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All glossary entries


Free on board at the exporter’s border

face-to-face payment

A payment where the payer and the payee are in the same physical location. Antonym: remote payment


See failed transaction (fail)

failed transaction (fail)

A transaction that does not settle on the contractual settlement date. Such a transaction may be retained and may settle thereafter.

failing or likely to fail (FOLTF)

There are four reasons why a bank can be declared failing or likely to fail: (i) it no longer fulfils the requirements for authorisation by the supervisor; (ii) it has more liabilities than assets; (iii) it is unable to pay its debts as they fall due; (iv) it requires extraordinary financial public support. At the time of declaring a bank failing or likely to fail, one of the above conditions must be met or be likely to be met.

fair value accounting (FVA)

A valuation principle that stipulates the use of either a market price, where it exists, or an estimation of a market price as the present value of expected cash flows to establish the balance sheet value of financial instruments.

final investor

The ultimate recipient of rights in securities held on a securities account (e.g. ownership rights, voting rights or dividends).

final settlement (final transfer)

A settlement or transfer is final when it is unconditional, enforceable and irrevocable, even in the framework of insolvency proceedings opened against a participant (except in the case of criminal offences or fraudulent acts, as determined by a competent court). In the European context, a distinction is made between: 1) the enforceability of a transfer order which is binding on third parties and protected from insolvency risks, provided that the transfer order was entered in the relevant system, in accordance with the rules of that system, prior to the opening of insolvency proceedings (with transfer orders entered in a system following the opening of insolvency proceedings being legally enforceable only in exceptional circumstances); and 2) the irrevocability of a transfer order which cannot be revoked by the participants as of the point in time laid down in the rules of that system. Finality of transfer order is distinguished from finality of transfer, when entitlement is legally transferred to a receiver.

final transfer

See final settlement (final transfer)

financial account (in a b.o.p. context)

A b.o.p. account that covers all transactions in direct investment, portfolio investment, other investment, financial derivatives and reserve assets, between residents and non-residents. See also balance of payments (b.o.p.)

financial accounts

Part of the system of national (or euro area) accounts showing the financial positions (stocks) and financial transactions of the different institutional sectors of an economy by type of financial instrument.

financial asset

Any asset that is (i) cash; or (ii) a contractual right to receive cash or another financial instrument from another enterprise; or (iii) a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable; or (iv) an equity instrument of another enterprise.

financial auxiliary

A corporation or quasi-corporation that is engaged primarily in auxiliary financial activities, e.g. insurance brokers, investment advisors and corporations providing infrastructure for financial markets.

financial corporations engaged in lending

Corporations and quasi-corporations, classified as OFIs, specialising mainly in asset financing for households and non-financial corporations. Included are also firms specialising in financial leasing, factoring, mortgage lending and consumer lending.

financial derivative (in a b.o.p. context)

A financial instrument that is linked to another specific financial instrument, indicator or commodity and through which specific financial risks (such as interest rate risk, foreign exchange risk, equity and commodity price risks, and credit risk) can be traded in financial markets in their own right. The value of a financial derivative is based on the price of an underlying item, such as an asset or index. No principal amount that has to be repaid is advanced, and no investment income accrues.

financial intermediary

A commercial entity that serves as an interface between lenders and borrowers, e.g. by collecting deposits from the general public and extending loans to households and businesses.

financial liability

Any liability that is a legal obligation to deliver cash or another financial instrument to another enterprise or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable.

financial markets

Markets in which those who have a surplus of funds lend to those who have a shortage.

financial stability

The condition in which the financial system – comprising financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and the unravelling of financial imbalances, thereby mitigating the likelihood of disruptions in the financial intermediation process which are severe enough to significantly impair the allocation of savings to profitable investment opportunities.

Financial Stability Board (FSB)

An international body that promotes international financial stability. It does so by coordinating national financial authorities and international standard-setting bodies as they work towards developing strong regulatory, supervisory and other financial sector policies. It fosters a level playing field by encouraging coherent implementation of these policies across sectors and jurisdictions.

financial vehicle corporation (FVC)

An entity whose principal activity is to carry out securitisation transactions. An FVC typically issues marketable securities that are offered for sale to the general public or sold in the form of private placements. These securities are backed by a portfolio of assets (typically loans) which are held by the FVC. In some cases, a securitisation transaction may involve more than one FVC, where one FVC holds the securitised assets and another issues the securities backed by those assets.

fine-tuning operation

A non-regular open market operation executed by the Eurosystem mainly to deal with unexpected liquidity fluctuations in the market.


financial reporting

FIRB approach

foundation internal ratings-based approach

fiscal compact

A part (Title III) of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union which stipulates that the budgetary position of the general government of signatory Member States shall be balanced or in surplus. See also general government, Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG)

fiscal policy stance (fiscal stance)

A measure of discretionary fiscal policy with an impact on aggregate demand. It is calculated as the annual change in the cyclically adjusted primary balance net of any financial support provided to the financial sector. It is typically described as “neutral”, “tightening” or “loosening”. Tightening puts a brake on economic activity and has a positive effect on the government budget balance, whereas loosening stimulates economic activity and negatively affects the budget balance. Changes in the cyclically adjusted primary balance reflecting temporary measures or other special factors are taken into account, as they tend to have an impact on aggregate demand. Support provided to the financial sector is excluded as it is not considered to directly affect economic activity. See also budget balance, discretionary fiscal policy

fit and proper assessment

Supervisory authorities assess whether candidates for the management bodies in banks are fit and proper. The ECB takes such fit and proper decisions for directors of significant banks (i.e. the banks it directly supervises), whereas fit and proper decisions for less significant institutions are taken by the national supervisors, except where a new banking licence is being granted.

fixed rate bond

A debt security with a nominal coupon payment that does not change during the life of the issue.

fixed rate instrument

A financial instrument for which the coupon is fixed throughout the life of the instrument.

fixed rate tender

A tender procedure, in which the interest rate is specified in advance by the central bank and in which participating counterparties bid the amount of money they want to transact at that interest rate.

floating rate instrument

A financial instrument for which the coupon is periodically reset relative to a reference index to reflect changes in short or medium-term market interest rates. Floating rate instruments have either pre-fixed coupons or post-fixed coupons.

flow (transactions)

The creation, transformation, exchange, transfer or extinction of economic value involving a change in the ownership of goods and/or financial assets, the provision of services or the provision of labour and capital. Flows can be calculated as differences in stocks adjusted to remove the effect of reclassifications, exchange rate variations, other revaluations and any other changes that do not arise from transactions.


financial market infrastructure


See failing or likely to fail (FOLTF)


Federal Open Market Committee

foreign currency holding

The net position in the respective currency. For the purpose of this definition special drawing rights (SDRs) shall be considered as a separate currency.

foreign exchange forward

A contract in which the outright purchase or sale of a certain amount denominated in a foreign currency against another currency, usually the domestic currency, is agreed on one day and the amount is to be delivered at a specified future date, more than two working days after the date of the contract, at a given price. This forward rate of exchange consists of the prevailing spot rate plus/minus an agreed premium/discount.

foreign exchange operations

The buying or selling of foreign exchange. In the context of the Eurosystem, this means buying or selling other currencies against euro.

foreign exchange revaluation

An adjustment to remove from flow data the effects of any change in the euro value of balance sheet items originally denominated in foreign currency that arises from changes in the relevant exchange rates against the euro.

foreign exchange settlement risk (cross-currency settlement risk)

The risk that a party to a foreign exchange transaction will transfer the currency it has sold, but not receive the currency it has bought. This is a form of principal risk. See also payment versus payment, principal risk

foreign exchange swap

Simultaneous spot and forward transactions exchanging one currency against another. The Eurosystem can execute open market monetary policy operations in the form of foreign exchange swaps, where the national central banks (or the ECB) buy or sell euro spot against a foreign currency and at the same time sell or buy them back in a forward transaction.

forward guidance

A communication by the Governing Council providing information about its future monetary policy intentions, based on its assessment of the outlook for price stability. The communication clarifies the Governing Council’s intentions with regard to the expected future path of the ECB’s key interest rates and/or its asset purchases.

forward rate agreement (FRA)

An agreement whereby one party undertakes to pay another party a certain interest rate on a certain principal amount for a certain period of time beginning at some point in the future.

forward transactions in securities

Over-the-counter contracts in which the purchase or sale of an interest rate instrument (usually a bond or note) is agreed on the contract date, for delivery at a future date, at a given price.

four-party card scheme

A card scheme where the stakeholders involved are: 1) the issuer; 2) the acquirer; 3) the cardholder; and 4) the card acceptor. (In the case of automated teller machine (ATM) transactions, it is usually the acquirer that offers its services via the ATM.) By contrast, in a three-party card scheme, the issuer and the acquirer are always the same entity. See also three-party card scheme


See forward rate agreement (FRA)

free-of-payment (FOP) delivery

A delivery of securities which is not linked to a corresponding transfer of funds.


See Financial Stability Board (FSB)


Financial Stability Review


See funds transfer system (FTS)

funds transfer system (FTS)

A formal arrangement based on a private contract or legislation, with multiple membership, common rules and standardised arrangements, for the transmission, clearing, netting and/or settlement of monetary obligations arising between its members. See also interbank funds transfer system, payment system


A characteristic of securities which are substitutable on account of their being identical.

futures contract

A contract to buy or sell securities or a commodity at a predetermined price on a specified future date.


See fair value accounting (FVA)


See financial vehicle corporation (FVC)


foreign exchange