Glossary of Economic Terms: B
balance of payments
An accounting statement of the money value of international transactions between one nation and the rest of the world over a specific time period. The statement shows the sum of transactions of individuals, businesses, and government agencies located in one nation, against those of all other nations.
balance of trade
That part of a nation’s balance of payments dealing with imports and exports, that is trade in goods and services, over a given period. If exports of goods exceed imports, the trade balance is said to be ‘favorable’; if imports exceed exports, the trade balance if said to be ‘unfavorable.’
A large extra payment that may be charged at the end of a loan or lease.
Bank for International Settlements – BIS
The BIS, located in Basle, Switzerland, was established in 1930 to administer the post-World War I reparations agreements. Since the 1960s, the BIS has evolved into an important international monetary institution, and has provided a forum in which central bankers meet and consult on a monthly basis. As an independent financial organization, the BIS performs a variety of banking, trustee, and agent functions, primarily with central banks.
bank holding company – BHC
Company that owns, or has controlling interest in, one or more banks. A company that owns more than one bank is known as a multibank holding company. A bank holding company may also own another bank holding company, which in turn owns or controls a bank; the company at the top of the ownership chain is called the top holder. The Board of Governors is responsible for regulating and supervising bank holding companies, even if the bank owned by the holding company is under the primary supervision of a different federal agency (the Comptroller of the Currency or the Federal Deposit Insurance Corporation).
A term used synonymously with paper money or currency issued by a bank. Notes are, in effect, a promise to pay the bearer on demand the amount stated on the face of the note. Today, only the Federal Reserve Banks are authorized to issue bank notes, i.e. Federal Reserve notes, in the United States.
The formulation and issuance by authorized agencies of specific rules or regulations, under governing law, for the conduct and structure of banking.
bank run – bank panic
A series of unexpected cash withdrawals caused by a sudden decline in depositor confidence or fear that the bank will be closed by the chartering agency, i.e. many depositors withdraw cash almost simultaneously. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.
Oversight of individual banks to ensure that they are operated prudently and in accordance with applicable statutes and regulations.
Bankers acceptances are negotiable time drafts, or bills of exchange, that have been accepted by a bank that, by accepting, assumes the obligation to pay the holder of the draft the face amount of the instrument on the maturity date specified. They are used primarily to finance the export, import, shipment, or storage of goods.
An electronic communications network owned by an association of banks and used to transfer messages between subscribing banks. Bankwire also offers a clearing service called Cashwire that includes a settlement facility.
An international policy having as its objective the achievement of particular balances of trade between two nations by means of discriminatory tariffs, exchange, or other controls. The initiative is usually taken by the country having an ‘unfavorable’ balance of trade. Extensive bilateralism results in a shift of international trade away from channels that would result from the principle of comparative advantage. See also multilateralism.
A short-term direct obligation of the U.S. Treasury (13, 26, or 52 weeks’ maturity). See also note and bond.
Board of Governors
Central governmental agency of the Federal Reserve System, located in Washington, DC, and composed of seven members who are appointed by the President and confirmed by the Senate. The Board is responsible for domestic and international economic analysis with other components of the System; for the conduct of monetary policy; for supervision and regulation of certain banking organizations; for operation of much of the nation’s payments system; and for administration of most of the nation’s laws that protect consumers in credit transactions.
A long-term obligation of the U.S. Treasury (more than 10 years’ maturity). See also bill and note.
Securities that are recorded in electronic records, called book entries, rather than as paper certificates. Ownership of U.S. government book-entry securities is transferred over Fedwire.
Any person, other than a bank, engaged in the business of buying or selling securities on her or his own behalf for others.
Money borrowed by brokers from banks for uses such as financing specialists’ inventories of stock, the underwriting of new issues of corporate and municipal securities, and customer margin accounts.
Established in 1875, the central bank of West Germany, located in Frankfurt.
Bureau of Labor Statistics – BLS
A research agency of the U.S. Department of Labor; it compiles statistics on hours of work, average hourly earnings, employment and unemployment, consumer prices, and many other variables.
A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer’s periodic payments to repay the indebtness.