Glossary

Term generally applied to an agreement with retail experiencing temporary financial difficulty, to a payment moratorium, to reduced repayments or to roll up arrears.

A contract to buy (or sell) a specified amount of a physical or financial commodity (e.g. foreign exchange), at an agreed price, at an agreed future date.

A US Government Sponsored Enterprise. It buys mortgages, principally issued by thrifts, on the secondary market, pools them, and sells them as residential mortgage-backed securities to investors on the open market. Its obligations are not explicitly guaranteed by the full faith and credit of the US Government.

A contract which provides for the future delivery (or acceptance of delivery) of some type of financial instrument or commodity under terms established at the outset. Futures differ from forward contracts in that they are traded on recognised exchanges and rarely result in actual delivery; most contracts are closed out prior to maturity by acquisition of an offsetting position.

A US Government Agency that guarantees investors the timely payment of principal and interest on mortgage-backed securities for which the underlying asset portfolios comprise federally insured or guaranteed loans – mainly loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Ginnie Mae obligations are fully and explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the US Government.

Difference between the cost of shares and the Group’s equity in the fair value of the underlying net assets.

A group of financial services corporations created by the US Congress. Their function is to improve the efficiency of capital markets and to overcome statutory and other market imperfections which otherwise prevent funds from moving easily from suppliers of funds to areas of high loan demand. They include Fannie Mae and Freddie Mac.

A type of loan in which the borrower uses the equity in their home as collateral. A home equity loan creates a charge against the borrower’s house.

IFRS definition of loans for which an impairment provision has been established; for collectively assessed loans, impairment loss provisions are not allocated to individual loans and the entire portfolio is included in impaired loans.

Impairment provisions are made against losses incurred on impaired financial assets measured at amortised cost. The provisions can be individually or collectively assessed. The impairment provision is an annual charge to the income statement. The cumulative impairment provisions (or reserves) are deducted from the respective assets on the balance sheet and represent the difference between carrying value and the present value of estimated future cash flows discounted at the asset’s original effective interest