Global financial institution Deutsche Bank goes to great lengths to make sure that all of its new employees are ready to hit the ground running, so the firm has produced a series of new employee resources, including a very useful Unofficial Guide to Banking and a banking industry Jargon Buster glossary.
Deutsche Bank’s Jargon Buster glossary is the focus of this article. DB’s glossary provides definitions for more than 150 commonly used, and a few not-so-commonly used, terms in banking.
Selected banking industry terminology from Deutsche Bank’s Jargon Buster glossary
Jargon Buster points out that the term “arbitrage” has at least two meanings:
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The practice of making a profit from trading on two markets simultaneously. If the price of wheat in London is cheaper than in New York, you buy in London and simultaneously sell in New York. Sports arbitrage is the practice of placing bets on an event with a range of bookmakers, exploiting their different prices to guarantee a profit regardless of the outcome.”
Many banking industry terms have rather unusual historical antecedents. Take “bulge bracket” for instance:
In common parlance, a bulge bracket firm is an investment bank considered to be one of the largest and most profitable in the world. The name comes from the practice of listing these banks at the top of the ‘tombstone’. A tombstone is an advertisement formally announcing a particular transaction – perhaps an offering or placement of stock of a company. The bank’s name at the top of the tombstone will typically be in a larger font and will therefore ‘bulge’ out.”
Deutsche Bank is surprisingly frank in its description of a “Chinese wall”:
The imaginary wall between different areas in the bank that may have a conflict of interest; it denotes a commitment not to disclose confidential information to one another. In many cases, bankers will be physically prevented from interacting with colleagues in conflicting parts of the bank by not having access to their area in the building. Blocks might also be put in place on emails and phone calls between these areas. This is a general business term, not unique to banking.”
The term “hedge” also has an interesting historical etymology:
Holding two opposing positions in two or more financial instruments (bonds, shares, commodities) in order to off set a loss in one against a profit in the other. A 16th century term, it refers to
the practice of hedging land, i.e. securing boundaries and limiting size. In the markets, to hedge your bets is to adopt a more secure position by limiting your exposure to risk.”
It’s always fun to read a definition of “hedge funds” as there is such a wide variation in perspective on just exactly what a hedge fund is:
A fund, usually used by wealthy individuals and institutions, which is allowed to use aggressive strategies (including leverage, swaps, arbitrage, and derivatives). They are not constrained by the same laws as mutual funds. Hedge funds look to generate returns to investors even when markets are volatile or performing poorly. However, because of the nature of these strategies, a high level of risk is involved.”
Of interest, “private clients” are people with significant personal assets, and are also known as “high net worth individuals“:
People with significant personal assets (cash, company stock, art, shares) requiring professional investment management; often referred to as high net worth individuals.
“High net worth Individual
A person who is worth a lot of money.”
Jargon Busters even offers a few examples of jargon being coined into new jargon, as in “off shoring” and “nearshoring”:
Off shoring is the practice of moving a business service to a provider in another country. However, there are instances in which greater distance or time-lag is not desirable for the effective running of the service. In this case, nearshoring might be a better solution. This is when the service is outsourced to a business in a neighboring country – making contact easier and more efficient while also reducing overall running costs.”