RBS 2010 Annual Report Download - page 438

Glossary of terms continued
Discontinued operation - is a component of the Group that either has
been disposed of or is classified as held for sale. A discontinued
operation is either: a separate major line of business or geographical
area of operations or part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of operations; or a
subsidiary acquired exclusively with a view to resale.
Exposure at default (EAD) - an estimate of the expected level of
utilisation of a credit facility at the time of a borrower's default. The EAD
may be higher than the current utilisation (e.g. in the case where further
drawings may be made under a revolving credit facility prior to default)
but will not typically exceed the total facility limit.
Fannie Mae (Federal National Mortgage Association) - is a US
Government Sponsored Enterprise. It buys mortgages, principally issued
by banks, 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.
Federal Home Loan Mortgage Corporation - see Freddie Mac.
Federal National Mortgage Association - see Fannie Mae.
FICO score - a FICO score is calculated using proprietary software
developed by the Fair Isaac Corporation in the US from a consumer's
credit profile. The scores range between 300 and 850 and are used in
credit decisions made by banks and other providers of credit.
First/second lien - a lien is a charge such as a mortgage held by one
party, over property owned by a second party, as security for payment of
some debt, obligation, or duty owed by that second party. The holder of a
first lien takes precedence over all other encumbrances on that property
i.e. second and subsequent liens.
Forbearance -is the term generally applied to an agreement, principally
in relation to secured loans with retail customers experiencing temporary
financial difficulty, to a payment moratorium, to reduced repayments or to
roll up arrears. Forbearance loans are a subset of Renegotiated loans.
Forward contract - a contract to buy (or sell) a specified amount of a
physical or financial commodity, at an agreed price, at an agreed future
date.
Freddie Mac (Federal Home Loan Mortgage Corporation) - is 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.
Futures contract -is 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.
G10 - the Group of Ten comprises the eleven industrial countries
(Belgium, Canada, France, Germany, Italy, Japan, the Netherlands,
Sweden, Switzerland, the United Kingdom and the United States) that
have agreed to participate in the IMF's General Arrangements to Borrow.
Ginnie Mae (Government National Mortgage Association) -is 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.
Government Sponsored Enterprises (GSEs) - are 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.
Gross yield - is the interest rate earned on average interest-earning
assets i.e. interest income divided by average interest-earning assets.
Guaranteed mortgages -are mortgages that are guaranteed by a
government or government agency. In the US, government loan
guarantee programmes are offered by the Federal Housing
Administration, the Department of Veterans Affairs and the Department of
Agriculture's Rural Housing Service. In the Netherlands, the
Gemeentegarantie programme is run partly by the central government
and partly by the municipalities.
Home equity loan - is 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.
Impaired loans - comprise all 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 allowance -see Loan impairment provisions.
Impairment losses - for impaired financial assets measured at amortised
cost, impairment losses - the difference between carrying value and the
present value of estimated future cash flows discounted at the asset's
original effective interest rate - are recognised in profit or loss and the
carrying amount of the financial asset reduced by establishing a provision
(allowance). For impaired available-for-sale financial assets, the
cumulative loss that had been recognised directly in equity is removed
from equity and recognised in profit or loss as an impairment loss.
RBS Group 2010436
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