GLOSSARY Terms related to the Federal Reserve, banking and economics   A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |   capacity A person's ability (present and future) to meet financial obligations.   capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.   capital A person's savings and other assets, which can be used as collateral for loans.   capital market The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded.   cash flow Money coming to an individual or business less money being paid out during a given period.   cease-and-desist order An order issued after notice and opportunity for hearing, requiring a depository institution, a holding company or a depository institution official to terminate unlawful, unsafe or unsound banking practices. Cease-and-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act and can be enforced directly by the courts.   central bank The principal monetary authority of a nation, which performs several key functions, including issuing currency and regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States.   central bank intervention The buying or selling of currency, foreign or domestic, by central banks in order to influence market conditions or exchange rate movements.   certificate of deposit (CD) A form of time deposit at a bank or savings institution; a time deposit cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity.   character A borrower's trustworthiness.   check clearing The movement of a check from the depository institution at which it was deposited back to the institution on which it was written; the movement of funds in the opposite direction and the corresponding credit and debit to the involved accounts. The Federal Reserve operates a nationwide check-clearing system.   clearinghouse An institution where mutual claims are settled between accounts of member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes, but more recently have cleared other types of settlements, including electronic fund transfers.   closed-end credit An agreement in which advanced credit plus any finance charges are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed-end agreements.   collateral Property that is offered to secure a loan or other credit and that becomes subject to seizure on default.   commercial bank Bank that offers a broad range of deposit accounts, including checking, savings and time deposits and extends loans to individuals and businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities.   common stock A kind of ownership in a corporation that entitles the investor to share any profits remaining after all other obligations have been met.   Community Reinvestment Act (CRA) Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations.   compound interest Interest that is calculated on the original principal plus all interest accrued to that point in time. Since interest is paid on interest as well as the amount borrowed, the effective interest rate is greater than the nominal interest rate. The compound interest rate method is often used by banks and savings institutions in determining interest they pay on savings deposits "loaned" to the institutions by the depositors.   Comptroller of the Currency (OCC) The Comptroller of the Currency is an officer of the Treasury Department responsible for chartering national banks and has primary supervisory authority over them. All national banks are required to be members of the Federal Reserve System and are insured by the Federal Deposit Insurance Corporation.   Consumer Advisory Council (CAC) A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer and creditor interests, advises the Federal Reserve Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks its advice.   Consumer Credit Protection Act In 1968 Congress passed the first in a series of laws, under the Consumer Credit Protection Act, designed to shield consumers from unfair lending practices. Understanding these laws can help you avoid unnecessary worries and may even save you money.   consumer price index (CPI) A measurement of the cost of living determined by the Bureau of Labor Statistics.   correspondent bank Bank that accepts deposits of, and performs services for, another bank (called a respondent bank); in most cases, the two banks are in different cities.   cosigner A term referring to a person, other than the principal borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.   credit The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.   credit bureau a business organization that puts together information for your credit file, keeps it up to date, and makes it available for a fee to lenders, insurance companies, and potential employers.   credit card Any card, plate or coupon book that may be used repeatedly to borrow money or buy goods and services on credit.   credit history A record of how a person has borrowed and repaid debt.   credit rating An estimate of the amount of credit that can be extended to an individual or business without undue risk. (See also credit scoring system)   credit record   credit report A loan and bill payment history, kept by a credit bureau and used by financial institutions and other potential creditors to determine the likelihood that a future debt will be repaid.   credit scoring system A statistical system used to determine whether to grant credit by assigning numerical scores to various characteristics related to creditworthiness.   credit union Financial cooperative organization of individuals who have a common bond, such as place of employment or residence or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings and use their funds to provide consumer installment loans to members.   creditor A person, financial institution or other business that lends money.   creditworthiness A creditor's measure of a consumer's past and future ability and willingness to repay debts.   current account balance The difference between the nation's total exports of goods and services, income, and transfers and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities.