Bonds for which the interest and/or the redemption value are linked to a real (the price of a basket of goods or services), currency (exchange rate) monetary (e.g. the ABI prime rate) or financial (e.g. the yield on bonds issued by banks) parameter.
This consists of the sum of the core capital, admitted in the calculation without any limitation, and the supplementary capital which is admitted up to the maximum amount of the core capital. Equity holdings, hybrid capital instruments and subordinated assets held in other banks and financial companies are deducted from this sum. More specifically non consolidated equity interests of more than 10% held in banks and financial companies as well as equity interests of less than 10% in banks and financial companies and subordinated assets issued by banks, which exceed 10% of the supplementary capital are deducted.
Swaps (on rates or foreign exchange)
An operation consisting of the exchange of revenues between counterparties according to contracted conditions. With an interest rate swap the counterparties exchange the interest payments calculated on notional reference capital on the basis of different criteria (e.g. one counterparty pays a fixed rate and the other a variable rate). In the case of currency swaps, the counterparties exchange specific amounts of two different currencies, returning them at set times which concerns both the principal and the interest.
Tier 1 (core capital)
This consists of paid up equity share capital, reserves, the provision for general banking risks and preference shares (up to a limit of 50% of the core capital). The following is deducted from this: own shares, goodwill and intangible assets, as well as prior and current year losses.
Tier 2 (supplementary capital)
This consists of revaluation reserves, hybrid capital instruments (non redeemable debt and other instruments redeemable on request of the issuer with the prior consent of the Bank of Italy) subordinated liabilities (up to a maximum of 50% of the core capital, the provision for bad and doubtful debt, net of losses on securities and profits or losses on equity holdings.
Trading on line
System for buying and selling financial instruments on the stock exchange via Internet.
Life insurance policies with performance linked to the value of investment funds.
VaR – Value at Risk
A measure of the maximum potential loss that may be incurred on a financial instrument or portfolio with a set probability (level of confidence) in a determined time period (the reference or holding period).
Negotiable instrument which grants the holder the right to purchase fixed rate securities or shares from the issuer or sell them to the issuer under precise conditions.
Bonds which do not pay an interest note, where the yield is given by the difference between the issue (or purchase) price and the redemption price.