Banking Reference Guide: Acronyms A-Z

Welcome to the Banking Acronym Reference Guide, your resource for understanding everyday banking and financial services industry acronyms. 

This guide will help new bankers navigate the alphabet soup of banking, enhance their communication skills, and build confidence in their professional interactions. It also serves as a handy refresher for seasoned bankers, helping them stay current with the latest acronyms in the evolving financial industry.

Use it for quick reference to ensure effective communication with colleagues, clients, and regulators, maintaining clarity and professionalism.

ACH - Automated Clearing House: A network that electronically moves money between bank accounts across the United States. ACH transactions are used to direct deposit payroll, automatic bill payments, and other types of electronic funds transfers. ACH transfers are known for being secure, reliable, and relatively fast, though not instant.

AI - Artificial Intelligence: The simulation of human intelligence in machines. AI systems can perform tasks like recognizing speech, making decisions, solving problems, understanding language, and interpreting visuals. It includes machine learning and robotics techniques to create autonomous systems that improve over time.

ALCO - Asset-Liability Committee: A bank management committee responsible for overseeing the bank’s assets and liabilities. Its main goal is to manage interest rates, liquidity, and capital risks. The committee ensures a balance between assets and liabilities to maintain financial stability and profitability, making strategic investments, funding, and product pricing decisions.

AML - Anti-Money Laundering: AML encompasses laws, regulations, and procedures to prevent criminals from converting illicit funds into legitimate income. Financial institutions implement AML programs to detect and report suspicious activities, ensuring illicit funds do not enter the legitimate financial system.

AML/KYC - Anti-Money Laundering/Know Your Customer: AML/KYC combines processes for preventing money laundering and verifying customer identity. AML involves detecting and reporting suspicious activities, while KYC focuses on verifying customers’ identities. Together, these processes help financial institutions prevent illegal activities by understanding and monitoring customer transactions.

APY - Annual Percentage Yield: The effective annual rate of return that accounts for the effect of compounding interest over a year. It provides a standardized way to compare the returns of various investment and savings options.

APR - Annual Percentage Rate: The annual rate charged for borrowing or earning through an investment, expressed as a percentage. It includes fees or additional costs associated with the transaction, providing a comprehensive measure of the price or return.

ALM - Asset Liability Management: A strategic approach financial institutions use to manage the risks that arise from mismatches between the assets and liabilities on their balance sheets. ALM aims to optimize the balance between risk and return by controlling factors such as interest rates, liquidity, and the duration of assets and liabilities. This helps ensure the institution can meet its financial obligations while maximizing profitability.

ATM - Automated Teller Machine: An ATM allows bank customers to conduct basic transactions, such as making cash withdrawals, depositing funds, and checking account balances, without needing a branch teller. ATMs provide convenient, 24/7 access to banking services.

BSA - Bank Secrecy Act: The BSA is U.S. legislation that prevents money laundering by requiring financial institutions to keep detailed records and file reports on transactions that may indicate illegal activities. These records and reports help authorities detect and investigate money laundering and other financial crimes.

CAMELS - Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, Sensitivity: A rating system used by regulators to evaluate the health of financial institutions. It assesses six key areas to determine a bank’s overall condition and ability to manage risks effectively.

CBWN - Community Bankers Webinar Network: Your first stop for online bank training on topics affecting everyone at every level of your bank. Find over 250+ live or on-demand webinars.

CD - Certificate of Deposit: A savings account with a fixed interest rate and a fixed date of withdrawal, known as the maturity date. CD's typically offer A higher interest rate than regular savings accounts in exchange for leaving the money deposited for a specified period.

CECL - Current Expected Credit Loss: A standard for estimating allowances for credit losses on financial instruments over their lifetime. It requires institutions to account for expected losses based on historical, current, and forecasted information.

CET1 - Common Equity Tier 1: Measures a bank’s core equity capital compared with its total risk-weighted assets. It is a key indicator of a bank’s financial strength and stability, reflecting its ability to absorb losses.

CLTV - Combined Loan-to-Value: A financial metric that measures the ratio of all secured loans on a property to the property’s appraised value. It is calculated by dividing the total amount of all loans secured by the property by the property's appraised value. CLTV is used by lenders to assess the risk of a borrower defaulting on their loan, with a higher CLTV indicating a higher risk.

CFA - Certified Financial Analyst: The CFA Institute offers this professional credential to finance and investment professionals. It signifies expertise in investment analysis, portfolio management, and ethical standards.

CFM - Cash Flow Management: Involves managing the inflow and outflow of cash to ensure a business has adequate liquidity to meet its obligations. Effective cash flow management helps maintain financial stability and operational efficiency.

CFPB - Consumer Financial Protection Bureau: A regulatory agency that oversees financial products and services. It aims to protect consumers by enforcing laws and regulations that ensure fair and transparent financial practices.

CIF - Customer Information File: A CIF contains information about a bank customer. It is used to track transactions and manage relationships. It includes personal details, account information, and transaction history to provide comprehensive customer insights.

CRA - Community Reinvestment Act: A law designed to incentivize financial institutions to assist in fulfilling the credit requirements of the communities they serve. It promotes fair lending practices and supports economic development in underserved areas.

CTR - Currency Transaction Report: A report filed for transactions over a certain amount to prevent money laundering. Financial institutions must report transactions exceeding $10,000 to the Financial Crimes Enforcement Network (FinCEN).

CVV - Card Verification Value: A security feature for credit and debit card transactions. It is a three- or four-digit code that helps verify the card’s legitimacy and protect against fraud during online or card-not-present transactions.

CIU - Cyber Intelligence Unit: A team within a financial institution dedicated to monitoring, analyzing, and mitigating cyber threats. The CIU focuses on identifying vulnerabilities, preventing cyber-attacks, and protecting digital assets using advanced tools and techniques. It also plays a key role in incident response and safeguarding sensitive data.

DDA - Demand Deposit Account: A bank account where deposited funds can be withdrawn at any time without prior notification to the institution. It offers flexibility for daily transactions, including checks, debit card purchases, and electronic transfers.

DEI - Diversity, Equity, and Inclusion: Encompasses policies and practices that promote the fair treatment and full participation of all people. The goal is to create an inclusive workplace that values diverse perspectives and fosters equal opportunities.

DTI - Debt-to-Income Ratio: A personal finance measure that compares an individual’s monthly debt payment to their monthly gross income. Lenders use it to assess a borrower’s ability to manage monthly payments and repay debts.

KPI - Key Performance Indicator: A measurable value demonstrating how effectively a company achieves key business objectives. KPIs help organizations track progress, identify areas for improvement, and make informed decisions.

KYC - Know Your Customer: Financial institutions use the KYC process to verify the identity of their clients and assess potential risks. These processes involve collecting and verifying personal information to ensure compliance with regulations and prevent illegal activities.

LCR - Liquidity Coverage Ratio: A requirement under Basel III to ensure banks maintain an adequate level of high-quality liquid assets. It helps banks meet short-term obligations and avoid liquidity crises.

LIBOR - London Interbank Offered Rate: LIBOR was a benchmark interest rate at which central global banks lend to one another in the international interbank market. It was widely used as a reference rate for various financial instruments. According to www.newyorkfed.org, June 30, 2023, marked the cessation of all USD LIBOR panel settings - the final major step in the transition. Today, SOFR is the dominant U.S. dollar interest rate benchmark.

LIFO - Last In, First Out: An asset management and valuation method in which the last items added to inventory are the first to be sold. It is often used for accounting purposes to match recent costs with current revenues.

LOC - Line of Credit: A credit facility extended by a bank or financial institution to a government, business, or individual customer. It enables the customer to draw on the facility when needed, up to a specified limit.

LTV - Loan to Value: A ratio that expresses the loan amount as a percentage of the property’s appraised value. Lenders use LTV to assess the risk of lending and determine loan terms.

MICR - Magnetic Ink Character Recognition: A technology employed to authenticate the validity or authenticity of physical documents, particularly checks. It uses magnetic ink and characters to facilitate automated processing and reduce fraud.

MMDA - Money Market Deposit Account: A type of savings account that typically pays a higher interest rate than a regular one. It provides the account holder with limited check-writing ability and access to funds.

MRBs - Marijuana-Related Businesses: Businesses involved in the growth, distribution, and sale of marijuana. Due to varying state and federal laws, they operate within a complex regulatory environment.

NACHA - National Automated Clearing House Association: An organization that oversees the ACH network. It develops rules and standards for electronic payments and ensures the efficient and secure transfer of funds.

NCUA - National Credit Union Administration: A U.S. government agency that regulates and supervises credit unions. It provides deposit insurance to protect members’ funds and promotes the safety and soundness of the credit union system.

NDA - Non-Disclosure Agreement: A legal contract between at two or more parties that outlines confidential material or information that the parties wish to share but restricts access to third parties. It helps protect sensitive information from being disclosed.

NFC - Near Field Communication: A set of communication protocols that enable two electronic devices to communicate with each other within a few centimeters of proximity. It is commonly used for contactless payments and data exchange.

NINJA - No Income, No Job, and No Assets: A type of loan extended to a borrower with no ability to pay. Due to their lack of stringent qualification requirements, these high-risk loans contributed to the financial crisis.

NPI - Nonpublic Personal Information: Information that a consumer provides to a financial institution that is not publicly available. It includes personal details such as Social Security numbers, account balances, and transaction history and requires protection and confidentiality.

NPS - Net Promoter Score: A metric used in customer experience programs to measure customer loyalty to a company. It is calculated based on responses to a question about the likelihood of recommending the company to others.

NSF - Non-Sufficient Funds: A term used when an account does not have enough money to cover a transaction. Financial institutions typically charge a fee for NSF occurrences, and the transaction is declined.

NSFR - Net Stable Funding Ratio: A requirement under Basel III that ensures banks have a stable funding profile in relation to their on- and off-balance sheet activities. It promotes long-term funding stability and reduces reliance on short-term borrowing.

OCC - Office of the Comptroller of the Currency: A U.S. Department of the Treasury bureau that regulates and supervises national banks and federal savings associations. It ensures that these institutions operate safely and soundly and comply with applicable laws and regulations.

OIS - Overnight Index Swap: A type of interest rate swap. It involves the exchange of a fixed interest rate for a floating rate, usually tied to an overnight index, helping parties manage interest rate risk.

OFAC - Office of Foreign Assets Control: A financial intelligence and enforcement agency of the U.S. Treasury Department. It administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals.

PCI - Payment Card Industry: Major credit card companies set PCI standards to help businesses protect credit card information and reduce fraud. Compliance with PCI standards is mandatory for organizations handling credit card transactions.

PIN - Personal Identification Number: A PIN is a numeric password used to authenticate a user to a system. It is commonly used with credit and debit cards for secure transactions.

PITI - Principal, Interest, Taxes, Insurance: PITI represents the components of a monthly mortgage payment. It includes the loan principal, interest, property taxes, and homeowners insurance, providing a comprehensive view of housing costs.

POS - Point of Sale: Where a transaction occurs, such as a checkout counter. POS systems facilitate sales, process payments, and manage inventory, streamlining retail operations.

PPP - Paycheck Protection Program: A loan program established by the U.S. federal government to help businesses keep their workforce employed during the COVID-19 crisis. It provides forgivable loans to cover payroll and other essential expenses.

PPP - Public-Private Partnership: A cooperative arrangement between one or more public and private sectors, typically of a long-term nature. It combines the strengths of both sectors to deliver public services or infrastructure projects.

PR - Prime Rate: The interest rate that commercial banks charge their most creditworthy customers. It is often used as a benchmark for various lending rates, including credit cards and loans.

PSD2 - Payment Services Directive 2: An EU regulation for electronic payment services. It aims to increase competition, innovation, and security in the payment industry by requiring stronger customer authentication and opening access to payment accounts.

PSR - Payments System Risk: The risk associated with payment systems. It includes credit, liquidity, operational, and legal risks that could affect their smooth functioning and financial stability.

QDIA - Qualified Default Investment Alternative: AA QDIA is a default investment option for retirement plans. It provides a safe harbor for plan sponsors by ensuring participants are automatically invested in a diversified portfolio if they do not make an investment choice.

QRM - Qualified Residential Mortgage: A home loan class that meets specific regulatory standards. These standards are designed to ensure borrowers’ strong ability to repay, promote safer lending practices, and reduce the risk of default.

RBC - Risk-Based Capital: Measures the minimum capital appropriate for a financial institution. It considers the riskiness of the institution’s assets and activities, ensuring sufficient capital to absorb potential losses.

RD - Recurring Deposit: A RD is a unique term deposit offered by banks that allows people with regular incomes to deposit a fixed amount every month into their RD account. It earns interest at a rate applicable to term deposits, encouraging systematic savings.

RDC - Remote Deposit Capture: A service that allows a bank customer to scan checks and transmit scanned images to a bank for posting and clearing. It offers convenience and faster access to funds by eliminating the need to visit a bank branch.

REIT - Real Estate Investment Trust: A company that owns, operates, or finances income-producing real estate. It allows investors to pool their capital to invest in a diversified portfolio of real estate assets, often providing regular income through dividends.

RESPA - Real Estate Settlement Procedures Act: A federal law designed to protect homebuyers by requiring lenders, mortgage brokers, and servicers of home loans to provide borrowers with pertinent and timely disclosures about the nature and costs of the real estate settlement process. It also prohibits certain practices, such as kickbacks and referral fees, that can increase the cost of settlement services.

ROI - Return on Investment: Measures an investment’s profitability. It is calculated by dividing the net profit by the initial investment cost, expressed as a percentage. It indicates how effectively an investment generates profits.

ROA - Return on Assets: Measures how profitable a company is relative to its total assets. It is calculated by dividing net income by total assets, showing how efficiently a company utilizes its assets to generate earnings.

ROE - Return on Equity: Measures a company’s financial performance by dividing net income by shareholders’ equity. It indicates how effectively a company uses equity investments to generate profits, providing insight into management’s efficiency.

RPA - Robotic Process Automation: A technology that automates routine tasks. It uses software robots to perform repetitive and rule-based processes, improving efficiency, accuracy, and productivity while reducing costs.

RTP - Real-Time Payments: An instant payment system that enables immediate money transfers between bank accounts. It offers 24/7 availability and instant confirmation, enhancing convenience and speed for consumers and businesses.

RWA - Risk-Weighted Assets: Measures the minimum amount of capital banks must hold by considering the riskiness of their assets. It helps banks maintain enough capital to absorb potential losses and remain solvent.

SAR - Suspicious Activity Report: A document that financial institutions must file with the Financial Crimes Enforcement Network (FinCEN) when they suspect that certain transactions could be related to illegal activities. It helps authorities detect and investigate money laundering and other financial crimes.

SBA - Small Business Administration: A U.S. government agency that supports entrepreneurs and small businesses. It offers loans, loan guarantees, contracts, counseling sessions, and other forms of assistance to help businesses start, grow, and succeed.

SDN - Specially Designated Nationals: OFAC blocks SDNs, individuals and companies. Their assets are frozen, and U.S. persons are generally prohibited from dealing with them due to their involvement in terrorism, narcotics trafficking, or other illegal activities.

SEC - Securities and Exchange Commission: A U.S. government agency that regulates securities markets. It aims to protect investors, maintain fair and efficient markets, and facilitate capital formation by enforcing securities laws and promoting transparency.

SIFI - Systemically Important Financial Institution: Institutions whose failure could trigger a financial crisis. They are subject to enhanced regulatory scrutiny and higher capital requirements to mitigate risks and ensure economic stability.

SOFR - Secured Overnight Financing Rate: A benchmark interest rate for dollar-denominated derivatives and loans. It is based on overnight transactions in the U.S. Treasury repurchase market. It offers a transparent and reliable measure of borrowing costs.

SOFR replaced LIBOR (London Interbank Offered Rate) as the benchmark interest rate in many financial contracts. This transition is part of a global effort to move away from LIBOR due to its susceptibility to manipulation and lack of underlying transaction volume. SOFR is based on actual transactions in the U.S. Treasury repurchase market, making it a more reliable and transparent benchmark. The shift to SOFR aims to improve the robustness and integrity of financial benchmarks used in various financial products and contracts.

SRT - Significant Risk Transfer: A regulatory framework determining whether banks can achieve capital relief through securitization. It assesses the extent to which risk has been transferred to third parties, ensuring that banks hold adequate capital for retained risks.

SWIFT - Society for Worldwide Interbank Financial Telecommunication: SWIFT is a network enabling financial institutions to send and receive information about financial transactions. It provides secure, standardized communication for international payments and settlements.

SWIFT Code - Society for Worldwide Interbank Financial Telecommunication Code: A standard format of Business Identifier Codes (BIC) approved by the International Organization for Standardization (ISO). It uniquely identifies banks and financial institutions globally, facilitating international wire transfers.

T&E - Travel and Entertainment: Expenses that are incurred by employees or companies for business-related travel and entertainment. These expenses typically include transportation, accommodation, meals, and other costs associated with conducting business away from the primary workplace.

TARP - Troubled Asset Relief Program: The United States government’s program to purchase toxic assets and equity from financial institutions to strengthen its financial sector was created in response to the economic crisis of 2007-2008 to stabilize the economy and restore confidence in the financial system.

TCF - Treating Customers Fairly: It is a regulatory initiative aimed at ensuring that financial institutions and intermediaries put the interests of their customers at the heart of their business. The TCF initiative seeks to improve the culture of financial services firms so that they consistently deliver fair outcomes to consumers. It emphasizes the need for transparency, fairness, and clarity in financial transactions and services.

TIN - Taxpayer Identification Number: The IRS assigns a TIN for tax purposes in the United States. It is required to file tax returns and other IRS documents, identify taxpayers, and process tax-related transactions.

TLAC - Total Loss-Absorbing Capacity: TLAC requirements ensure banks have sufficient capital to absorb losses. They include equity and debt instruments that can recapitalize a bank in distress, enhancing its resilience and reducing the likelihood of taxpayer bailouts.

TLTRO - Targeted Long-Term Refinancing Operations: A policy tool central banks use to provide long-term loans to banks at attractive conditions. They aim to enhance credit creation in the private sector by encouraging banks to lend to businesses and households.

TILA - Truth in Lending Act: A federal law enacted to promote the informed use of consumer credit by requiring disclosures about its terms and costs. It ensures consumers receive clear and accurate information about the actual cost of credit, helping them compare and make better credit decisions.

TMS - Treasury Management System: Software for managing an organization’s financial operations. It helps companies manage liquidity, cash flow, investments, and risk, optimizing the use of economic resources and improving financial efficiency.

TRID - TILA-RESPA Integrated Disclosure: A regulation by the Consumer Financial Protection Bureau (CFPB) that merges the disclosure requirements of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). TRID simplifies the mortgage process by using two forms: the Loan Estimate and the Closing Disclosure. The Loan Estimate outlines key loan terms and costs, while the Closing Disclosure details the final loan terms and costs.

UBPR - Uniform Bank Performance Report: A report provided by the Federal Financial Institutions Examination Council (FFIEC) that shows individual banks’ performance and risk profile. It helps regulators, analysts, and bankers assess and compare a bank’s financial health with peers.

UDAAP - Unfair, Deceptive, or Abusive Acts or Practices: Refers to unfair, deceptive, or abusive practices in consumer finance. The Dodd-Frank Act prohibits these practices to protect 

consumers from financial harm and ensure fair treatment.

USDA - United States Department of Agriculture: The U.S. federal executive department responsible for developing and executing federal laws related to farming, forestry, rural economic development, and food. It aims to support farmers, promote agricultural trade, ensure food safety, and improve rural communities.

VA - Veterans Affairs: The government-run military veteran benefit system with Cabinet-level status. It provides comprehensive healthcare, benefits, and support services to U.S. military veterans and their families.

VAR - Value at Risk: A statistical technique used to measure the risk of loss. It estimates the maximum potential loss over a specific period with a given confidence level, helping financial institutions manage risk and make informed investment decisions.

VC - Venture Capital: A form of private equity and financing investors provide to startups and small businesses. It supports early-stage companies with high growth potential, typically in exchange for equity ownership.

VISA - Visa International Service Association: A global payments technology company that facilitates electronic funds transfers worldwide, primarily through credit, debit, and prepaid cards. It connects consumers, businesses, financial institutions, and governments.

W-2 - Wage and Tax Statement: An IRS form used to report wages paid to employees and the taxes withheld. Employers provide it to employees and the IRS annually, summarizing earnings and tax information for the year.

W-8 - Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding: An IRS form used by foreign individuals and entities to certify their status. It exempts them from specific U.S. tax withholding requirements on income from U.S. sources.

W-9 - Request for Taxpayer Identification Number and Certification: A form used in the United States to request a taxpayer identification number and certification. Businesses typically use it to collect tax identification information from contractors, vendors, and other entities for tax reporting purposes.

WACC - Weighted Average Cost of Capital: A calculation of a firm’s cost of capital in which each category of capital is proportionately weighted. It represents the average rate of return a company is expected to pay its security holders, providing insight into its financial health and investment potential.

YTM - Yield to Maturity: The return expected on a bond if held until it matures. It accounts for the bond’s current market price, coupon interest rate, par value and time to maturity, offering a comprehensive measure of its profitability.

ZBA - Zero Balance Account: A checking account that maintains a zero balance by automatically transferring funds from a master account in an amount large enough to cover the checks presented. It helps organizations manage cash flow efficiently and reduce idle balances.

XBRL - eXtensible Business Reporting Language: A standard for exchanging business information. It enables the efficient, accurate, and automated exchange of financial data across different systems and organizations, enhancing transparency and comparability in financial reporting.

401(k) - A retirement savings plan: Many employers in the United States offer a retirement savings plan. 403(k)s allow employees to save and invest a portion of their paycheck before taxes are taken out. The employer often matches contributions, and the money grows tax-deferred until retirement.