Banking Terms Based on the word / phrase from letter C (Part III/IV)

Banking Terms Based on the word / phrase from letter C (Part III/IV) :
Commercial Papers (CP).

Is a short-term debt (typically a maximum 9 months), issued by a company (generally large companies with good performance) with a discount system. CP is an unsecured debt (unsecured promissory Notes).
CP may be an alternative placement of funds for banks and in Indonesia should be rated by independent rating agencies. Currently agencies are PT. Pefindo (Rating Agency of Indonesia).
Bank Indonesia stipulates that CP rating that can be made the object of investment of bank funds only PA.1 s / d PA.4 (Investment grade).

Commitment Letter.

Is a 'statement' issued by the bank stating that the bank will provide a financing facility or other facility if the holders 'Commitment Letter' concerned meets the specified requirements. Commitment Letter is based on good faith (in a good faith) and the commercial and not a definitive document. To be able to reach the point, the customer must meet the necessary requirements and carry out transactions dikemukan in the 'Commitment Letter' in accordance with the intention of publishing the letter. Commitment Letter may also be issued by a Leasing Company as a representation or warranty that the Leasing Company will provide financing Lease Purchase of a capital goods.

 see Compliance Director Compliance Director.

Compound Interest.

Is the method of calculating interest which is not only based on the principal but by the principal of the loan plus interest thereon which have expired. Other terms are 'Flowers blooming'.

COMWIL (Cost or market the which ever is lower).

Is a method of determining the value of securities, especially for the presentation of the position of securities in the Bank Financial Statements (Balance Sheet). The value specified role in the Balance Sheet value of securities is based on the value of the lower of cost or market value (cost or markers of the which ever is lower).

Confirmed Irrevocable L / C.

Is the L / C guaranteed by the issuing bank for payment in addition, also guaranteed by the advising bank or other party designated in the L / C (Confirming bank) that are irrevocable.

Consular Invoice.

Invoices are issued by the official agency that is the embassy / consulate / representative of the buyer country or made by exporters who legalized by the embassy or consulate / representative of the purchaser or the friendly country of the buyer country.

Container B / L.

Is the B / L stating that the transport of export goods at B / L by using the container.

Contingency Funding Plan (CFP).

Is a set of policies and procedures which is the blueprint (blueprint) for a bank in meeting the needs of the fund in a given period at a cost (cost) specific. CFP is a projection of future cash flow and funding sources of a bank in the scenario of a particular market situation, including the sharp rise in asset growth or rapid decline in liabilities. To be effective, the CFP should be a manifestation of management's best estimate of the change in position of balance that can be derived from the events / transactions on the aspect of liquidity or credit. CFP may provide a useful framework for managing liquidity risk both short and long term. Further CFP helps to believe that a bank to apply prudential principles, effectively manage liquidity fluctuations in both routine and face large fluctuations.
Coverage of the CFP:
The complexity of a CFP depends on the size (size), nature (nature) and the complexity of the business, risk exposures and organizational structure. To begin with, the CFP should be anticipating all the bank's funding and liquidity needs through:
1. ANALISYS and projecting the flow of funds (funds flows) quantitatively from on and off Balance Sheet and the impact caused.
2. Matching potential cash flows with the use of funds.
3. Establish an early warning indicator for management to establish a level of potential risk.

Contingent Liabilities Contingent Liability  see.

Control Environment (Environmental Control).

Is the attitude and activity (attitute and activities) of the Board relating to the importance of control in the organization. Control Environment form the discipline and structure to achieve the main objectives of the internal control system. The control environment includes the following elements:
 Integrity and ethical values.
 Management's philosophy and operating style
 Organizational structure
 Assignment of authority and responsibility
 Human Resource Policies and Practices
 Competence personnel.

Controller (Host - Front End).

Known also as the Telecommunications Control Unit (TCU), is a computer term for a kind of mini computer that serves to control the performance of hardware and software that exist on a system, such as a computer terminal or ATM, network communications or other computer means (12). ( Source: Bank Indonesia).

Convertible Preferred Shares (the Commercial Bank Recapitalization).

This term is related to the recapitalization of commercial banks, are stocks that:
1. Have voting rights on matters that are strategic (Stategic Voting Rights) is limited to:
o The appointment or dismissal as well as important changes in the management of commercial banks, mergers, acquisitions, liquidation is done voluntarily (other) based on Bank Indonesia policy, asset sales that are not directly related to its business activities, issuance of new shares or similar instruments stock others, as well as the determination of dividend declaration.
o Appointment of directors to represent the Government as holder of Preferred Stock;
o Obtaining payment of dividends are cumulative or not cumulative;
o Obtaining advance payment in the case of banks in liquidation.
2. Conversion of the Preferred Stock into common stock immediately upon:
o Government as holder of Preferred Stock Shares Preferennya assign or sell to another party;
o There was a breach of the Recapitalization Agreement is not completed;
o Sale of Additional Preferred Stock by management to investors without government approval.

Core Principles.

Core Principles are a framework which is the minimum standard in sound banking supervision practices that are universally aplikabel. Basel Committee developed the Core Principles and Methodologinya as a contribution to strengthening the global financial system. Weaknesses in the banking system in a State, both in developed countries and in developing countries can threaten financial stability both for the country and internationally. The Basel Committee believes that implementation of core principles in all States is a significant step forward for improving financial stability domestically and internationally, and provides a good basis for continued development of an effective system of banking supervision.
Basel Core Principles define the 25 (twenty five) principles that are necessary in a system of effective banking supervision, namely the principles relating to:
(1) Principle 1: Objectives, independence, powers, transparency and cooperation.
(2) Principle 2; permissible activities.

(3) Principle 3; Licencing criteria.
(4) Principle 4: Transfer of significant ownership.
(5) Principle 5: Major Acquisitions.
(6) Principle 6: Capital adequacy.
(7) Principle 7: Risk management process.
(8) Principle 8: Credit risk.
(9) Principle 9: Problem assets, provisions and reserves.
(10) Principle 10: Large exposure limits.
(11) Principle 11; Exposure to related parties.
(12) Principle 12; Country and transfer risk
(13) Principle 13; Market risk.
(14) Principle 14: Liquidity risk
(15) Principle 15: Operational risk.
(16) Principle 16; Interest rate risk
(17) Principle 17: Internal control and audit
(18) Principle 18: Abuse of financial services
(19) Principle 19: Supervisory approach
(20) Principle 20: Supervisory techniques
(21) Principle 21: Supervisory reporting.
(22) Principle 22: Accounting and disclosure
(23) Principle 23: Corrective and remedial powers of Supervisors.
(24) Principle 24: Consolidated supervision
(25) Principle 25; Home host relationship
Twenty-five principles mentioned above is a renewal of the core principles of the Basel Committee published in 1997, and not final so it can still be addressed or commented on by the financial and banking community s / d in June 2006.

Core Principles for systemically important payment system (CP-SIPS).

Are the principles of the fee system established by the Bank for International Settlements (BIS) which is used as guidelines by Bank Indonesia in setting up the system and the provisions of the BI-RTGS system (Bank Indonesia - Real Time Gross Settlement) as follows:
1. Implementation of BI-RTGS system should be based on a strong legal basis.
2. Organizers should develop rules and procedures that provide clarity to the participants about the financial risks faced by participants
3. Implementation of BI-RTGS system shall be provided with clear procedures within the framework of payment system risk management
4. Organizers should ensure that the design of the BI-RTGS system can make sure things are as follows:
a. all transactions through the BI-RTGS system that had been done last Settlement is final and irrevocable;
b. Final settlement is done immediately (real time); and
5. Final settlement is done by using the available funds
Participants in the Current Account
6. BI-RTGS system should be organized by security level
high and can function (available) during operating hours of
established, and has procedures for handling the fault conditions
and / or emergencies.
7. Implementation of BI-RTGS system should be implemented in an efficient and practical so beneficial to the participants and the economy in general
8. Organizers should ensure that membership criteria are objective and transparent
9. Organizers must implement effective governance, accountable and transparent, conducted among others by:
a. internal audit function;
b. supervision of the BI-RTGS system by the supervisor
payments;
c. pengkonsultasian policy plan with a Participant; and
d. publication of the report.

Core Risk Taking Units.

Is the main operational unit who take and implement decisions on risks, including but not limited to the activities of credit, treasury, information systems, including office and accounting operations.

Correspondent Banking.

Is the activity of a bank (correspondent) in providing services for other banks (respondents) pursuant to a written agreement in order to provide payment services and other banking services.
As for who is the Cross Border Correspondent Banking Corespondent Banking is where one of the position of the bank or banks corespondent respondents are outside the territory of the Republic of Indonesia.

Corporate Plan.

Is the bank's strategic plans in the medium term (3 years) and long-term (5 years) in the achievement of objectives bank.

COSO (Committee On Sponsoring Organization of the Treadway Commission).

Is a committee sponsored by the "American Institute of Certified Public Accountants' (AICPA), American Accounting Association (AMA), The Financial Excecutives Institute (FEI), Institute of Internal Auditors (IIA) and The National Association Of Accountant, which then replace renamed the Institute of Management Accountants (IMA). The Committee indicated the existence of things that go wrong because of the increasing "Fraudulent Financial Reporting" in the early 80s in the United States. It is perceived as a failure audit the Financial Statements. Many opinion estimates that the culprit of the failure is "internal control weaknesses" in the companies concerned. Therefore these institutions agreed to seek a more definite cause and form the COSO (Committee On Sponsoring Organization of the Treadway Commission) to conduct a study of the problem.
COSO issued its report entitled "Report of the National Commission on Fraudulent Financial Reporting" in October 1987. Then the report is being sent to all institutions concerned, including the SEC (Securities Exchange Commisiion), accounting and auditing educational institutions and so on. Further COSO commissioned to draw up a framework to redefine the re-definition of Internal Control which had been valid. COSO Internal Control Framework was published in 1992 and perfected until 1994.
Definition of Internal Control is set to be as follows:
A process effected by an entity's Board of Directors, management, and other personnel, designed to Provide reasonable assurance regarding the achievement of objectives in the following three categories: effectiveness and efficiency of operations, reliability of financial reports and compliance with applicable laws and regulations.
As per the definition above, set out three objectives of internal control, namely:
i. Effectiveness and effeiciency of operation
ii. Reliability of the Financial Report
iii. Compliance with law and regulation aplicable
Then the set is also the process of achieving these goals through five (5) Internal Component Control as follows:
1. Control environment
2. Risk Assessment
3. Control Activities
4. Information and communication
5. Monitoring
COSO Internal Control models are widely applied by enterprises, especially in the USA and adopted, among others, by the Bank for International Settlements. COSO Internal Control then developed an audit also become COSO model. COSO model in the audit, the audit focused on 15 examination grip of matrix between the objectives and components one by one, so the examiner can conclude the reliability or the weakness of Internal Control in a company being examined.

Cost of Money (COM).

Is the cost of bank funds collected, which consist of interest costs paid by the bank plus the overhead. Typically calculated globally from the total interest expense plus the expense associated with the fundraiser (O / H), divided by the average of a successful third-party funds collected in a same period. (Eg one year).

Counterparty limit.

Is the determination of the maximum number of trades to counterparties on the basis of analysis of risks that may occur such as Bank Risk, Liquidity Risk, Interest Rate Risk, Country Risk and so on. Considerations in setting this limit is influenced also by the bonafides, counterparty business volume, past performance and the Reciprocal Business of the relevant counterparty


Continued to Part IV/ End