Glossary

Anti Money-Laundering (AML) forms

Australian Prudential Regulation Authority (APRA)

Authorised Deposit Taking Institutions (ADIs)

Bank Accepted Bill

Bank Bill Swap Rate (BBSW)

Banking Act 1959

Break Costs

Compounding Interest Payments

Credit Unions

Cuscal

Liquidity

Negotiable Certificate of Deposit (NCDs)

Official Cash Rate

Ratings Agencies

Reserve Bank of Australia (RBA)

Term Deposits

Witholding Tax

Yield Curve

All financial institutions are required by law to identify their clients and the AML forms are part of this process.

The prudential regulator of the financial services industry, overseeing banks, credit unions, building societies, insurance companies, friendly societies and most members of the superannuation industry.

Further information can be found here: http://www.apra.gov.au

From APRA –“Authorised Deposit-taking Institutions (ADIs) are corporations which are authorised under the Banking Act 1959. ADIs include banks, building societies and credit unions. All ADIs are subject to the same Prudential Standards but the use of the names 'bank', 'building society' and 'credit union' is subject to corporations meeting certain criteria.”

Also referred to as a Bank Bill of Exchange. A bill of exchange where a bank’s name appears as acceptor. Hence, when the bill is presented, the bank has primary liability to pay the amount appearing on the bill to the holder.

A compilation of market rates supplied by the banks. Averages are then calculated and used as references for the respective months (1-12 months).

An act to regulate banking, to make provision for the protection of the currency and the public credit of the Commonwealth, and for other purposes.

Most of the institutions will apply a penalty if you recall the funds prematurely. They may take the form of a fee or they may be dependant on interest rate movements. These charges are generally described as “break costs”.

Most ADIs will allow you to compound your interest. This means that any interest owed at maturity can be added to the principal for the next investment.

Credit unions have different corporate structures to banks. A credit union is a cooperative financial institution that is owned and controlled by its members. Some credit unions differ from other financial institutions in that their focus is on member/customer satisfaction rather than pure profitability. This is referred to within the industry as the mutuality dividend.

Credit unions were formed by groups of individuals sharing a common bond of association - typically by community or employment and traditionally are focused on providing a service to the retail market. Approximately two thirds of all credit unions are either locally or industry-based. Any person or body corporate that falls within the ambit of the bond of association can become a member, but usually only members can be customers. Recent times have seen the bond of association requirements loosened significantly so that in most cases anyone can become a member of a credit union.

Provider of wholesale and transactional banking services to retail financial institutions.

Further information can be found here: http://www.cuscal.com.au

A term used to describe how easy it is to sell a security. Term deposits are not securities so they cannot be onsold. Negotiable Certificates of Deposits (NCDs) and Bank Bills can be sold to a third party.

Issued by the banks as a bill of exchange, promising to repay the inscribed amount on the particular maturity date.

Established by the Reserve Bank of Australia at their monthly meetings. It determines the overnight cash rate applicable to loans between financial intermediaries. It is the main tool the RBA employs to dictate monetary policy.

Are employed by borrowers to assign credit ratings which reflect the ability of the borrowers to pay coupons and repay principal. Familiar names include Standard and Poor’s, Moody’s and Fitch.

The RBA is responsible for maintaining monetary policy in Australia. Policy objectives are centered around achieving low and stable inflation. Other major roles include maintaining financial system stability, managing foreign reserves and issuing currency. The RBA is also the banker to the Australian Government. Read more here.

Money placed with an Authorised Deposit Taking Institution (ADI) for a fixed term and interest rate. The interest rate will not change during the deposit.

Tax paid by overseas investors for income earned in Australia.

Provides a graphical representation of available yields according to their maturity date.