Financial Services Glossary

Source: FCAC and others

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Amortization period
The actual number of years it will take to repay a mortgage in full.

Annuity
A type of investment contract that pays you income at regular intervals, usually after retirement.

Asset
Any thing of value owned by an individual or organization.

Automated banking machine (ABM)
An electronic kiosk or terminal that allows you to conduct financial transactions such as paying bills, withdrawing cash and depositing cheques. Also known as an automatic teller machine (ATM).

Automatic teller machine (ATM)
See automated banking machine.

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Bank
A federally regulated financial institution that, in general, engages in the business of taking deposits, lending and providing other financial services.

Bank Act
Federal legislation governing the structure and operation of banks in Canada.

Bank of Canada
Canada's central bank. The Bank of Canada is responsible for Canadian monetary policy, issuing bank notes, regulating and supporting Canada's principal systems for clearing and settling payments, and acting as fiscal agent for federal government debt.

Bank Draft
A guaranteed form of payment which is issued in amounts over $1,000.

Bank rate
The minimum lending rate of the Bank of Canada. It is applied to advances to institutions that are members of the Canadian Payments Association, and to purchase and resale transactions with key investment dealers in the money market. It is also the primary indicator of Bank of Canada monetary policy. The bank rate is an important tool because it is seen as the trend-setter for other short-term interest rates. Changes in the bank rate often lead to changes in the prime rate, which is the rate of interest that commercial banks charge their lowest-risk customers. Other rates can be affected, including those for mortgages, cars and business loans, as well as rates paid to savers on deposits and investment certificates.

Bond
A certificate received for a loan made to a company or government. In return, the issuer of the bond promises to pay the lender interest at a set rate and to repay the loan on a set date.

Broker
A securities firm or a registered individual affiliated with one. Brokers are the link between investors and the stock market, handling the public's orders to buy and sell securities, commodities, etc.

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Canada Deposit Insurance Corporation (CDIC)
A federal Crown corporation established in 1967 to protect Canadian currency deposits against the possible failure of member financial institutions (which include banks and trust and loan companies). As a general rule, eligible deposits are protected up to a maximum of $60,000 per person, including principal and interest, at each member institution.

Canada Education Savings Grant (CESG)
Federal government program designed to help parents, grandparents and interested Canadians save for a child's post-secondary education. The Government of Canada will contribute 20% of the amount of contributions made to a Registered Education Savings Plan, to a maximum yearly amount of $400 per child per year or a lifetime maximum of $7,200.

Canada Mortgage and Housing Corporation (CMHC)
Crown corporation that administers the National Housing Act for the federal government, and creates and sells mortgage loan insurance products.

Canada Premium Bond
A savings product for individual Canadians introduced by the Government of Canada in 1998. It offers a higher interest rate than the Canada Savings Bond, and is redeemable once a year on the anniversary of the issue date or during the 30 days thereafter without penalty.

Canada Savings Bond (CSB)
A savings product issued and guaranteed by the federal government, and offered for sale by most Canadian financial institutions to individual Canadians. It pays a competitive rate of interest that is guaranteed for one or more years. It may be cashed at any time and, after the first three months, pays interest up to the end of the month prior to encashment.

Canadian Bankers Association (CBA)
Established in 1891, the CBA is the main representative body for banks in Canada. It provides its members — the chartered banks of Canada — with information, research, advocacy and operational support services. The CBA also provides information to the public on banking and financial issues.

Canadian Life and Health Insurance Association (CLHIA)
An association comprised of most of the life and health insurance companies in Canada. It conducts research and compiles information about the life and health insurance industry in Canada.

Canadian Life and Health Insurance Compensation Corporation (CompCorp)
A private, non-profit corporation established in 1990 by the life insurance industry. It is funded by the industry and provides Canadian policyholders with compensation coverage against loss of policy benefits in the event of the insolvency of their insurance company.

Canadian Life and Health Insurance OmbudService (CLHIO)
An independent service that assists consumers with concerns and complaints about life and health insurance products and services, with the objective of providing fair and prompt resolution of problems.

Canadian Payments Association (CPA)
A financial network established in 1980 to operate a national clearing and settlement system.

Capital gain or loss
The profit or loss that results from the sale of an asset, such as a security or real estate.

Charge card
A plastic card that allows the holder to make purchases at participating retailers with borrowed funds.

Cheque
A written order for payment of a certain amount of money.

Cheque cashing outlet
A business that provides cheque cashing and basic financial services, such as foreign currency exchange, money transfers and money orders.

Code of conduct
Non-legislated guidelines that one or more organizations agree to follow. Also referred to as "voluntary code" or "code of practice," it typically outlines service standards that you can expect in dealings with a company subscribing to the code.

Coercive tied selling
A practice that imposes undue pressure on, or coerces, a person to obtain a product/service from a bank or any of its affiliates as a condition for obtaining any other product from the same institution. Banks are prohibited from engaging in coercive tied selling — contact the Financial Consumer Agency of Canada if you believe you’re affected by this practice.

Collateral
A pledge of property or other assets by a customer who is borrowing from a financial institution. Financial institutions require collateral as security in the event that the customer defaults on his/her loan.

Common shares
An investment that gives the holder part ownership in a company and the right to vote on major decisions affecting it.

Complaint handling process
Procedures that financial institutions must have in place for customers who want to make a complaint.

Compliance agreement
The Commissioner of the Financial Consumer Agency of Canada may enter into an agreement, called a "compliance agreement," with a financial institution for the purposes of implementing any measure designed to further compliance by that institution with federal consumer provisions (see below).

Consumer price index (CPI)
Measure of price changes, produced by Statistics Canada on a monthly basis. It measures the retail prices of a "shopping basket" of about 300 goods and services, including food, housing, transportation, clothing and recreation.

Consumer provisions
Certain sections of various federal acts and regulations relating to financial institutions (e.g., the Bank Act, the Insurance Companies Act) are designated as “consumer provisions” by the Financial Consumer Agency of Canada Act. They are designed to protect consumers in their everyday dealings with financial institutions. The FCAC monitors federally regulated financial institutions to ensure they adhere to the consumer provisions that apply to them.

Co-operative credit association
An association that is organized and operated on co-operative principles, with one of its principal purposes being to provide financial services to its members.

Co-operative Credit Associations Act
Federal legislation governing the structure and operation of co-operative credit associations in Canada.

Credit
On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit. However, 'credit' also means money that you borrow from a financial lender, like a bank.

Credit Bureau
An organization that provides lenders with with credit information concerning existing or potential customers who are looking to obtain credit services.

Credit card
A plastic payment card that allows the holder to obtain goods and services on credit terms and without the requirement to pay cash. A credit card may also be used to obtain cash.

Credit memo
A record of the funds which have been credited to an account.

Credit rating
A rating created by authorized credit agencies that denotes a person's credit history.

Credit union / caisse populaire
A co-operative financial institution that is owned by its members and operates for their benefit. Credit unions and caisses populaires (a form of credit union located primarily in Quebec) are subject to provincial regulation and are usually small and locally oriented.

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Debit
Funds which have been deducted from your account. The opposite of a debit is a credit.

Debit card
A plastic card that, when used in conjunction with a personal identification number (PIN), allows you to electronically access your bank accounts from automated banking machines or at retailers offering the Interac Direct Payment service.

Debit memo
A record of the funds which have been debited from an account.

Deductible
A set amount that you must pay before an insurance company provides any benefit payments to you under an insurance policy.

Demutualization
The process of converting from a mutual company to a stock company. A mutual company is owned by its voting policyholders, while a stock company is owned by its shareholders.

Department of Finance
The federal department primarily responsible for providing the government with analysis and advice on the broad economic and financial affairs of Canada. Its mandate includes preparing the federal budget, preparing tax and tariff legislation, managing federal borrowing on financial markets, and representing Canada within international financial institutions. To fulfil the department's role, Finance officials monitor and research the performance of the Canadian economy in all important aspects: output and growth, employment and income, price stability and monetary policy, and long-term structural change. The department is also vitally concerned with trade, monetary affairs and other aspects of the global economy that bear on Canada's domestic performance.

Deposit
Money put into an account at a financial institution, such as a bank. The deposit may be in the form of cash, cheque or electronic transaction.

Deposit account
An account in which money is deposited. Examples include chequing and savings accounts.

Deposit insurance
Certain types of deposits with a financial institution are insured up to a maximum amount, in the event that the financial institution fails (i.e., goes bankrupt).

Deposit-taking institution
A bank, trust company, credit union / caisse populaire or other financial institution that accepts deposits from the public and provides regular banking services, such as chequing and savings accounts.

Derivative
A financial instrument that derives its value from the performance of another asset, index or investment. There are various types of derivatives, such as swaps, options, futures and forward contracts.

Direct deposit
A system where funds are electronically credited to an account by a financial institution or a payroll service.

Discount brokerage
A firm that buys and sells investments for the public without giving any advice (in contrast with a full-service brokerage, which executes trades and provides advice). A discount brokerage typically charges lower commissions or trading fees than a full-service brokerage.

Dividend
A portion of a company's profit paid to shareholders.

Draft
A guaranteed form of payment which is issued in amounts over $1,000 (see also Bank Draft).

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Electronic commerce (E-commerce)
Conducting business communications and transactions over networks and through computers. Electronic commerce is the buying and selling of goods and services, and the transfer of funds, through digital communications. It also includes buying and selling over the Internet, electronic fund transfers, smart cards, digital cash and all other ways of doing business over digital networks.

EFT (electronic funds transfer)
Funds which are electronically credited to an individual’s account (e.g. direct deposit), or electronically debited from their account on an ongoing basis (e.g. a pre-authorized monthly bill payment, or a monthly loan or mortgage payment). A wire transfer is a form of EFT.

Estate planning
The process of arranging one's personal affairs to provide for death or mental incapacity.

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Federally regulated financial institution
A financial institution regulated by the federal government. It has been created or allowed to offer financial services in Canada pursuant to one of the financial institution statutes established by the federal government (the Bank Act, the Insurance Companies Act, etc.). Federally regulated institutions (also called federal financial institutions) consist of all banks and all federally incorporated or registered insurance, trust and loan companies and co-operative credit associations.

Financial advisor
An individual who advises clients on one or more aspects of their finances. Financial advice comes in many forms and from many sources. It can be from an insurance agent who recommends certain types of insurance, an accountant who offers tax tips, or a mortgage broker who suggests a home financing strategy. A financial advisor is not to be confused with a financial planner, although their roles may overlap. A financial planner analyses a client's total financial situation and prepares a comprehensive plan to help that person attain financial security in the long term.

Financial Consumer Agency of Canada (FCAC)
A new independent agency working to protect and educate consumers of financial services. The FCAC provides consumer information and oversees financial institutions to ensure that they comply with federal consumer protection laws.

Financial institution
A commercial or investment bank, trust company, brokerage house, insurance company, or other institution that participates in financial transactions involving cash or financial products. The primary role of such an institution is to facilitate the financing of investments, from home mortgages to the raising of funds via the issue of debt or equity for mega-projects. It may also provide insurance, take on fiduciary responsibilities, store cash and securities for safekeeping, etc.

Financial planner
A professional who reviews and analyses all aspects of a client's financial situation — investments, tax situation, insurance, retirement strategies and estate planning — and prepares a comprehensive individualized plan to help that person attain financial security in the long term. A financial planner works with clients to assess their goals and important personal information, and then provides written recommendations and implements a financial plan tailored to their needs. Currently, Quebec is the only province with legislated standards for financial planners (i.e., to be a financial planner in Quebec, an individual must be licensed and fulfil certain educational and experience requirements). Regulators are in the process of developing common standards that would apply to financial planners in the rest of the country.

Financial service charge
A fee charged by a financial institution for using its services — for instance, for making bill payments, writing cheques or using automated banking machines. Fees vary depending on the service and the financial institution used. Under per transaction fee plans, you pay as you go for each transaction; under flat fee plans, you pay a set price each month for a certain number of transactions. Companies set their own service charges but federally regulated institutions must advise clients when they plan to increase or introduce new fees.

Financial Services OmbudsNetwork (CFSON)
The Centre for the Financial Services OmbudsNetwork (CFSON) provides Canadian financial services consumers with single-window access to high-quality, independent, impartial and effective complaint resolution services in the banking, life and health insurance, general insurance, securities and mutual funds industries.

Foreign bank branches
Legislation permits a foreign bank to operate in Canada through branches rather than subsidiaries, and to focus on commercial banking and broader lending activities. Foreign bank branches are permitted to take only deposits of $150,000 and over, which are defined as retail deposits.

Foreign exchange
Various instruments used to settle payments for transactions between individuals or organizations using different currencies (e.g., notes, cheques, etc.).

Fraternal benefit society
An institution that has a representative form of government and is operated for fraternal, benevolent or religious purposes, including the insurance of members or the spouses, common-law partners or children of members against accident, sickness, disability or death.

Full-service brokerage
A firm that buys and sells investments, provides investment advice and helps manage portfolios. It typically charges higher commissions or trading fees than a discount brokerage, which doesn't offer investment advice.

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Guaranteed investment certificate (GIC)
An investment that offers a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years.

General Insurance OmbudService (GIO)
The General Insurance OmbudService assists in resolving differences between home, car and business insurance companies and their customers. When disputes arise, GIO's professional mediators and experienced customer services officers help insurance companies and customers work toward a solution that is in the best interest of all parties in a fair, independent and impartial environment.

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Health insurance
Insurance that pays for specified expenses related to medical treatment.

Holding company
A company that has control over other companies through ownership of a sufficient proportion of those companies' common stock.

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Index
A statistical measure of the state of the stock market or economy. There are indexes that measure changes in the prices of consumer goods and services (e.g., consumer price index) and others that measure the value of groups of stocks or bonds (e.g., stock market index).

Index-linked deposit (ILD)
A term deposit that pays a rate of return based on the performance of one or more financial indicators such as the level of a stock market index (e.g., Toronto Stock Exchange [TSX] 60 or 35) over the term of the deposit. It differs from a savings product that pays a fixed rate of interest and assures a guaranteed return on the investment, such as a traditional GIC or term deposit. With an ILD, the original deposit is guaranteed but any return is not. An example is a market-linked GIC: if the stock market rises over the term of the investment, the investor benefits from the rise up to a maximum return. If there is no rise in the stock market, the original deposit remains fully protected but the investor will receive no return (i.e., no interest is payable).

Inflation
The average rate of increase in prices. When economists speak of inflation as an economic problem, they generally mean a persistent increase in the general price level over a period of time, resulting in a decline in a currency's purchasing power. Inflation is usually measured as a percentage increase in the consumer price index.

Insurance claim
A request for payment of benefits under the terms of an insurance policy.

Insurance claimant
A person or party requesting payment of benefits under the terms of an insurance policy.

Insurance Companies Act
Federal legislation governing the structure and operation of federally incorporated or registered insurance companies in Canada.

Insurance company
A financial institution (either federally or provincially regulated) that engages primarily in the business of insuring risks. Insurance companies are generally divided into two categories: life and health insurers, and property and casualty insurers.

Insurance policy
A written document that serves as evidence of insurance coverage and contains pertinent information about the benefits, coverage and owner, as well as its associated obligations.

Interac Association
National organization of financial institutions and technology service providers, allowing Canadians convenient access to their deposit accounts through the shared network of automated banking machines and Interac Direct Payment, the debit card service.

Interac Direct Payment
A means of paying for goods and services with a debit card that authorizes transfer of the funds, via the Interac Direct Payment network, directly from the purchaser's account to the merchant's account.

Interest
The cost of borrowing money; the price that a lender charges a borrower for the use of the lender's money. Interest is paid on deposits because they are, in effect, loans to the bank or other deposit-taking institutions.

Interest rate
Rate charged or paid for the use of money, normally expressed as a percentage.

Investment
Money put into a form that earns a return or profit. In essence, the money is being used to make money.

Investment dealer
A firm that trades securities for its clients and offers other investment services. Also known as a securities dealer or brokerage house.

Investment Dealers Association (IDA)
Formed in 1916, the IDA is the national self-regulatory organization of the securities industry. It monitors and regulates the activities of investment dealers, and promotes the interests of the securities industry.

Investment income
The income received from investment in securities and property. It includes rent from property, dividends from shares in corporations, and interest from bonds, guaranteed investment certificates, bank accounts, certificates of deposit, Treasury bills and other financial securities.

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Joint venture
A project undertaken by two or more parties to achieve a mutual objective.

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Lease
An agreement to rent for a period of time at an agreed price.

Life and health insurance company
A financial institution that offers life and health insurance products and a range of other financial products and services, such as annuities and Registered Retirement Savings Plans. The federal and provincial governments share jurisdiction over life and health insurers. In general, the provinces regulate licensing and marketing, while the Office of the Superintendent of Financial Institutions conducts prudential reviews of the companies to determine their financial soundness. Federal supervision covers Canadian-owned insurers and branches of foreign companies that hold more than 90% of industry assets.

Life insurance
An insurance policy that pays a set amount to those named in the policy (the "beneficiaries") when the policy-holder dies.

Line of credit
A type of loan in which a borrower draws down funds as needed, up to a specified maximum.

Liquidity
The ease with which assets or investments can be converted into cash — that is, made "liquid." Liquid investments include savings accounts, Canada Savings Bonds, Treasury bills and money market mutual funds. In contrast, a home is not considered a liquid investment because it cannot be easily transformed into cash.

Loan company
A financial institution that operates under either provincial or federal legislation and conducts lending activities similar to those of a bank.

Locked-in Registered Retirement Savings Plan
A Registered Retirement Savings Plan set up to receive funds transferred from a registered pension plan on the condition that it is used solely for retirement income purposes. The pension monies are usually "locked in" (unless otherwise permitted by the legislation of the province in which the employer is registered). A locked-in RRSP can also be an investment bought through a financial institution, with the monies locked in for a specific period as agreed by both parties (the financial institution and the client) at the time of the purchase.

Low-fee account
Eight banks in Canada have each signed a memorandum of understanding (MOU) with the federal government, agreeing to offer a standard low-fee account to their customers. The names and features of the accounts differ by bank, but the accounts all meet certain standards, including: a low monthly fee; the availability of some in-branch transactions; no charge for deposits; and a free monthly statement or passbook. Negotiating MOUs with the banks is an approach the government has taken to ensure that Canadians have access to an account at an affordable price. The eight banks are the Bank of Montreal, Royal Bank of Canada, National Bank of Canada, HSBC Bank Canada, Laurentian Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and TD Canada Trust.

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Maturity
The time at which a loan, insurance policy or annuity reaches the end of its span.

Merger
The joining together of two companies to form one entity.

Micro-credit
The allocation of small loans, usually under $5,000, to individuals to allow them to sustain self-employment or start up small businesses.

Monetary policy
The process of managing the supply of money and credit to contribute to economic performance. The Bank of Canada manages Canadian monetary policy mainly through its influence on short-term interest rates, though it is ultimately answerable to the federal government for its actions. The Bank influences short-term interest rates by adjusting its own bank rate. A rise in the bank rate "tightens" the supply of money and credit, at once restraining elements in the economy that contribute to inflation and elements that contribute to economic performance. A lowering of the bank rate does the reverse. The bank rate and the money supply influence interest rates and the exchange rate of the Canadian dollar, and determine the monetary conditions under which the Canadian economy operates.

Money order
A guaranteed form of payment in amounts up to and including $1,000. One might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.

Monoline
A financial company that specializes in a single line of products, such as credit cards, mortgages or home equity loans, and that may use direct marketing practices and statistical models to target specific customers. In many cases, monolines have no expensive overheads from large branch networks and have low-cost financing open to them by securitizing their loans on the capital markets. These features make such companies highly competitive.

Moral suasion
A type of approach used by an authority to get members to adhere to a policy, goal or initiative. It involves applying pressure on members, rather than using legislation or force, to achieve a desired result.

Mortgage
A loan with a property pledged to guarantee repayment.

Mortgage broker
An independent contractor who offers the loan products of different lenders. A mortgage broker is an agent for lenders in much the same way that an insurance broker is an agent for insurance companies. Mortgage brokers act as agents for banks, trust companies, credit unions, mortgage corporations, finance companies and individual private investors. Some mortgage brokers are exclusively lenders of their own money and provide a direct source of mortgage funds.

Mutual fund
A type of investment in which the money of many investors is pooled together to buy a portfolio of different securities. The fund is managed by a professional who invests in stocks, bonds, options, money market instruments or other securities.

Mutual fund company
A company that uses its capital to invest in other companies. Its capital is a pool of funds gathered from a number of investors and placed in securities selected to meet specific criteria and goals. Mutual fund companies fall under the jurisdiction of the provincial securities commissions.

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Office of the Superintendent of Financial Institutions (OSFI)
A federal agency established under the Financial Institutions and Deposit Insurance System Amendment Act to supervise all federally regulated financial institutions. These include all banks, all federally incorporated or registered insurance, trust and loan companies, co-operative credit associations, and fraternal benefit societies. OSFI is also responsible for monitoring federally regulated pension plans.

Ombudsman
An individual appointed to receive, investigate, report on and (in some instances) resolve complaints against institutions. The Ombudsman for Banking Services and Investments (OBSI) is an example.

Ombudsman for Banking Services and Investments (OBSI)
The Ombudsman for Banking Services and Investments (OBSI) is an independent organization that investigates customer complaints against financial services providers, including banks and other deposit-taking organizations, investment dealers, mutual fund dealers and mutual fund companies.

Overdraft protection
A short-term source of credit which allows you to overdraw on your account up to a pre-established limit. For example, overdraft protection spares customers both the cost and the personal embarrassment of NSF cheques.

Ownership rules
Federal rules and restrictions governing the ownership of financial institutions. For example, the Bank Act prohibits control of any large financial institution by any single shareholder or group of shareholders. Large banks (those with equity greater than $5 billion) must be "widely held" — that is, no one investor can own more than 20% of any class of voting shares or 30% of non-voting shares.

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Payments system
An electronic clearing and settlement system that enables cheques and other methods of payment to be used in transactions throughout the economy. This financial network includes the cheque payment system, the Visa and MasterCard credit card systems, the automated banking machine and debit card networks of Interac, and the separate clearing systems for debt and equities and for mutual funds. One part of the financial network was established in 1980 under the Canadian Payments Association Act to operate a national clearing and settlement system.

Personal identification number (PIN)
A secret code intended for the sole use of its user. For example, the PIN is used in conjunction with a debit card to confirm the identity of the cardholder and to authorize debit card transactions.

Personal line of credit (PLC)
A revolving source of credit with a pre-established limit. The individual accesses the funds only as needed, and any amount paid back becomes accessible to him or her again. Unlike a personal loan, a PLC permits the individual to write cheques and make bank machine withdrawals, and requires him or her to pay interest only on the funds actually used.

PLUS system
A bank machine network outside Canada, across the U.S. and internationally. Customers who use a bank machine with a 'PLUS' symbol may be charged a fee.

Point of sale (POS)
The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.

Policyholder
An individual or organization with an insurance policy.

Pre-authorized debit
A withdrawal from an account made by a company with the written authority of the account holder. A convenient substitute for issuing cheques to pay the same bill every week or month.

Premium (insurance)
Payment made at fixed intervals for an insurance policy.

Prime rate
The interest rate banks charge to their most credit-worthy (low-risk) customers. It is based on the rate established by the Bank of Canada.

Property and casualty (P&C) insurance
Also known as "general" insurance because it provides insurance protection for risks other than those related to life or health. Examples include home, automobile, travel and liability insurance.

Property and casualty insurance company
A company that provides insurance coverage for risks other than life and health. The P&C insurance industry provides insurance protection for most homes, motor vehicles and commercial enterprises throughout the country.

Property and Casualty Insurance Compensation Corporation (PACICC)
An industry-funded, non-profit corporation that, in the event of the failure of a property and casualty insurer in Canada, will respond to claims of policyholders. It covers most policies issued by P&C insurance companies. All property and casualty insurers licensed in a province or territory of Canada are required to be members of PACICC, except for insurers licensed to sell only specialty lines of insurance such as surety, fidelity, marine and aviation, as well as auto insurers in British Columbia, Manitoba and Saskatchewan.

Provincially regulated financial institution
A financial institution regulated at the provincial level. Includes all securities dealers, credit unions and caisses populaires, and all provincially incorporated or registered insurance, trust and loan companies, and fraternal benefit societies.

Public Accountability Statement
A statement that must be published yearly by any bank, trust or loan company, or domestic insurance firm with more than $1 billion in equity, describing its contribution to Canada's economy and society. The statements are filed with the Financial Consumer Agency of Canada and are available to the public from the financial institution.

Public Interest Impact Assessment
A report that must be submitted to the Minister of Finance for proposed mergers between large banks (i.e., banks with more than $5 billion in equity). The Assessment must (a) describe their business plan and objectives; (b) clearly identify the benefits and costs to the nation and the public; and (c) outline any steps to mitigate public interest costs and any assurances in respect of public interest benefits.

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Registered Education Savings Plan (RESP)
An investment plan that allows savings to grow tax-free until a child is ready to pursue a post-secondary education, at which time the money is withdrawn to help finance the costs.

Registered Retirement Income Fund (RRIF)
A maturity option available for Registered Retirement Savings Plan assets to provide a stream of income at retirement.

Registered Retirement Savings Plan (RRSP)
A government-approved savings plan designed to encourage Canadians to save money for retirement. Contributions to an RRSP, along with the earnings they generate, are allowed to grow tax-free until the money is withdrawn.

Retail branch
In banking, a location where banking services are provided to individuals.

Reverse mortgage
Unlike an ordinary mortgage, which involves payments by the borrower to the lender, a reverse mortgage involves payments by the lender to the borrower. It is an arrangement whereby homeowners get cash (usually in the form of monthly payments or a lump sum) in return for a mortgage on their home, which is used as security against the loan. This is a strategy sometimes used by retired homeowners who need to supplement their income. A reverse mortgage is one way of tapping into the value of a home.

Risk
The potential of losing one's money or the uncertainty of future returns.

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Secured loan
A lump sum of funds for which the customer must provide collateral.

Securities commission
A government agency that administers provincial securities legislation. Examples include the Alberta Securities Commission and the Ontario Securities Commission.

Securities dealer
A firm that trades securities for its clients and offers other investment services. Also known as an investment dealer or brokerage house.

Security
A transferable certificate of ownership of an investment product such as a note, bond, stock, futures contract or option. A security can also be defined as "property, which is pledged as collateral for a loan or other credit, and subject to seizure in the event of default."

Segregated fund
A pooled investment fund, much like a mutual fund, established by an insurance company and segregated from the general capital of the company. Its chief distinction from a mutual fund is its guarantee that, regardless of fund performance, at least a minimum percentage of the investor's payments into the fund will be returned when the fund matures.

Self-regulatory organization (SRO)
An organization that has been given the responsibility and authority to regulate its members. Examples include the Toronto Stock Exchange and the Investment Dealers Association.

Service charge/fee
Fees established by financial institutions for certain transactions.

Stock
Unit of ownership in a company, which is bought and sold on a stock exchange. The terms "share" and "stock" are often used interchangeably.

Stock exchange
The marketplace where stocks are traded. Examples are the Toronto Stock Exchange and the Canadian Venture Exchange.

Stop payment
A service which enables you to request a 'stop' on any cheque or other pre-authorized payment, as long as the funds have not yet been disbursed. For example, you might request a stop payment on a post-dated cheque if you no longer need the product or service for which that cheque was initially written.

Subsidiary
A company that is legally controlled by another company.

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Term
The period of time during which a financial contract – such as a GIC or a loan – is in force.

Tiered interest rate
A pre-set scale of interest which is based on the premise that higher sums of money earn higher rates of interest.

Treasury bill (T-bill)
A short-term, low-risk investment issued by a federal or provincial government. It is sold in denominations ranging from $1,000 to $1 million, with terms to maturity of one month to a year. The difference between the purchase price and the face amount represents the return to the investor.

Trust
An arrangement under which money or other property is held by one person or company (often a trust company) for the benefit of another person or persons. These assets are administered according to the terms of the trust agreement. Each province has a trustee act, which regulates the kinds of investments that can be made by the trustees of a trust fund.

Trust and Loan Companies Act
Federal legislation governing the structure and operation of federally incorporated or registered trust and loan companies in Canada.

Trust company
A financial institution that operates under either provincial or federal legislation, and conducts activities similar to those of a bank. However, because of its fiduciary role, a trust company can administer estates, trusts, pension plans and agency contracts, which banks cannot do directly.

Trustee services
Services associated with administering and managing a trust on behalf of a client. They can include the establishment of a trust, handling tax issues and distributing assets to the client's beneficiaries.

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Venture capital
Funds that are invested by a third party in a business venture, as either equity or a form of debt.

Voluntary code
Non-legislated guidelines that one or more organizations agree to follow. Also referred to as a "code of conduct" or "code of practice," it typically outlines service standards that you can expect in dealings with a company subscribing to that code.

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Widely held bank
A bank owned by many shareholders, with no individual owner holding sufficient shares to exercise control over the bank. Under the Bank Act, institutions with over $5 billion in equity and Schedule I banks must be "widely held" by the public, with no single shareholder owning more than 20% of any class of voting shares or 30% of any class of non-voting shares.

Wire transfer
An electronic transmission of money from one place to another.

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