Risk Management Manual of Examination Policies - FDIC

INTERNATIONAL BANKING Section 11.1
Trust Receipt – Used extensively in letter of credit
financing, this is a document or receipt in which the buyer
promises to hold the property received in the name of the
releasing bank, although the bank retains title to the goods.
The merchant is called the trustee and the bank the
entruster. Trust receipts are used primarily to allow an
importer to take possession of the goods for resale before
paying the issuing bank.
Two-way Quotation – A simultaneous quotation of
foreign exchange buying and selling rates implying the
willingness of the bank to deal either way.
Two-way Rate – An exchange rate or an interest rate
quotation that contains both a bid rate and an offer rate.
The size of the spread between the two rates indicates the
relative quality of the quotation.
Undervalued – Decline in the spot rate below purchasing
power parities, so that goods of one country are cheaper
than in another country. In relation to foreign exchange,
“undervalued” means that forward premiums are narrower
or forward discounts are wider than the interest parities
between the two financial centers.
Uniform Customs and Practices for Documentary
Credits – Sets of rules governing documentary letters of
credit formulated by the International Chamber of
Commerce. Includes general provisions, definitions,
forms, responsibilities, documents, and the transfer of
documentary letters of credit.
Unmatched – A forward purchase is unmatched when a
forward sale for the same date has not been executed or
vice versa.
Usance – The period of time between presentation of a
draft and its maturity. See also tenor.
Value Date – The date on which foreign exchange bought
and sold must be delivered and on which the price for them
in local currency must be paid.
Value-impaired – A category assigned by ICERC that
indicates a country has protracted debt problems.
Value Today – An arrangement by which spot exchange
must be delivered and paid for on the day of the transaction
instead of two business days later.
Value Tomorrow – An arrangement by which spot
exchange must be delivered and paid for on the business
day following the transaction instead of two business days
later.
Volume Quotation System – A method of giving
exchange rates in which a certain specified amount of local
currency (usually 1 or 100) is stated as the corresponding
amount in foreign currency.
Vostro Account – A demand account maintained for a
bank by a correspondent bank in a foreign country. The
nostro account of one bank is the vostro account of the
other bank. See also nostro account.
Warehouse Receipt – An instrument that lists and is a
receipt for goods or commodities deposited in the
warehouse which issues the receipt. These receipts may be
negotiable or non-negotiable. A negotiable warehouse
receipt is made to the "bearer," and a non- negotiable
warehouse receipt specifies precisely to whom the goods
shall be delivered. There are several alternatives for
releasing goods held under warehouse receipts: (1) the
delivery of goods may be allowed only against cash
payment or substitution of similar collateral; (2) some or
all of the goods may be released against trust receipt
without payment; or (3) a warehouseman may release a
stipulated quantity of goods without a specific delivery
order. Banks will accept a warehouse receipt as collateral
for a loan only if the issuer of a receipt is a bonded
warehouseman. The bank must have protected assurances
for the authenticity of the receipt and the fact that the
commodities pledged are fully available as listed on the
warehouse receipt.
Withholding Tax – A tax imposed by a country on the
gross amount of payments to a foreign lender from an incountry
borrower.
Within-line Facility – Subfacilities of the line of credit
that establish parameters, terms, and conditions of various
other facilities available for specific additional purposes or
transactions. The aggregate sum of all outstandings under
within-line facilities must not exceed the total of the overall
line of credit.
World Bank – An international financial organization
whose purpose is to aid the development of productive
facilities in member countries, particularly in developing
countries. The chief source of funds is capital
contributions made by member countries, which vary with
the financial strength of the country. Another funding
source is the sale of long-term bonds.
Yankee Bond – A U.S. dollar-denominated foreign bond
issued in the U.S. market.
Zero Coupon – A bond that pays no interest but that is
redeemed at its face value at maturity.
International Banking (12-04) 11.1-48 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation