A
Administration order
This refers to a legal procedure which is designed to rescue insolvent companies. It allows them to continue running their business while being operated by an administrator.
Annuity
This is a fixed amount of money paid to an individual each year. An example of the same would be a contract sold by an insurance company which provides payments to the holder at specified intervals; usually a way of ensuring a steady cash flow during retirement.
AER
This stands for 'Annual Equivalent Rate', and refers to the official interest rate for savings accounts. It allows you to compare products easily, and shows what you would get over a year if you put money into your account and left it there. The 'gross rate' is the interest actually paid.
AIR
This stands for 'Authorised Insurance Representative' and means an individual authorised in accordance with the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002.
AML/CFT
Anti-Money Laundering and Countering the Financing of Terrorism.
APR
This stands for 'Annual Percentage Rate' and refers to the overall cost of a debt, i.e. the cost of borrowing together with any associated fees, such as an arrangement fee. This varies between lenders.
Arrears
This is when money is not paid by its due date, and is therefore owed.
ATM
This stands for 'Automated Teller Machine', and is another name for a cash machine.
B
BACS
(Formerly Bankers' Automated Clearing Services). This is the system which allows you to pay your bills and transfer money electronically, for example, direct debits.
Balance
This is the amount of money you have in your bank account at a given time, or alternatively, the amount you owe on your credit card. The bank or card provider will send you statements at regular intervals showing your current balance, or you can access this information if you have an online banking facility.
Bank
A financial establishment that provides a range of services and where you can, for example, deposit money and withdraw it when required, obtain loans, and exchange currency.
Bankruptcy
In the UK, this is a way of dealing with debts that you cannot pay. While declared bankrupt any assets that you have may be used to pay off your debts. After a period of time most of your outstanding debts are written off, although there are long-term effects of bankruptcy such as certain employment restrictions.
Bankruptcy is often applied for by the borrower themselves (voluntary), or a creditor can apply to make you bankrupt (involuntary). In the UK when a company or organisation cannot repay its debts, it can either enter into administration, which works like a rescue function which allows the firm to carry on running their business, or it can enter liquidation, where a company is brought to an end.
This does not apply in the Bailiwick. For information relating to the Bailiwick personal insolvency regime, please refer to Renunciation, Saisie and Désastre.
Basic bank account
These are straightforward bank accounts, and are designed for people who may have difficulty opening other types of bank accounts. More information can be on the Consumers pages.
Beneficiary
A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, or other contract.
Binary Options
These are a form of betting where stakes are placed on an event either happening or not. They are banned in the UK so any offer involving them should be approached cautiously.
Boiler room fraud
This is the illegal practice of cold calling individuals and attempting to pressure them into buying shares in companies that either do not exist or are virtually worthless.
Bounced cheque
This happens when someone writes a cheque but does not have enough money in their account to pay it. The bank will not cash the cheque and will return it to the person it was made out to. The bank may then charge a fee to the person who wrote the cheque.
Building Society
A financial institution owned entirely by its members as a mutual organisation. It provides banking and other financial services to its members.
C
Customer Due Diligence (CDD)
This refers to the steps a financial services business is required to carry out in order to identify and verify the identity of the parties to a relationship. It also refers to the steps that it takes to obtain information on the purpose and intended nature of each business relationship.
Certified documents
These are photocopies of original documents that have been signed by a professional, for example, an advocate, accountant, teacher or doctor, and which banks request in order to verify your identity. The certifier must state on the document that they have seen the original document, and then sign it and date it. They will need to give their full name, profession, and address.
CHAPS
This stands for Clearing House Automated Payment System. It is the automated payment system which you can use to make same-day payments within the UK. There is normally a charge for using this service; it is primarily used for high value payments.
Cheque
This is a written order instructing your bank to pay out money from your account.
Clearing
This is the time it takes for your bank to credit money into your account.
Collective investment scheme
This is a fund which allows a number of investors to 'pool' their assets and have these managed professionally.
Commission
This can refer to a fee paid to a broker or agent for negotiating a sale, with the fee usually calculated as a percentage of the policy premium. Alternatively, it can mean that the amount earned by an employee when making a specific sale, and is calculated as a percentage of the price of the sale made.
Compound interest
This is when you earn additional interest on interest. If referring to savings, this means that any interest you earn is added to your original deposit, and then this larger amount continues to earn you even more interest. If referring to a loan, it means you will be charged interest, not only on the amount borrowed, but also on any interest outstanding at that point in time.
Cooling off period
This refers to the period of time after a contract has been signed during which you have the right to change your mind and cancel the contract, without loss or penalty. This is not always offered when purchasing financial products, and how long a cooling off period lasts depends on how and what you have bought. This should always be made clear to you at the time of your purchase.
Credit
This term can be used in different ways. It can refer to money being paid into your account, or if your account is 'in credit', i.e. the balance in your account is positive rather than negative. It can also refer to a contractual agreement in which you, as the borrower, receive money to pay for goods or a service now and agree to repay the lender at a later date.
Credit card
This is a plastic card, issued by a financial company, which allows you to purchase goods or services on credit. The credit card issuer then sends a monthly bill to the holder of the credit card showing the balance owed, and the minimum amount that needs to be paid back. Interest is charged for the amount of time that any money remains outstanding. You have to be 18 years old or over to apply for a credit card.
Credit limit
This is the maximum amount of credit you have available, for example, on your credit card.
CRM
Client Relationship Manager.
D
Day Trading
Day traders rapidly buy, sell, and short-sell stocks throughout the day in the hope that the stocks continue climbing or falling in value for the seconds or minutes they hold the shares, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time.
Debit
This refers to money being paid out of your account.
Debit card
This is a plastic card that can be used instead of cash. It can be used to withdraw money from a cash point or used to make a contactless payment. When you use your debit card, the amount is taken automatically from your account.
Deposit Compensation Scheme (DCS)
Or giving it its full title; 'the Guernsey Banking Deposit Compensation Scheme'. It is a scheme designed to compensate depositors if a bank fails, subject to certain limits.
Désastre
This is a Guernsey and Alderney court process for enforcing judgements of the Royal Court against property other than the real estate of a person or arresting such property prior to obtaining a monetary judgement. Please note that this process can be undertaken in relation to either an individual or non-individual debtor. Désastre does not extinguish creditors' claims against the debtor to the extent that those claims remain unpaid.
Direct debit
This is when you give permission for money to be debited (taken out of) from your account automatically, for example, to pay your mortgage, household bills, or a monthly gym membership. A direct debit can only be set up by the organisation to which you are making a payment.
E
Endowment policy
This is a life insurance product, designed to pay out a lump sum on its maturity date, or on death.
Exit penalty
This is a fee or charge you may be required to pay if you withdraw your money early from a fixed term financial product. It may also be charged if you make an early repayment of the full amount of a loan.
F
FCA
Financial Conduct Authority (formerly FSA - Financial Services Authority).
Fixed rate
This is where the interest rate and payment remain the same for the length of time you have a financial product, for example, a mortgage or loan. This will be agreed prior to you signing up to the product.
Fixed term account
This is a deposit which is held at a financial institution for an agreed fixed term. The length of the term can range from say, a month to several years. By virtue of its term being fixed, you will only be able to withdraw your money after the term has ended, or by giving an agreed period of notice. Your bank may allow you to withdraw your money early, but each bank's requirements will be different in this regard, and you are likely to incur a fee or penalty for doing so.
Forex / FX
Foreign Exchange.
Financial Services Compensation Scheme (FSCS)
This is the UK's deposit compensation scheme. It can pay compensation to consumers if a financial services firm is unable, or is likely to be unable, to pay claims against it. This scheme does not cover deposits held with banks licensed in Guernsey. Guernsey has its own deposit compensation scheme - the Guernsey Banking Deposit Compensation Scheme.
G
GFSC
Guernsey Financial Services Commission - the regulatory body for the finance sector in the Bailiwick of Guernsey.
Guarantor
This is a person who guarantees to pay off another individual's debt, should the borrower find that they cannot pay it.
H
HMRC
HM Revenue and Customs – the UK's tax authority.
I
IBAN
International Bank Account Number.
IFA
This stands for 'Independent Financial Adviser'.
Initial Coin Offering (ICO)
The term ICO refers to a digital way of raising funds from the public using a virtual currency, also known as cryptocurrency. An ICO can also be known as ‘token sale’ or ‘coin sale’. ICOs are very high-risk speculative investments. Please refer to the FAQ - Should I invest in an Initial Coin Offering (ICO)?
Insurance excess
This is the level of contribution that you are required to pay if you make a claim on your insurance policy. This information should be made clear to you before you take out your policy, and the excess amount should be stated clearly in your policy documents.
Interest
If you are saving money, this refers to the amount of money earned from the bank on your deposit. If you are borrowing money, this refers to the fee charged by the lender for your borrowing money.
Interest only mortgage
This is a mortgage where you only pay the interest on the sum borrowed, and the size of the loan remains the same.
Interest rate
This is the percentage that is paid to you by the bank in interest on savings, or the percentage you pay to the lender if you have taken out a loan.
International Money Order (IMO)
This is a written order for the payment of a sum of money to a named individual. It is usually issued and payable at a bank or post office.
Interest Rate Hedging Product (IRHP)
These are financial products which are designed to enable customers to manage fluctuations in interest rates, for example, swaps, caps, collars, and structured collars. More information on this subject can be found at Interest Rate Hedging Products (IRHPs) — GFSC.
ISA
This stands for 'Individual Savings Account'. These are available to UK residents only, and are a form of tax-free savings account.
J
Joint account
This is an account which is opened in the name of more than one person; usually a close relative or business partner. You will be asked to agree when opening the account whether each person is to be able to withdraw funds independently, or whether they will require the consent of the other before so doing.
K
Know your customer (KYC)
This is the process by which a financial services business verifies the identity of its clients.
L
Licensed banks
This refers to all the banks licensed by the Commission to take deposits.
Liquidation
This is when a company is brought to an end, either on a compulsory or voluntary basis.
Loan
A sum of money which is borrowed for a set period of time, and which is paid back to the lender, together with an agreed amount of interest.
Loan to value (LTV)
This refers to the size of your mortgage in relation to how much your property is worth, and is reflected as a percentage. For example, if you have a mortgage of £200,000 on a house that is worth £400,000, you have an LTV of 50%.
M
Mortgage
This is a loan from the bank to finance the purchase of property.
N
Negative equity
This is when you owe more on your mortgage than your house is worth.
O
Offsetting
This is when you use the balance in your current and/or savings accounts against your mortgage balance, and pay interest only on the difference. Although it is possible to reduce the total amount of interest you will pay on your mortgage, you will not earn interest on your credit balance.
Overdraft
This facility is often offered with bank accounts, and allows you to take out more money than is in your account, up to an agreed limit. Some banks will charge you a fee if you go over your overdraft limit.
P
Payee
This refers to the person receiving a payment, for example, a cheque.
Payer
This refers to the person making a payment, for example, if you write a cheque.
Phishing
This is when scammers fraudulently obtain and use your personal or financial information, such as usernames, passwords, and credit card details, by pretending to be someone trustworthy, such as your bank. or the police.
PIN
This stands for 'Personal Identification Number', and refers to the number you are asked to type in when using your debit or credit card, when making a payment, or withdrawing cash.
Payment Protection Insurance (PPI)
This is an insurance policy designed to protect you with regard to your loan or debt repayments, in the event that you are unable to meet the regular repayments due to illness, accident, or unemployment. The Commission has published further information on a page dedicated to PPI.
Q
QROPS
This stands for 'Qualifying Recognised Overseas Pension Scheme'.
R
RATS
This stands for 'Retirement Annuity Trust Schemes'.
Regulated business
These are firms licensed by the Commission to carry out regulated activities. A list of which is published on the Regulated Entities pages of our website.
Re-mortgage
This term is often confused with the term 'second mortgage'. Re-mortgaging is when you change your mortgage to another deal, usually when you have reached the end of a fixed term contract, or when a discounted rate is due to come to an end.
Renunciation
This is a process under which an application may be made to the Royal Court for a declaration of insolvency. The process includes the potential for the debtor to eventually be discharged from his liabilities after the realisation and distribution of his assets. This process is the closest equivalent in Guernsey to the English concept of bankruptcy.
Repayment mortgage
This is a type of mortgage that requires you repay the sum borrowed from the bank (and interest upon the same) by the end of the mortgage term. Each of your mortgage payments will therefore consist of not only the interest on the loan, but also some of the money borrowed.
S
Saisie
This is a Guernsey court process for realising and distributing a debtor's real estate. Please note that this process can be undertaken in relation to either an individual or a non-individual debtor.
Savings account
These accounts allow you to put money aside, and are accounts in which you earn a higher level of interest than that offered by a current account. However, compared to current accounts, they often do not allow you such easy access to your money.
Second mortgage
This is when you take out a loan secured on your home, when your original mortgage is still in effect.
Secured loan
If you have taken out a secured loan it means you have promised to forfeit something specific to the lender if you find yourself unable to pay back what you borrowed. Mortgages and car loans are examples of secured loans.
Simple interest
In contrast to compound interest, simple interest is interest paid on the original deposit only.
Standing order
This is when you instruct your bank to pay a set amount of money from your account at regular intervals. The payments could be to another person, a company, or to another one of your bank accounts, and can be amended as and when you wish.
Statement
This is a summary of all the financial transactions that have occurred over your bank account during a given period. Statements can be received on a monthly, quarterly, or annual basis.
SWIFT
This is a network that allows financial institutions worldwide to send and receive payment orders securely.
T
U
Unsecured loan
If you have an unsecured loan, it means that there is nothing the lender can directly repossess if you find yourself unable to repay the amount that you borrowed. Credit card debt, student loans, and utility bills are common examples.
Utility bill
These are the bills you receive for the using utility services, such as water, gas, electricity, and telephone. Banks frequently request to see recent utility bills to verify your address.
V
Variable rate
This is where the interest rates and therefore payments on deposits or loans, such as mortgages, change as a result of external factors, for example, a change in the base rate set by the Bank of England.