liquidity: The quality of a business that enables it to meet its payment obligations, in terms of possessing enough liquid assets (such as cash).

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M

Maturity: The final date of an investment or savings term. The maturity date of a three month Time Deposit for example is three months after it has been opened.

Money Market Funds: Mutual Funds that invest in low-risk, short-term debts such as deposits and commercial papers.

Multi Currency: More than one currency. This can apply to an account that you are able to manage in a range of different currencies.

Mutual Funds: (also known as investment funds, collective investment schemes): A pooled investment that invests widely across securities and therefore spreads risk. Funds can invest in a particular sector, geographical area, risk weighting or asset class and they provide an easy way for investors to access the markets, while minimising risk exposure and trading costs.

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N

NAV: Net asset value (NAV) represents a fund's per share market value. This is the price at which investors buy ("bid price") fund shares from a fund company and sell them ("redemption price") to a fund company. It is derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities.

Non-advisory (also known as execution only): Without advice. If you buy a product on a non-advisory basis you do not take advice but the product is arranged and sold to you, based on your specific instructions. Buying products or investing on a non-advisory basis is only suitable for sophisticated investors.

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O

Offshore: Situated or registered abroad. Or banking in another country or jurisdiction to either your residence (where you live) or your domicile (where you are from, pay tax or have permanent residence).

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P

Perpetual bonds: A perpetual bond is a bond that doesn't have a maturity date. Because of this they are treated as an equity, not a debt and they pay coupons or interest ongoing.

Pooled investment (also known as collective investment, investment fund): A method of investing where your money is pooled with that of other investors and managed to create growth, income or both. Because your money is pooled you save on transaction costs and can invest in a wider range of shares or other investments than if you invested directly alone. A Mutual Fund is a pooled investment.

Portfolio: A collection of investments held by a person, company or other institution. Your portfolio is made up of all the different assets and investments you own.

Preferred shares: A type of share which is issued over a fixed period of time with an agreed rate of interest. Holders of preferred shares have priority over standard shareholders for payment of dividends, but they have no voting rights (holders of ordinary shares can vote at Annual General Meetings).

Principal: The initial amount you deposited in a savings or investment plan.

Principal-protected investment (also known as structured investment, Structured Note): An investment that protects the initial principal invested and usually offers either a set rate of interest on top, or the chance to benefit from stock market or investment growth.

Private Investment Companies (PICs): A Private Investment Company (PIC) is a corporation established to hold your investment assets. You own the PIC, but it has a separate legal identity that provides many wealth protection benefits.

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R

Residence: The country in which you are currently living.

Risk-averse: Against risk. A 'risk-averse' investor is very cautious.

Roll-over rates: A rate you move onto on maturity of another account. For example on maturity of a Time Deposit, clients can roll-over their money into another Time Deposit and access our 'roll-over' rates.

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S

Self-cert mortgage: A mortgage where the borrower states their income and this is not verified by the lender. You certify your earnings and the lender does not ask for proof.

SEPA funds transfers: Available to our UK and London clients, SEPA funds transfers enable you to transfer money in Euro securely, easily and free of charge to any other account within SEPA (the Single European Payment Area). Funds usually clear within three days and are available across over 30 European countries.

Shares: Also known as equities. They offer a way of investing directly in companies by literally buying one or more shares in that business. You buy your shares and receive returns in the form of a dividend which the company may choose to pay – often annually, but it can be more or less frequently. In addition, the value of your shares may increase or fall depending on the underlying value of the company.

Strike price: In a Dual Currency Placement you agree a 'strike price' in advance, which is an exchange rate you are comfortable with, in the event that the bank pays you back in your alternate currency choice. If the current exchange rate is USD to GBP = 0.6935 for example, you might decide you are happy to receive your principal plus interest back at a rate of 0.6835 at the end of your chosen term.

Structured Notes: An investment product that can protect your principal and give you access to stock market growth. A Sturctured Note combines two elements: a low risk bond (that protects your principal) makes up most of the investment (typically 80%), and the rest of your money is put into a higher risk investment like equities or derivatives which offer the potential for high growth.

SWIFT funds transfers: SWIFT Funds Transfers allow you to transfer money to most countries in most currencies. SWIFT Funds Transfers are wire transfers that usually clear within 1-5 working days. Available to UK, London and Jersey clients.

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T

Time Deposits: A low risk short-term savings option giving you attractive returns with no risk to your capital.

Trusts: A way to hold your assets without holding legal title to them. It is a confidential arrangement where a trustee holds legal title to your assets and manages the Trust under exact terms specified by you.

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W

Warrants: A security that entitles the holder to buy stock of the company that issued it at a specified price, which is usually higher than the stock price at the time of issue.

Wealth Management: Growing, protecting and managing your wealth can require a long-term strategy. Our investment experts help you build such a strategy, helping you achieve your financial goals.

Wealth structuring: Protecting your wealth, both in terms of planning your inheritance and protecting your wealth outside your home country. Typical wealth structuring strategies include opening a Private Investment Company or Trust to ensure your financial matters are private and safe, and work exactly to your instructions.

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Z

Zero coupon bonds (also known as discount bonds): A zero coupon bond is bought at a price lower than its face value, and the face value is repaid on maturity. It does not pay a coupon (interest).

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