Draft: A signed, written order by which one party (the drawer) instructs another party

(the drawee) to pay a specified sum to a third party (the payee), at sight or at a specific
date. Typical bank drafts are negotiable instruments and are similar in many ways to
checks.
Drawee: The person (or bank) who is expected to pay a check or draft when it is
presented for payment.
Drawer: The person who writes a check or draft instructing the drawee to pay someone
else.

Check: A written order instructing a financial institution to pay immediately on demand

a specified amount of money from the check writer's account to the person named on the
check or, if a specific person is not named, to whoever bears the check to the institution
for payment.
Cashier's check: A check drawn on the funds of the bank, not against the funds in a
depositor's account. However, the depositor paid for the cashier's check with funds from
their account. The primary benefit of a cashier's check is that the recipient of the check is
assured that the funds are available.
Prime rate - interest rate banks charge to their most creditworthy customers. The rate is
determined by the market forces affecting a bank's cost of funds and the rates that
borrowers will accept. The prime rate tends to become standard across the banking
industry when a major bank moves its prime rate up or down. Banks may offer major
customers discounts on the prime rate.
payee person receiving payment through a check, bill, money order, promissory note,
credit card, cash, or other payment method.(or party named as the beneficiary of a check
or negotiable instrument the person to whom the written amount on the face of the
instrument is paid.)
maker person who writes a check , signs a promissory note or other negotiable
instrument, and assumes primary liability for payment. The maker of a check is also
known as the drawer .
discount rate
rate charged by Federal Reserve Banks for loans at the Federal Reserve discount
window . The discount rate is set by each Federal Reserve Bank and approved by
the Federal Reserve Board of Governors in Washington. Each Reserve Bank
submits its own rate to the board, which then either approves the rate or denies it.
The discount rate is not necessarily the same across all 12 Federal Reserve Banks.
Occasionally, one or more of the district Fed banks has insisted on a different rate
than other Fed banks. This situation could persist for several weeks, although in
recent years the Reserve Banks have tended to fall into line with a uniform
discount rate, reflecting the emergence of a national market for bank credit. The
discount rate is one of the policy tools the Federal Reserve Board employs to
 carry out monitory objectives; the others are open market operations and reserve
requirements . As of March 31, 1980, when the monetary control act of 1980
became law, all depository financial institutions holding transaction accounts
were able to borrow at the discount window.
bank discount rate , quoted by banks when they accept acceptances and bills of
exchange. The best names, those holding prime paper, qualify for the lowest rates.
discount window place in the Federal Reserve where banks go to borrow money at the
discount rate . Borrowing from the Fed has been a last resort for banks short of reserves,
but in mid-2002, the Fed proposed encouraging direct loans to reduce volatility in the
federal funds rate . Banks would be expected to use the "window" when Fed funds
exceeded the Fed's target rate .

open market operations purchase or sale of government securities by the Open Market
desk at the Federal Reserve Bank of New York, as directed by the Federal Open Market
Committee .
By buying and selling securities, mostly short-term Treasury obligations,i.e., Treasury
bills, the Federal Reserve is able to: (1) meet the public demand for cash by adjusting
bank reserves upward or downward, as needed, and (2) influence bank interest rates,
including rates such as the Federal Funds (Fed Funds) rate that banks charge for short-
term sale of excess reserves . Because reserve accounts at Federal Reserve Banks don't
earn interest, banks try to hold reserves to a minimum or to the level of required reserves.
When the manager of the Fed's Open Market Desk at the Federal Reserve Bank of New
York makes the decision to buy securities, the Fed writes a check on itself to the bank, or
other institutional investor holding the securities, and deposits a check in a commercial
bank. If the Fed buys $1 billion in Treasury bills, bank reserves are increased by that
amount. Selling $1 billion in T-bills has the opposite effect, shrinking the reserves in the
banking system, which tends to drive up the cost of credit, and interest rates. Because
commercial bank reserve accounts don't earn any interest, banks try to hold their reserves
at a minimum. When the Fed is worried that the inflation rate is rising, it pursues a tight
money policy by selling securities. What results is higher interest rates, because the banks
pass the added cost along to the borrowers.
The Fed also adds reserves to the banking system to meet the public's seasonal demand
for cash. This demand for cash varies seasonally; it is highest in December, and lowest in
late summer.
For these reasons, open market operations are the most flexible monetary tool the Fed has
available in implementing its monetary policy objectives. Because commercial banks
have about three-fourths of the nation's checking account deposits, the Fed, by managing
the level of reserves in the banking system, is able to influence the nation's supply of
money (the money supply or money stock), and the cost of credit. Both the Fed Funds
rate, which is the market rate banks pay one another for nonborrowed reserves, and the
bank prime rate are influenced to a large degree by the Fed's actions in open market
operations.
Other tools of monetary policy are the discount rate and reserve requirements .
See also fiscal policy , matched sale-purchase agreement , reverse repurchase agreement ,
swap network

reserve requirements portion of their deposits banks and savings institutions are
required to maintain as legal reserves for the protection of depositors. Reserve
requirements also provide one of the monetary adjustment tools the Federal Reserve
System employs to regulate the supply of credit in the banking system. By raising or
lowering the amount of required reserves, the Federal Reserve can either stimulate or
tighten available bank credit, and the ability of banks to lend-known as fractional reserve
banking. The ratio of required reserves to deposits ranges from 3% to 12% for transaction
accounts such as checking accounts and Negotiable Order of Withdrawal (NOW)
accounts, and up to 3% for time deposits (certificates of deposit). The reserve
requirement may be kept in a separate checking account or with the bank's own cash (
vault cash ). Commercial banks that are member banks in the Federal Reserve System are
required to maintain their reserves in a checking account ( reserve account ) at the nearest
Federal Reserve Bank. Other financial institutions have the option of holding reserves at
a Federal Reserve Bank or in a checking account (called a pass-through account ) at a
correspondent bank.
Depository Institutions Deregulation And Monetary Control Act federal legislation
of 1980 providing for deregulation of the banking system. The act established the
Depository Institutions Deregulation Committee, composed of five voting members, the
Secretary of the Treasury and the chair of the Federal Reserve Board, the Federal Home
Loan Bank Board, the Federal Deposit Insurance Corporation, and the National Credit
Union Administration, and one nonvoting member, the Comptroller of the Currency. The
committee was charged with phasing out regulation of interest rates of banks and savings
institutions over a six-year period (passbook accounts were de-regulated effective April,
1986, under a different federal law). The act authorized interest-bearing negotiable order
of withdrawal (NOW) accounts to be offered anywhere in the country. The act also
overruled state usury laws on home mortgages over $25,000 and otherwise modernized
mortgages by eliminating dollar limits, permitting second mortgages, and ending
territorial restrictions in mortgage lending. Another part of the law permitted stock
brokerages to offer checking accounts.
attitudes mental position or emotional feelings about products, services, companies,
ideas, issues, or institutions. Attitudes are shaped by demographics , social values, and
personality. As the consumer attempts to evaluate a product, service, or the like, he or she
will develop an attitude about the thing being evaluated. In advertising, the desire is to
generate favorable perceptions toward the thing being advertised, and to promote positive
consumer attitudes.
federal reserve bank one of 12 regional banks in the federal reserve system . These
banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta,
Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The role of
each bank, and its branches, is to provide central bank services, such as check collection,
access to the Federal Reserve Wire Network ( federal wire or Fed Wire) and credit
advances at the Fed discount window . In addition, Federal Reserve Banks establish
monetary policy along with the Federal Reserve Board of Governors, and monitor
commercial and savings banks to ensure that financial institutions follow Federal Reserve
regulations. Reserve banks act as depositories for member banks in their regions. Each
Federal Reserve Bank is owned by commercial banks in its Federal Reserve district that
hold stock in the Fed district bank. These commercial banks are member banks in the
Federal Reserve System.

federal reserve system system established by the Federal Reserve Act of 1913 to
regulate the U.S. monetary and banking system. The Federal Reserve System (the Fed) is
comprised of 12 regional Federal Reserve Banks, their 24 branches, and all national and
state banks that are part of the system. National banks are stockholdersof the federal
reserve bank in their region.
The Federal Reserve System's main functions are to regulate the national money supply,
set reserve requirements for member banks, supervise the printing of currency at the
mint, act as clearinghouse for the transfer of funds throughout the banking system, and
examine member banks to make sure they meet various Federal Reserve regulations.
Although the members of the system's governing board are appointed by the President of
the United States and confirmed by the Senate, the Federal Reserve System is considered
an independent entity, which is supposed to make its decisions free of political influence.
Governors are appointed for terms of 14 years, which further assures their independence.

cross-sell selling more than one banking product at the customer service desk, for
example, check overdraft protection to a customer opening a checking account. Banks
often give employee bonuses, such as cash incentives to branch employees to meet sales
objectives. Cross-marketing is perfectly legal as long as there are no tie-in arrangements,
i.e., making the sale conditional on acceptance of the add-on product.
time deposit savings account at a financial institution that earns interest but is not legally
subject to withdrawal on demand or transfer by check. The depositor can withdraw only
by giving notice. A Certificate of Deposit (CD) is a special type of time deposit. Should
the CD depositor wish to withdraw funds prior to the date of maturity, the financial
institution imposes a substantial penalty.

demand deposit account balance which, without prior notice to the bank, can be drawn
on by check, cash withdrawal from an automatic teller machine, or by transfer to other
accounts using the telephone or home computers. Demand deposits are the largest
component of the U.S. money supply , and the principal medium through which the
Federal Reserve implements monetary policy.

Federal Deposit Insurance Corporation (FDIC) federal agency established in 1933

that guarantees (within limits) funds on deposit in member banks and thrift institutions
and performs other functions such as making loans to or buying assets from member
institutions to facilitate mergers or prevent failures. In 1989, Congress passed savings and
loan association bailout legislation that reorganized FDIC into two insurance units: the
Bank Insurance Fund (BIF) continued the traditional FDIC functions with respect to
banking institutions and the Savings Association Insurance Fund (SAIF) insured thrift
institution deposits, replacing the Federal Savings and Loan Insurance Corporation
(FSLIC) , which ceased to exist. In 2005, Congress passed the FDI Reform Act merging
the SAIF and BIF into one insurance fund called the Deposit Insurance Fund (DIF). The
same law also raised the federal deposit insurance level from $100,000 to $250,000 on
retirement accounts and gave the FDIC the option to increase insurance ceilings on
regular bank accounts from $100,000 by $10,000 a year, based on inflation, every five
years thereafter starting April 1, 2010.
charter
Law: document issued by a government establishing a corporate entity. Many kinds of
organizations-including cities-are chartered.

split deposit deposit where the customer presenting an endorsed check receives part of
the amount being deposited in cash. Split deposits are a major source of teller errors and
potential fraud in customer statements. Contrast with mixed deposit
mixed deposit deposit at a teller window, night depository, or at an automated teller
machine, containing both cash and checks. Contrast with split deposit .

transaction any event that causes a change in an organization's financial position or net
worth, resulting from normal business activity. It is recorded on the general ledger by
debit or credit tickets.; advance of funds, as in a credit card cash advance, purchase of
goods at a retailer, or when a borrower activates a revolving line of credit. See also
standby commitment .; activities affecting a deposit account, such as a deposit of funds or
a withdrawal, carried out at the request of the account owner.
central bank government agency that performs a number of key functions: (1) issues the
nation's currency; (2) regulates the supply of credit in the economy; (3) manages the
external value of its currency in the foreign exchange markets; (4) holds deposits
representing reserves of other banks and other central banks; (5) acts as fiscalagent for
the central government, when the government sells new issues of securities to finance its
operations; and (6) attempts to maintain an orderly market in these securities by actively
participating in the government securities market.
The federal reserve system , the central bank in the United States, regulates bank credit
by raising or lowering the discount rate , and by buying and selling government securities
in the open market. This process, known as open market operations , aims to promote
stable economic growth while controlling the rate of inflation. Other major central banks
are the Bank of England, the European Central Bank, and the Bank of Japan.
endorsement signature on a draft or check by a payee before transfer to a third party. A
payee provides such an endorsement when transferring this draft to the payee's bank.
Checks can be endorsed in three different ways. In a blank endorsement, once signed, it
becomes a negotiable instrument and can be used as such by anyone. A restrictive
endorsementlimits the use of the check to a single purpose. "For deposit only" is written
on a check when it is deposited by mail. If the check is lost in the mail and subsequently
found, it cannot be cashed. A special endorsementis used to pay someone else. All that is
required is to indicate the payee and sign.

traveler's check check issued by a financial institution such as American Express, Visa,
or Mastercard that allows travelers to carry travel funds in a more convenient way than
cash. The traveler buys the checks, often for a nominal fee, with cash, a credit card, or a
regular check at a bank or travel service office and then signs each traveler's check. The
check can then be used virtually anywhere in the world once it has been countersigned
with the same signature. The advantage to the traveler is that the traveler's check cannot
be used by someone else if it is lost or stolen, and can be replaced usually anywhere in
the world. Traveler's checks are also issued in many foreign currencies, allowing a
traveler to lock in at a particular exchange rate before the trip begins. Many issuers of
traveler's checks offer a type of check that enables two travelers to share the same travel
funds. American Express was the first issuer to introduce this form of check. Institutions
issuing traveler's checks profit from the float , earning interest on the money from the
time the customer buys the check to the time they use the check.
float amount of funds represented by checks that have been issued but not yet collected.;
time between the deposit of checks in a bank and payment. Due to the time difference,
many firms are able to "play the float," that is, to write checks against money not
presently in the firm's bank account.; to issue new securities, usually through an
underwriter.float dollar value of cash balances created by the time lag in processing
unpaid checks. Collection float is interest that may be lost to the depositor; payment float
is interest that may be gained by the payer. The largest component of float is federal
reserve float , created when a Federal Reserve Bank credits the reserve account of a
collecting bank before it has collected from the paying bank. Other kinds of float are mail
float , caused by delays in mail handling between cities; holiday float created when a
bank is not open for business due to a state or national holiday; and return item float,
created when checks are returned for insufficient funds or other reasons. At greater
distances between paying and receiving banks, bank clearing float tends to increase,
although federal legislation enacted in 1987 requires banks to adhere to uniform funds
availability on out-of-town checks, which will give banks an incentive to hold clearing
float at a minimum. A bank customer's average daily float is often calculated for purposes
of account analysis .
Account Banking: relationship under a particular name, usually evidenced by a deposit
against which withdrawals can be made. Among them are demand, time, custodial, joint,
trustee, corporate, special, and regular accounts. Administrative responsibility is handled
by an account officer.