This is a glossary of financial services terms designed to help demystify the jargon and technical language often encountered in the world of finance, this resource is a valuable tool for both beginners and seasoned professionals. Whether you’re navigating investments, managing personal finances, or exploring complex financial products, our glossary offers clear and concise definitions to enhance your understanding. Dive in to find the short straightforward explanations of key terms.
Always remember to contact a qualified professional so you can make informed decisions in your financial journey.
Accrual Accounting: A method of accounting that records revenue and expenses when they are earned or incurred, regardless of when the cash is received or paid.
Alternative Investments: Investments in asset classes other than traditional stocks, bonds, or cash, including hedge funds, private equity, real estate, and commodities.
Annual Percentage Rate (APR): The annualized interest rate that includes not only the interest charged on a loan or credit card but also any additional fees or charges. It helps borrowers understand the true cost of borrowing.
Asset Allocation: The strategic distribution of an investment portfolio among various asset classes, such as stocks, bonds, and cash, to achieve specific financial goals and risk management.
Asset Management: The process of managing investments, including stocks, bonds, and real estate, on behalf of individuals or institutions to achieve specific financial goals.
Basis Point (BPS): A unit of measurement commonly used in finance to describe small changes in interest rates or investment returns. One basis point is equal to 0.01%.
Capital Adequacy Ratio (CAR): A measure of a bank’s financial strength and its ability to absorb losses, calculated by comparing a bank’s capital to its risk-weighted assets.
Capital Gains Tax (CGT): A tax imposed on the profit gained from the sale of assets such as real estate, stocks, or other investments. The rate of CGT in Ireland varies depending on the asset and the individual’s tax status.
Central Bank: The national financial institution responsible for regulating and overseeing the country’s banking and monetary system. In Ireland, the Central Bank of Ireland plays a central role in monetary policy and financial stability.
Collateral: An asset or property pledged as security to back a loan. If the borrower defaults, the lender can seize and sell the collateral to recover their losses.
Contingency Planning: The process of preparing for and mitigating potential risks and unexpected events that could disrupt business operations or financial stability.
Credit Union: A member-owned financial cooperative that provides savings and loan services to its members. Credit unions are often community-based and offer competitive interest rates.
Current Account: A basic bank account used for day-to-day financial transactions, such as deposits, withdrawals, and payments.
Derivative: A financial contract or instrument whose value is derived from the price of an underlying asset, such as futures, options, or swaps.
Deposit Account: A bank account that allows individuals or businesses to deposit money for safekeeping while earning interest. These accounts are low-risk and highly liquid.
Dividend Yield: A financial ratio that measures the annual dividend income earned from an investment relative to its current market price, often expressed as a percentage.
EFT (Electronic Funds Transfer): The electronic transfer of money from one bank account to another, often used for various financial transactions, including payroll and bill payments.
Environmental, Social, and Governance (ESG) Investing: An investment approach that considers environmental, social, and governance factors when making investment decisions, promoting ethical and sustainable practices.
Exchange Rate: The rate at which one currency can be exchanged for another. Exchange rates fluctuate based on supply and demand and can impact international trade and investment.
Exchange Rate Risk: The risk that changes in exchange rates between currencies can impact the value of foreign investments or transactions, affecting financial outcomes.
Fintech (Financial Technology): The use of technology, including software and applications, to provide financial services such as payments, lending, and investing in innovative ways.
Financial Broker: A professional who acts as an intermediary between clients and financial institutions, helping clients make investment decisions and manage their finances.
Financial Regulation: The rules and policies set by government authorities and regulatory bodies to oversee and govern the financial industry, ensuring stability and consumer protection.
Fiscal Policy: The government’s use of taxation and spending to influence the economy, often used to stimulate economic growth or control inflation.
Fiscal Year: The financial year used for accounting and reporting purposes, typically different from the calendar year. In Ireland, the fiscal year often runs from January 1st to December 31st.
Fixed Income: Investments, such as bonds or certificates of deposit (CDs), that provide regular payments to investors.
Fixed Rate Mortgage: A mortgage loan with a stable, unchanging interest rate over the short to medium term, subject to the lenders criteria of the loan, providing predictability in monthly payments.
Grant: Financial assistance provided by the government or other organizations to support specific projects, research, or activities, often with conditions and reporting requirements.
Green Finance: Financial products and services that support environmentally sustainable projects and initiatives, promoting environmentally responsible investing.
Gross Domestic Product (GDP): The total monetary value of all goods and services produced within a country’s borders in a specific time period, often used as an indicator of economic health.
Gross Margin: The percentage difference between a company’s revenue and the cost of goods sold, representing the profitability of its core operations.
Guarantor: A person or entity that agrees to assume financial responsibility for another person’s debt or obligations if the original debtor defaults.
Hedge Fund: An investment fund that uses various strategies to generate returns for its investors. Hedge funds may invest in a wide range of assets, including stocks, bonds, and derivatives.
Hedge: A strategy used to offset potential losses in one investment by making another investment that is expected to move in the opposite direction.
Holding Company: A company that owns a controlling interest in other companies, often for the purpose of managing a diversified portfolio of businesses.
Holding Period: The length of time an investor holds an investment before selling it, affecting capital gains taxes and overall investment strategy.
Initial Margin: The collateral required by a broker or exchange to cover potential losses on a derivative contract or investment position.
Inheritance Planning: The process of arranging and structuring the distribution of assets and wealth to heirs and beneficiaries to minimize taxes and ensure a smooth transfer of wealth.
Inheritance Tax: A tax levied on the assets and properties inherited from a deceased person’s estate, subject to certain exemptions and thresholds.
Insurance Broker: A professional who assists individuals and businesses in finding suitable insurance policies, providing advice on coverage options and premium rates.
Interest Rate: The cost of borrowing money or the return on investment expressed as a percentage of the principal amount.
Investment Portfolio: A collection of investments, including stocks, bonds, mutual funds, and other assets, held by an individual or organization to achieve financial goals.
Joint Account: A bank account shared by two or more individuals, allowing all account holders to access and manage the account’s funds.
Joint and Several Liability: A legal concept where multiple parties can be held individually and collectively responsible for a financial obligation or liability.
Joint Venture: A business arrangement in which two or more parties collaborate and share ownership, risks, and profits in a specific project or venture.
KYC (Know Your Customer): The process financial institutions use to verify and assess the identity and risk profile of their customers, typically to prevent fraud and money laundering.
Leverage: The use of borrowed funds or debt to amplify potential returns on investments, but it also increases the risk of losses.
Liquidity Risk: The risk that an asset cannot be quickly sold or converted into cash without significantly affecting its price, potentially leading to losses.
Liquidation: The process of selling off a company’s assets to pay its debts when it cannot meet its financial obligations. It may result in the closure of the company.
Loan-to-Value (LTV) Ratio: A financial metric used to assess the risk of a mortgage or loan, calculated by dividing the loan amount by the appraised value of the collateral (usually a property).
Liquidity Provider: An entity, often a financial institution, that facilitates the buying and selling of financial assets in the market, providing liquidity and improving market efficiency.
Macroprudential Regulation: Regulatory measures designed to promote the stability of the financial system as a whole, often focusing on systemic risks and potential crises.
Merchant Services: Financial services that enable businesses to accept electronic payments, such as credit and debit card transactions, from customers.
Microeconomic Factors: Economic factors that focus on individual markets, businesses, and consumer behaviour, including supply and demand dynamics and pricing.
Microfinance: Financial services, such as small loans and savings accounts, provided to individuals and small businesses in underserved or low-income communities.
Maturity Date: The date when a financial instrument, such as a bond or certificate of deposit, becomes due for repayment, and the principal amount is returned to the investor.
Mortgage Broker: A professional who assists individuals in finding suitable mortgage loans, comparing rates, and navigating the mortgage application process.
Mortgage Rate: The interest rate charged on a mortgage loan used to finance the purchase of real estate, often with a fixed or variable rate.
Negative Equity: A situation where the value of an asset, such as a property, is less than the outstanding debt secured by that asset.
Nominal Interest Rate: The interest rate stated on a loan or investment without adjusting for inflation or other factors that affect the real purchasing power of money.
Non-Disclosure Agreement (NDA): A legal contract that obligates parties to keep certain information confidential, often used in business transactions and partnerships.
Non-Performing Loan (NPL): A loan on which the borrower has failed to make required payments, often leading to potential losses for the lender.
Offshore Banking: Banking services offered by financial institutions located in jurisdictions with favourable tax and regulatory conditions for non-resident clients.
Overdraft: A financial arrangement where a bank allows a customer to withdraw more money than is available in their account, often subject to interest and fees.
P/E Ratio (Price-to-Earnings Ratio): A financial ratio that compares a company’s stock price to its earnings per share, often used to assess valuation and investment potential.
Pension Scheme: A retirement savings plan that allows individuals to contribute funds over their working years to secure income in retirement. In Ireland, this often includes Defined Benefit and Defined Contribution schemes.
Portfolio Diversification: A risk management strategy that involves spreading investments across a variety of assets to reduce overall risk and achieve more consistent returns.
Portfolio Manager: An investment professional or entity responsible for making investment decisions on behalf of clients or managing a portfolio of assets.
Private Equity: Equity investments made in private companies or non-publicly traded firms by private equity firms or investors, often with the goal of enhancing company performance.
Quantitative Easing (QE): A monetary policy implemented by central banks to stimulate the economy by purchasing financial assets, typically government bonds, to increase the money supply.
Qualified Retirement Plan: A retirement savings plan that meets specific Revenue requirements and provides tax benefits, such as occupational/PRSA/personal pension plansfor employees and individuals.
Regulatory Compliance: The adherence to laws, regulations, and industry standards by financial institutions to ensure ethical conduct, transparency, and legal operation.
Risk Management: The process of identifying, assessing, and mitigating potential risks to minimize financial losses and protect assets.
Securities: Financial instruments that represent ownership or debt, such as stocks, bonds, and derivatives, which can be bought and sold in financial markets.
Sovereign Debt: Sovereign debt, also known as government debt, national debt, or public debt, refers to the money that a country’s government borrows. It can be issued domestically (borrowed within the country) or externally (from foreign lenders). Sovereign debt is typically raised to finance government spending, especially in situations where tax revenues are insufficient to cover expenditures.
