International banking and wealth management glossary
Nedbank Private Wealth has put together this is an A–Z glossary including plain English definitions, covering international banking, cross-border wealth planning, payments, credit, investment and security terms. The glossary can help our clients to understand the terminology used in documentation, so they can make informed decisions about products and services.
Clear, source-led explanations for international banking and wealth terminology
This glossary explains some of the most common terms used in banking infrastructure, tax planning, credit services, investment and wealth structures, and banking fraud and security.
The definitions we provide are based on official sources such as regulator and ombudsman websites and we explain some examples to provide greater understanding.
Key themes covered across international banking and wealth management terminology
Banking and payments
Deposit protection – Deposit protection is a scheme that can provide compensation to an individual if their authorised financial firm fails. For example, UK regulators set a £120,000 deposit protection limit per person on eligible products.
Capital adequacy – Regulators require firms to have a certain amount of financial reserve and capital to absorb potential losses, providing financial security to clients.
Liquidity – This refers to how easy or hard it is to convert assets into ready cash without impacting the value of the asset. For example, property is regarded as low liquidity as it usually takes time to sell the property to access cash, while bank deposits are high liquidity as cash can be available to withdraw immediately.
Custody – Custody refers to the responsibility of safeguarding assets on behalf of an individual. For example, a wealth management services provider acts as a custodian.
FPS – FPS stands for Faster Payments Service and is a method used for electronic financial transfers. FPS payments are usually made within a few seconds between UK accounts.
CHAPS – CHAPS stands for Clearing House Automated Payment System. It is an electronic payment system used in the UK that provides same-day financial transfers and is often used for higher value transfers.
SEPA – SEPA stands for Single Euro Payments Area and provides the ability to make cross-border electronic payments in euro currency.
SWIFT – SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications. Individuals use SWIFT payments to make international money transfers and it has a network operating across over 200 countries.
Wealth, credit and planning
Domicile – The term ‘domicile’ refers to the country which is viewed as a person’s permanent, legal home.
Tax residency – A person’s tax residency refers to which country you pay tax in, usually based on where you live or work. For example, if you are a UK resident, you are required to pay UK tax on worldwide income.
Remittance basis – Remittance basis was a tax treatment where resident, non-domiciled individuals could avoid paying tax on worldwide income that was not brought into the UK. Remittance basis has been replaced by the new residency-based system.
Lombard lending – Lombard lending is a type of personal lending where firms provide money that is secured against assets. For example, investors can secure loans against investments rather than selling them to access the cash.
Collateral – This term refers to an asset that is used to secure a loan against. For example, a property could be collateral, where failure to repay the loan would allow the lender to sell the property to retrieve their losses.
Margin call – A margin call is a request from an investment broker for the investor to deposit cash or securities into their account urgently.
Discretionary management – This is an investment service where the investor passes over the management activities to an investment manager. This allows the manager to buy and sell assets on behalf of the investor, with decisions based on the client’s risk tolerance and financial goals.
Diversification – This refers to a strategy used to spread risk across different types of assets. For example, a diversified investment portfolio might include property, stocks and bonds. Diversification also includes holding assets across different markets and geographical locations to minimise risk.
Fiduciary duty – This is a legal obligation where a party such as a company director must act in the best interests of another party such as a shareholder, rather than acting in their own interests.
AML – AML stands for anti-money laundering regulations that are in place to prevent criminal activity such as attempting to bring money gained from illicit activities into the banking system. Financial services providers are required to follow AML laws to monitor for suspicious transactions.
KYC – KYC refers to the Know Your Customer process that financial services firms must use to verify that clients are who they say they are. It involves completing identity checks and it is a strict legal requirement in countries including the UK.
APP fraud – This term stands for Authorised Push Payment fraud and involves criminals persuading victims to send money through scams. They will often trick people into sending money by pretending to be someone else, like a bank.
Phishing – Phishing is a type of scam where criminals trick people into providing login details or card details through deceptive messages such as emails impersonating a legitimate contact.
Understanding financial terminology
These definitions help clients to understand terms that relate to their banking, investment and taxation so that they can make informed decisions around managing their finances and assets.
- Cross-border tax impact – Understanding the terms such as domicile and tax residency status helps to clarify an individual’s tax obligations, such as whether they are required to pay tax on worldwide assets and income.
- Payments and security – The definitions and examples provided around payments and security will help clients to understand how different payment systems work and which ones can be used for international transfers. Understanding terms referring to fraud scams educates clients on digital dangers and can help protect them from falling victim to scams such as phishing.
- Credit and investment risk – Our glossary definitions explain how different types of lending services such as Lombard lending work, so that clients can decide whether they are suitable for them. We also provide examples of risk management strategies such as diversification to guide investors on the benefits of this approach.
Clarity supports effective international wealth decisions
The terminology used in financial services can be complex and misunderstandings can lead to issues such as increased tax exposure and risks regarding liquidity and asset protection. This glossary provides an overview of the key terms that are relevant to investors and individuals with cross-border wealth who face multiple regulatory systems.
By providing explanations of payment infrastructures and credit options, this can be used as an educational resource to support informed decisions regarding investments, banking systems, estate planning and overall wealth management.
Improving financial literacy across international wealth matters
For clients with cross-border assets, cross-border tax definitions help to understand the different rules that apply. This glossary helps to educate clients on fraud prevention terms and the regulatory safeguards that are in place to protect clients from fraud risks.
Managing information responsibly
At Nedbank Private Wealth, our compliance team conducts internal reviews of the information that we publish or send to clients to ensure it meets strict governance standards. We also perform regular internal audits to check whether we need to make updates in relation to any regulatory or market changes.
FAQs
What is Anti-Money Laundering AML?
AML refers to the regulations that are in place for financial institutions to prevent criminals from laundering money made from illegal activities. AML regulations include monitoring financial transactions and completing customer due diligence to assess risk and to check that finances have been sourced in a legal manner.
What does KYC require from clients?
KYC (Know Your Customer) processes involve checking ID, personal details and sources of wealth. Clients are required to provide proof of identity through passports, driving licenses or national ID cards and proof of address is required through documents such as utility bills and bank statements.
Regulated firms are also required to request evidence of where client’s money is from, such as proof of income, proof of property sale proceeds, pensions and investments income.
What is discretionary portfolio management?
This is an investment service where the investor passes over the management activities to a portfolio manager. This allows the manager to buy and sell assets, with decisions based on the client’s risk tolerance and financial goals.
What is Authorised Push Payment fraud?
This term stands for Authorised Push Payment fraud and involves criminals persuading victims to send money through scams. They will often trick people into sending money by pretending to be someone else, like a bank.