A Dictionary of Finance and Banking

By Brian Butler; David Butler et al. | Go to book overview

B

baby bonds Bonds offered by tax-exempt friendly societies, which produce maturing funds for an infant over a period, usually 10 years. The maximum investment allowed by the UK government is currently £18 a month or £200 a year.

backdate1. To put an earlier date on a document than that on which it was compiled, in order to make it effective from that earlier date. 2. To agree that salary increases, especially those settled in a pay award, should apply from a specified date in the recent past.

back door One of the methods by which the * Bank of England injects cash into the *money market. The bank purchases Treasury bills at the market rate rather than by lending money directly to the discount houses (the front-door method) when it acts as *lender of last resort.

back-end load The final charge made by an *investment trust when an investor sells shares in the fund.

back-to-back credit (countervailing credit) A method used to conceal the identity of the seller from the buyer in a credit arrangement. When the credit is arranged by a British finance house, the foreign seller provides the relevant documentation The finance house, acting as an intermediary, issues its own documents to the buyer, omitting the seller's name and so concealing the seller's identity. The reason for not revealing the seller's identity is to prevent buyer and seller dealing direct in future transactions and thus cutting out the middle man.

back-to-back loan A loan from one company to another in a different country, often in a different currency, using a bank or other financial institution as a middle man to provide the loan but not the funding, which comes from a third party. Usually the loan is between a parent company and overseas subsidiaries; a pledge is usually given to honour loans on which there may be a default.

back-up credit An alternative source of funds arranged if an issue of *commercial paper is not fully taken up by the market. Back-up credit is provided by a bank for a fee or by the deposit of credit balances at the bank of the issuer. The back-up is often a stand-by facility provided by the bank, which may be drawn upon if the paper is not placed.

backwardation1. The difference between the spot price of a commodity, including rent, insurance, and interest accrued, and the forward price, when the spot price is the higher. 2. A situation that occasionally occurs on the London Stock Exchange when a market maker quotes a buying price for a share that is lower than the selling price quoted by another market maker. However, with prices now displayed on screens, this situation does not now last long. Backwardation also occurs in commodity markets, especially on the London Metal Exchange. CompareFORWARDATION.

BACS Abbreviation for *Bankers Automated Clearing System. See also ASSOCIATION FOR PAYMENT CLEARING SERVICES.

bad debt An amount owed by a debtor that is unlikely to be paid; for example. due to a company going into liquidation. The full amount should be written off

-23-

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A Dictionary of Finance and Banking
Table of contents

Table of contents

  • Title Page iii
  • Preface v
  • A 1
  • B 23
  • C 48
  • D 91
  • E 112
  • F 131
  • G 152
  • H 164
  • I 168
  • J 190
  • K 192
  • L 194
  • M 211
  • N 233
  • O 247
  • P 258
  • Q 288
  • R 291
  • S 313
  • T 345
  • U 361
  • V 368
  • W 372
  • X, Y, Z 377
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