Download - Volksbank AG

Cost-income ratio. Index of the cost-efficiency of enterprises under IAS: general administrative expenses as a proportion of income
(the total of net interest income, net fee and commission income, net trading result and net financial investment result).
Credit default swap. A credit derivative, similar in structure to a conventional guarantee. One party (secured party) makes a
recurrent payment to the other party (transferor of title) that is essentially determined according to the nominal value of a financial
instrument (e.g. a bond) and the rating of the relevant address. In the event of default, the transferor makes good the loss.
Credit derivatives. Instruments with which credit risks are transferred. They neither change nor re-establish the original credit
relations of the counterparts (the parties disposing of the credit risks).
Credit equivalent. Also called credit risk equivalent. Procedure for translating volatile claims against customers for purposes of
comparability into an equivalent, constant claim over time with regard to the risk content. The credit equivalent consists of the
current commitment, a share of unused credit lines and, in the case of derivatives, sometimes a surcharge for the possible future
increase in the claim. It also corresponds to the amount for the relevant regulatory credit risk (risk-weighted assets), which must be
underpinned with equity capital.
CreditMetrics. A J.P. Morgan method and data for the calculation of credit risk, see http://new.riskmetrics.com/products/data/, a
further development of RiskMetrics.
Credit risk. The danger that customers will not meet their contractually agreed payment commitments. The credit risk includes
credit, sovereign and settlement risks.
Credit Value at Risk (Credit VAR). Maximum possible default with a given probability.
Derivatives. Derivative instruments: financing instruments whose valuation is mainly derived from the price, price fluctuations and
price expectations of a basic instrument (for example, shares, bond issues, foreign currency, indices). The chief derivatives are swaps,
options and futures.
Dirty price. Price of a financial instrument including provision for deferred or accrued interest.
Dividend per share. The dividend per share proposed to the Annual General Meeting.
Early stage financing. Financing of the early phase in the development of a corporate, from financing the basic concept to the
commencement of production and marketing.
Earnings per share. According to IAS, an index that compares the profit for the year after tax (less the result accounted for by
shareholders outside the Group) to the average number of ordinary shares. In addition to earnings per share, adjusted earnings per
share are shown if the number of shares has increased or can increase owing to the recognition of drawing rights (”dilution effect”).
In its trading portfolio, Investkredit temporarily holds its own shares only in its capacity as a market-maker to ensure the Vienna Stock
Exchange’s ability to function. Therefore, such shares are treated as shares outstanding.
Electronic banking. Banking transactions via the Internet or other electronic networks or through the exchange of data carriers.
Expected default frequency (EDF). The probability of default of a debtor within a particular period of time (as a rule, 1 year).
Exposure. The amount that can be lost by a bank in connection with a loss from a risk incurred, for example, the default of a
borrower.
Fair value. The amount or price at which assets or liabilities could be traded between knowledgeable, willing parties in an arm’s
length transaction. The fair value is regularly identical with the market price.
Fair value hedge. Microhedge to protect the fair value of balance-sheet items.
FLORAX bond. Variable-interest bond, the interest on which is tied to a reference rate, e.g. EURIBOR.
Foreign exchange swap. Agreement between two contracting parties to exchange capital and interest payments in different
currencies.
Forward rate agreements (FRAs). Agreements between two contracting parties fixing the interest rate for a future period and an
agreed nominal amount (not an exchange of capital).
Fully consolidated enterprises. Related enterprises are fully consolidated if they are not insignificant. In the context of full
consolidation, assets, liabilities, earnings and expenses are fully incorporated in the consolidated financial statement after deduction
of consolidation items.
Fund of funds. Securities fund that invests in other funds. For reasons of risk diversification, a fund of funds may not invest more
than 20% of its assets in a single target fund (among the Investkredit investment funds, i2V-Select is a fund of funds).
Futures. Listed contracts standardized with regard to amount, quality and date of delivery in which an item traded in the money,
capital, precious metals or foreign exchange market is to be delivered or purchased at the price determined by the stock exchange.
Frequently, in such contracts (for example, on the basis of share indices), an adjusting payment is due in order to fulfil the existing
commitment (instead of the physical delivery or purchase of securities).
Glossary
THE BANK FOR CORPORATES
71