ANNUAL REPORT 2008 - Polymer Bank Notes of the World

operating expenses) to sales, the ratio of net income (operating and non-operating income, aftertax, depreciation and extraordinary items) to sales, the return on assets (relating net income to totalassets) and the return on equity (relating net income to shareholders’ funds). At the macroeconomiclevel, the gross operating surplus, based on national accounts, for instance in relation to GDP orvalue added, is often used as a measure of profitability.Correspondent central banking model (CCBM): a mechanism established by the Eurosystemwith the aim of enabling counterparties to use eligible assets on a cross-border basis. In theCCBM, NCBs act as custodians for one another. Each NCB has a securities account in its securitiesadministration for each of the other NCBs (and for the European Central Bank).Cost of the external financing of non-financial corporations (real): the cost incurred by nonfinancialcorporations when taking up new external funds. For euro area non-financial corporations,it is calculated as a weighted average of the cost of bank lending, the cost of debt securities and thecost of equity, based on the amounts outstanding (corrected for valuation effects) and deflated byinflation expectations.Counterparty: the opposite party in a financial transaction (e.g. any party transacting with a centralbank).Credit derivative: a financial instrument which separates the credit risk from an underlyingfinancial transaction, enabling the credit risk to be priced and transferred separately.Credit institution: i) an undertaking whose business is to receive deposits or other repayable fundsfrom the public and to grant credit for its own account; or ii) an undertaking or any other legalperson, other than those under i), which issues means of payment in the form of electronic money.Credit risk: the risk that a counterparty will not settle an obligation for full value, either whendue or at any time thereafter. Credit risk includes replacement cost risk and principal risk. It alsoincludes the risk of the failure of the settlement bank.Debt security: a promise on the part of the issuer (i.e. the borrower) to make one or morepayment(s) to the holder (the lender) at a specified future date or dates. Such securities usually carrya specific rate of interest (the coupon) and/or are sold at a discount to the amount that will be repaidat maturity. Debt securities issued with an original maturity of more than one year are classified aslong-term.Deposit facility: a standing facility of the Eurosystem which counterparties may use to makeovernight deposits, remunerated at a pre-specified interest rate, at an NCB (see also key ECBinterest rates).Direct investment: cross-border investment for the purpose of obtaining a lasting interest in anenterprise resident in another economy (assumed, in practice, for ownership of at least 10% of theordinary shares or voting power). Included are equity capital, reinvested earnings and other capitalassociated with inter-company operations.ECOFIN Council: the EU Council meeting in the composition of the ministers of economy andfinance.276 ECBAnnual Report2008