Acronyms of companies or associations
ABI: Associazione Bancaria Italiana (Italian Banking Association)
BaFin: ABundesanstalt für Finanzdienstleistungsaufsicht (German Federal Agency for Financial Services Supervision)

BA-CA: Bank Austria Creditanstalt AG

CONSOB: Commissione Nazionale per le Società e la Borsa (Italian Securities and Exchange Commission)
ECB: European Central Bank
HVB: Bayerische Hypo- und Vereinsbank AG
HVB Milan: Bayerische Hypo- und Vereinsbank AG - Milan Branch
UGC: UniCredit Credit Management Bank (formerly UniCredit Gestione Crediti)

Acquisition Finance
Financing for company acquisition transactions. The most widespread form of acquisition finance is the leveraged buy-out (see Leveraged Finance).

ABS (Asset-Backed Security)
A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. For investors, asset-backed securities are an alternative to investing in corporate debt.

Absorbed capital
is the capital required to cover business risks. It is the higher between the regulatory capital (which is obtained by multiplying risk-weighted assets by the target core tier 1 ratio) and the internal capital, which represents the total amount of capital the entire Group sets aside as a buffer against potential losses and needs to support its business activities and all positions held. Internal capital is the sum of the aggregated economic capital and a cushion that considers the effects of the cycle and model risk.

Affluent
High-income clients.

Alt-A Residential Mortgages
Mortgages whose borrowers, while not subject to the significant repayment problems of those described as subprime, have high loan-to-value and installment-to-income ratios or incompletely documented income.

Arranger (arrangement)
Co-ordinator (co-ordination) of the organisational aspects of a complex financing transaction (e.g. acquisition finance or corporate finance).

Asset allocation
The distribution of investments across categories of assets, such as equities, bonds and cash or across sectors in a single asset class. Asset allocation affects both risk and return and is a central concept in financial planning and investment management.

Asset management
The management of assets on behalf of customers such as business, banks, insurance companies, pension funds and private individuals. Asset management includes the management of funds and other portfolios of investments in equities, bonds, cash and real estate.

Asset gathering
Total customer funds, including deposits, assets under management and securities under custody.

Bancassurance
An expression describing the offer of insurance products through the operating network of banks.

Basel II (New Basel Capital Accord)
In 1988, the Basel Capital Accord (Basel I) laid down regulatory standards for capital required to be held against banking transactions. These rules were reviewed by the Basel Committee on Banking Supervision.
The purpose of the new capital adequacy framework is to differentiate more precisely between capital requirements for risks actually assumed by the bank, and to take account of the more recent developments on financial markets and of banks' risk management processes. The new rules, while defining the capital adequacy requirements, call for a number of simple and more advanced approaches to measure credit risk and operational risk.

Basel Committee
Banking supervision committee set up in 1975 by the Central Bank Governors of the Group of Ten (Belgium, Canada, France, Germany, Japan, Italy, Luxembourg, The Netherlands, United Kingdom, Sweden, Switzerland and United States). The Committee normally meets at the Bank for International Settlements in Basle.

Benchmark
A standard against which the performance of a security, mutual fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose.

Bond
A certificate issued by a government or a public company promising to repay borrowed money at a fixed rate of interest at a specified time

Book runner (Joint book runner)
The entity who sets up the underwriting syndicate for a bond issue.

Book value
Value at which a security is recorded on a balance sheet, usually the cost of buying it, less any depreciation. If securities have been acquired at different times and different periods, the book value will reflect the average buying cost. See also market value.

Broker
Intermediary whose role is to put two counterparties in contact.

AA1000
Standard created by London's ISEA (Institute of Social and Ethical AccountAbility) for improving the quality of auditing, accounting and ethical and social reporting processes. The cornerstone of AA 1000 is the involvement of stakeholders in stable and enduring relations with the company.

ABI
The Italian Banking Association. The Italian Banking Association - ABI - is a voluntary non-profit organization. Its purpose is to represent, defend and promote the interests of its member banks and financial intermediaries. It works, in this framework, for the development of the awareness in society and within the banking and financial system of the social and behavioral values that follow from entrepreneurial principles and from the formation of open and competitive markets. ABI also represents the Italian credit and financial system in all international fora: above all, in view of the continuous engagement and full competence involved, vis-a-vis the European Banking Federation and the European Mortgage Federation.

Accountability
Principle whereby the person in charge of an organisation (a policy, a project) is "held accountable" by stakeholders for his/her decisions, actions, activities and results.

Advisor
Specialist with an in-depth knowledge of a given subject. Usually, when companies are privatised, the appointed advisors are highly regarded Italian or foreign merchant banks and important auditing firms.

Audit
A management tool involving a systematic, documented, periodic and objective assessment of an organisation's performance, management system and processes designed to protect the environment in order to: i) manage behaviour that might have an environmental impact; ii) ascertain compliance with the organisation's environmental policy, including its environmental targets and goals.

CAGR (Compound Annual Growth Rate)
The CAGR represents a measure of the trend of growth/decrease of a figure on an average annual compound basis.

Call centre
Telephone service available to customers to perform banking transactions (homebanking) or ask for information (help-desk). Also used for support activities (customer care) and marketing (telemarketing).

Capital allocation
The activity of investing and allocating efficiently the available capital to the best risk/return profile strategy or investment choice (or, within the UCG perimeter, business line/legal entity).

Capital for regulatory purposes
Bank capital which is valid for the purposes of regulatory provisions, consisting of the total amount of "Tier 1 capital" and "Tier 2 capital", minus, according to specific and detailed methods, equity investments and other interests owned in credit and/or financial institutions.

Capital ratio
Index which expresses the degree to which shareholders' equity covers the risk assets held by banks.

CASHES
Core Tier 1 "Convertible Equity Instruments". CASHES are securities that are convertible at the investor's option into new UniCredit ordinary shares to be issued following receipt of the necessary authorizations.

Chapter 11 of US bankruptcy code
Chapter 11 relates to the procedure set out by chapter 11 of the US Bankruptcy Code and is intended to satisfy creditors and at the same time allow a company in crisis to continue its activities.

Collateralized Bond Obligations (CBOs)
Collateralized Debt Obligations (q.v.) with bonds as underlyings.

Collateralized Debt Obligations (CDOs)
Bonds issued by a vehicle with loans, bonds, Asset Backed Securities (q.v.) or other CDOs as underlyings. CDOs make it possible to derecognize assets in the bank's balance sheet and also to arbitrage the differences in yield between the securitized assets and the bonds issued by the vehicle. CDOs may be funded if the vehicle legally acquires title to the assets or unfunded if the vehicle acquires the underlying risk by means of a Credit Default Swap (q.v.) or similar security. These bonds may be further subdivided as follows:
- CDOs of ABSs, which in turn have tranches of ABSs as underlyings
- Commercial Real Estate CDOs (CRE CDOs), with commercial property loans as underlyings
- Balance Sheet CDOs which enable the Originator (q.v.), usually a bank, to transfer its credit risk to outside investors, and, where possible under local law and supervisory regulations, to derecognize the assets from its balance sheet
- Market Value CDOs whereby payments of interest and principal are made not only out of cash flow from the underlying assets, but also by trading the instruments. The performance of the notes issued by the vehicle thus depends not only on the credit risk, but also on the market value of the underlyings
- Preferred Stock CDOs with hybrid debt/equity instruments or preference shares issued by financial institutions
- Synthetic Arbitrage CDOs which arbitrage the differences in yield between the securitized assets acquired synthetically by means of deriviatives and the bonds issued by the vehicle.

Commercial paper
Short-term obligations with maturities ranging from 2 to 270 days issued by corporations, banks, or other borrowers to investors who have temporarily idle cash on hand. Commercial paper is usually unsecured and discounted.

Conduits
Asset Backed Commercial Paper Conduits ("ABCPs") are a kind of Special Purpose Vehicle set up to securitize various kinds of assets and financed by Commercial Paper. Commercial Paper generally matures in 270 days, payment of principal and interest depending on the cash flow generated by the assets. ABCP conduits may be single-sellers or multi-sellers according to the number of issues they make. ABCP Conduits generally require several SPVs. The first-level vehicles issue the commercial paper and finance one or more second-level vehicles or purchase companies (q.v.) which purchase the assets to be securitized. An ABCP Conduit will have the following:
- issues of short-term paper creating a maturity mismatch between the assets held and the paper issued;
- liquidity lines covering the maturity mismatch and;
- security covering default risk in respect of both specific assets and the entire program.

Conversion
The process of converting convertible loan stock of a company into ordinary shares. The right to convert is inherent in the convertible loan stock but usually you will only be allowed to convert only on a particular date.

Convertible
Convertibles are bonds issued by companies which can be converted into ordinary shares or preference shares at a given price at a future date. For example a convertible might pay 6% in income, and give the holder the right to 5 ordinary shares for every £20 of bond value.
A convertible bond is a form of hybrid security that has both the characteristics of a debt security and an equity security. The convertible bonds offer a low coupon rate. Nevertheless, the compensation is provided to the bondholder with the benefit of conversion of the bond to common stock. The amount of premium payable is decided as a percentage of the market value of the share and the premium amount is also quite high.

Core tier 1 capital
Tier 1 Capital excluding hybrid instruments.

Core tier 1 ratio
It measures the Capital Adequacy of a bank: it's the ratio of Core T1 capital to RWA.

Corporate
Customer segment corresponding to medium to large companies.

Corporate banking
Financial services aimed at the corporate segment.

Corporate governance
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law.

Cost/income ratio
Indicator used to analyse management efficiency, obtained by dividing total operating expenses by total revenues.

Cost of risk
It is the ratio between loan loss provisions and average RWA for credit risk of the period. It's one of the indicators of bank asset riskiness: the lower the ratio, the less risky the bank assets.

Country risk
Set of economic, financial and political factors which may make it difficult for debts to be repaid by borrowers resident in a country, regardless of their individual solvency.

Covered warrant
Derivative financial instrument consisting of a "warrant" which gives subscribers the right to purchase (call CW) or sell (put CW) a specific financial or real asset (underlying) by a specific deadline (American CW) or on a specific date (European CW) in a pre-established quantity (nominal or multiple value) for a pre-established price (strike price).

Credit Default Swaps (CDSs)
A derivative in which a seller of protection engages, for a fee, to pay the buyer of protection a fixed amount should a certain event indicating a deterioration of the creditworthiness of a reference entity occur.

Credit scoring
Coded procedures (automatic or semi-automatic) for assessing credit risk.

Cross-selling
Activity aimed at increasing customer loyalty by selling integrated products and services.

Default
Identifies a situation in which a party has stated that it cannot honour its debts and/or pay the corresponding interest.

Depository bank
A Depository Bank is entrusted with the custody of financial instruments and liquidity of mutual funds. The bank has to comply with the instructions of the asset management company which manages the fund, and with the rules prescribed by market supervisors.

Derivatives (products/instruments)
A financial instrument defined as a derivative because its cost/performance profile is derived from the cost/performance parameters of other principal instruments called "underlying assets", which may be commodities, currencies, interest rates, securities, share indices. In other words, the value of a derivative is a contractually pre-established function of the value of a specific real or financial asset (underlying asset), the price of which (spot price) is formed in the respective market. Their intention is generally to modify the exposure of the contractual parties to market risks. They include futures, options, swaps and forward contracts.

Dividend
Regular payments from earnings by companies to their shareholders. The level of dividend payment is decided upon periodically by company management.

Desk
Generally identifies an operational unit in which a specific activity is concentrated.

Doubtful loans
Credit granted to customers who are in a clearly difficult situation which may however be overcome within a reasonable period of time.

Code of Conduct
Our Code of Conduct, which includes measures to combat corruption, defines our core principles as a bank and outlines our commitment to: obey laws and regulations; reject the giving or receiving of bribes; restrict the giving or receiving of gifts and facilitation payments; address conflicts of interest; adhere to competition and corruption laws; prevent money laundering; counter market abuses; ensure banking secrecy; ensure data protection; treat others with dignity and respect; value health and safety.

Corporate Social Responsibility
The integration on a voluntary basis of the companies' social and ecological issues with their commercial operations and their relations with stakeholders (from 2001 Green Paper of European Commission).

Dow Jones Sustainability Indexes
Launched in 1999, the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide. Based on the cooperation of Dow Jones Indexes and SAM they provide asset managers with reliable and objective benchmarks to manage sustainability portfolios.

Exchangeable bond
Bond which offers the owner the opportunity to convert it into shares in a company other than the issuer.

EPS (Earnings per share)
Is an indicator of a company's profitability calculated as:
- Net Profit/
- Average total outstanding shares (excluding treasury shares)

Equity
The amount which shareholders own in a publicly quoted company. Equity is the riskbearing part of the company's capital and contrasts with debt capital in that it entitles to a share of profits which has priority over shareholders if the company becomes insolvent and its assets are distributed.

Equity derivatives
Derivative products with values linked to equity securities or share indices.

Equity-linked bonds
Bonds whose performance depends on that of the parameter to which they are linked. The index parameter can be a stock exchange index, a basket of stock exchange indexes, a share, a basket of shares or an investment fund.

EVA (Economic Value Added)
Expresses the capacity to create value in monetary terms as the difference between net operating profit and the invested capital charge. EVA is equal to the difference between the NOPAT (Net Operating Profit After Taxes) and the invested capital charge.

Factoring
Contract to transfer accounts receivable to banks or specialised companies either with recourse (with credit risk borne by the assignor) or without recourse (with credit risk borne by the assignee) for management and collection purposes, which may be associated with financing granted to the customer.

FDIC (Federal Deposit Insurance Corporation)
Independent US agency created by Congress that maintains the stability and public confidence in the US financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships.

Fixed-floater bonds
Bonds characterised by fixedrate coupons for the first "n" periods and by variable rate coupons for the remaining "t minus n" periods.

FRA (Forward Rate Agreement)
Contract by which parties agree to receive (pay) on maturity the difference between the value calculated by applying a predetermined interest rate to the value of the transaction and the value obtained on the basis of the level reached by a reference rate chosen by the parties.

FTE (Full Time Equivalent)
is the number of a company's fulltime employees. Part-time employees are considered on a pro-rata temporis basis.

Funding
Provision of the funds required to finance company activity or specific financial transactions.

Futures
Standardised contracts with which the parties undertake to exchange currencies, securities or goods at a predefined price and on a future date. These contracts are negotiated in regulated markets where their performance is guaranteed.

Global (Joint global) Co-ordinator
Company acting (together with others) as a general co-ordinator in a security issue/placement transaction.

Guarantee or L/C
A transaction by means of which the bank or a financial company undertakes to assume or guarantee an undertaking given by one of its customers to a third party.

Goodwill
Identifies the amount paid to acquire a shareholding equal to the difference between the cost and the corresponding share of shareholders' equity for the part which is not attributable to elements making up the assets of the acquired company.

Hedge fund
Investment fund of a speculative nature, distinguished by the small number of participants and the high minimum investment required, with ample freedom in terms of objectives, investment instruments and positions taken.

High Net Worth Individuals
Segment comprising the most affluent private clients.

Home banking
Telephone or Internet connection to manage a bank account and/or check its situation.

IAS/IFRS (International Accounting Standards)
Accounting standards endorsed by the European Union mandatory introduced as of 2005 for every listed company.

Index-linked
Life policies with performance linked to reference indexes, normally drawn from the financial markets.

Indirect deposits
Credit instruments and other securities not issued by the custodian bank, received by the latter in custody, administration or in relation to asset management activities. Since they are not direct obligations of the bank they are not shown on the balance sheet.

Institutional investors
These include insurance companies, pension funds, trust funds and private asset management services.

Interest rate cap
Contract clause which establishes that the variable interest rate of a finance deal or debt must not exceed a maximum fixed value (ceiling) at the time it is issued.

Interest rate derivatives
Derivative products, the value of which is linked to bonds or interest rates.

Interest-rate risk
Economic and financial risk to which a credit institution is exposed in relation to a variation in interest rates, measurable in terms of potential variations in future interest margins or in the present value of the net capital (i.e. the difference between the present value of interestbearing assets and liabilities).

Investment banking
Segment of banking involved in the subscription and placement of newly issued securities, as well as the negotiation of financial instruments.

Investor
Any entity other than the sponsor or originator with exposure to a securitization.

IPO (Initial Public Offering)
Transaction by which shares in a company which intends to be listed in a regulated market are offered to the public.

Issue price
The price at which a company's shares are offered to the market for the first time. When they begin to be traded, the market price may be above or below the issue price.

Junior, Senior and Mezzanine exposures
junior exposures are the last exposures to be repaid in a securitization transaction. Accordingly, junior exposures absorb the first loss. Senior exposures are the first exposure to be repaid. The "mezzanine" category includes exposure with medium priority, but with different levels of repayment priority within the category.

EMAS
EcoManagement and Audit Scheme - Regulation 761/2001 of the European Council allowing voluntary participation by organisations in a Community eco-management and audit scheme.

Employer Branding
To denote an organisation's reputation as an employer.

Environmental Analysis
Thorough preliminary analysis of the environmental problems, impact and performance related to the activities of an organisation.

Environmental Aspects
Aspect of the activities, products and services of an organisation that can interact with the environment.

Environmental Impacts
Any positive or negative environmental change arising, in whole or in part, from an organisation's products and services.

Environmental Managemet System
A set of rules and regulations that a company is equipped to identify the environmental aspects, to mitigate the impacts generated by its operations in a logic of containment

Equator Principles
Voluntary set of standards, developed by private sector banks, for determining, assessing and managing social and environmental risk in project financing.

Ethical Cards
Credit and debit cards which offer banks customers the opportunity to support charitable causes simply by using their cards, with a variable percentage of each transaction supporting social and environmental projects.

Ethical Finance
The policy of selecting stocks for a portfolio partly on the grounds of the ethical or environmental code pursued by the companies in question. The major exclusions tend to be arms, alcohol, tobacco, gambling, animal testing, environmental damage and the payment of exploitative wages in developing countries.

EWC
The UniCredit European Works Council (UEWC) is a governance body providing for the information and consultation of Employees in Community-scale and Community-scale groups of undertakings as required by the European Works Council Directive (94/45/EC) and lately by the revised 2009/38/EC recast directive.

FTSE4Good Index Series
Market capitalization weighted indexes maintained by the FTSE group to measure the performance of companies that meet globally recognized corporate responsibility standards. The FTSE4Good Index Series is designed to provide exposure to companies that are managing their social and environmental risks, while also helping ethical investors avoid companies that aren't. 

Full Time Equivalent
Number of equivalent full time employees.

GHG Emissions
Any of the atmospheric gases that contribute to the greenhouse effect by absorbing infrared radiation produced by solar warming of the Earth's surface.

GRI
Global Reporting Initiative is an organisation made up of different stakeholders and independent institutions whose mission is to develop and disseminate guidelines for all sectors to prepare disclosures and sustainability reports.

ILO
The ILO is the international organization responsible for drawing up and overseeing international labour standards. It is the only 'tripartite' United Nations agency that brings together representatives of governments, employers and workers to jointly shape policies and programmes promoting Decent Work for all.

In-Kind Contributions
Monetary equivalent of product, property or services offered for free to the community.

Injury Frequency Index
This was calculated as follows: (total no. of workplace injuries/total working hours)*1,000,000.

Injury Severity Index
This was calculated as follows: (total no. of days of absence/total working hours)*1,000. Days of absence refers to: injuries, illness, strikes and other reasons (e.g., medical controls, election days).

Injury Index
This was calculated as follows: (total no. of days of absence due to injuries/total working hours)*1,000.

ISO 14001
Standard related to environmental management systems issued by the International Standard Organization.

Lead Arranger
The bank responsible for arranging a securitization. The arranger's duties include checking the quality and quantity of the assets to be securitized, conducting relations with rating agencies, drawing up the prospectus and dealing with accounting and legal problems.

Lead (co-lead) manager
The leading bank in a loan syndicate, which negotiates with the debtor, selects the co-lead managers and other members of the guarantee syndicate in agreement with the issuer. It is also responsible for forming the sales team and establishing the methods of the transactions, managing its implementation, often also undertaking to place the largest share on the market; it also keeps the accounts. In exchange for performing these functions, in addition to a reimbursement of expenses and normal commissions, it also receives a special commission.

Leasing
Contract by which one party (lessor) grants the other (lessee) use of property purchased or built by the lessor, according to the lessee's choices and instructions, for a certain period of time, allowing the lessee to purchase the property according to preestablished conditions at the end of the leasing contract.

Leveraged finance
Also known as "acquisition finance". It covers all the transactions involved in transferring the ownership and control of a company on the basis of an organisational and financial formula which creates a debt for the company being transferred (leveraged buy-out).

Liability Management
Financial management of the debt structure of a company.

Lower Tier 2
Subordinated liabilities which are eligible for inclusion in the additional shareholders' equity or Tier 2.

Mark-down
Negative difference compared to a reference index, normally an interbank rate, applied to the interest rate on customer deposits.

Mark-up
Positive difference compared to a reference index, normally an interbank rate, applied to the interest rate on loans to customers.

Market effect
Effect of a change in the share prices and exchange rates on aggregates calculated at market values (e.g. indirect deposits).

Market-making
Activities carried out by specialised intermediaries who undertake to provide continuous bid and offer prices relating to one or more investment assets and to apply them to preestablished minimum amounts by other parties.

Market indices
MIB: general index of the Milan Stock Exchange
S&P 500: Standard & Poor's index of the New York Stock Exchange calculated on the 500 most highly capitalised securities
MSCI Europe: Index calculated by Morgan Stanley and Capital International representing the performance of European Stock Exchanges.

Market risk
Risk of incurring value fluctuations of balance sheet or off-balance-sheet items connected with changes in market prices/factors, including interest rates, exchange rates and share prices.

Mark to Market
The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.

Mark To Model
The pricing of a specific investment position or portfolio based on internal assumptions or financial models. This contrasts with traditional mark-to-market valuations, in which market prices are used to calculate values as well as the losses or gains on positions.

Market value
The price at which a security is trading and could presumably be purchased or sold.

Mass market
Households and individuals.

Maturity
Maturity is a life of security. It may also refer to the final payment date of a loan or other financial instrument, at which point all remaining interest and principal is due to be paid.

M&A (Mergers and Acquisitions)
Company acquisition and reorganisation activity and the related advisory service.

MBS (Mortgage-Backed Security)
A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.

Merger
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

MIFID (Markets in Financial Instruments Directive)
European Union law which provides a harmonised regulatory regime for investment services across the 30 member states of the European Economic Area. The main objectives of the Directive are to increase competition and consumer protection in investment services.

Monoline Insurers
Insurance companies that insure only one kind of risk. Against payment of premium they guarantee the repayment of principal and interest of bonds - usually Asset Backed Securities (q.v.) or US municipal bonds - on default by the issuer, which enables the guaranteed bond to obtain a better rating than similar unguaranteed issues.

MTA (Italian electronically-based equity trading system)
MTA is the Italian Stock Exchange's electronic market on which shares, convertible bonds, warrants and option rights are traded.

MTN (medium term note)
A debt note that usually matures in 2 to 10 years.

MTS (Italian government bonds automated market)
Automated circuit for negotiating Government Bonds in the secondary market, set up by a decree issued by the Italian Ministry of the Treasury on 8/2/1988.

Netting
Clearing agreements between financial counterparties which provide for them to "fulfil" their respective contractual duties by paying the difference between funds payable and funds receivable. In derivative contracts it identifies the provision which allows the positive and negative substitution costs of each individual contract to be offset by not making them individually enforceable.

Non-performing loan
Loan to insolvent entities (even if this has not been confirmed by a court of law) or in substantially similar situations.

Offering Circular
Prospectus drawn up according to international principles for the distribution of securities abroad (particularly in the USA and Canada).

OPA (Italy)
Public offering or take-over bid (or tender offer): method by which a person approaches all the holders of shares in a specific company, offering to buy the shares or bonds they own within a specific period of time and for a price, paid in cash, which normally remains fixed for as long as the offer remains open. The offer is subject to acceptance by a number of shareholders representing a preestablished percentage of the capital stock, otherwise it becomes automatically null and void.

OPAS (Italy)
Tender and share exchange offer.

OPS (Italy)
Share exchange offer: This is a public purchase offer in which the price is not paid in cash but by transferring other securities (e.g. ordinary shares in the company promoting the PPO).

Options
These represent a right, not a commitment, to purchase (call option) or to sell (put option) a financial instrument at a pre-established price or on a fixed date in the future.

Ordinary share
Ordinary shares (US: common stocks) embody both the shareholders' customary statutory rights and their customary rights under the corporate Articles of Incorporation. The term is only meaningful with stock prices if the company in question has also issued preference shares. Opposite: preference share.

Origination
Activity involving the subscription and placement of debt securities (debt underwriting) or equities (equity underwriting). This includes contact with the potential client, obtaining a mandate, management and coordination of the security subscription and placement stages.

Originator
The entity that originated the assets to be securitized or acquired them from others.

OTC (over the counter)
Transactions carried out directly between the parties, without using a regulated market.

OTD (originate to distribute)
Bank business model based on the origination of loans and the subsequent pooling and repackaging of these loans by the process of securitisiation, culminating in the final distribution of the securities to investors.

Overcollateralization
The value of the assets underlying the bonds issued is higher than the amount of the bonds.

Payout ratio
Is the percentage of net income that is distributed to shareholders. The percentage distributed is determined mainly on the basis of the company's self-financing needs and the return expected by shareholders.

Performing loan
Credit position of the bank with a customer who is deemed to be solvent and therefore able to make repayments as scheduled.

Performing (non-performing)
Term which refers generally to regularly (non regularly) performing loans. Non-performing loans are generally associated with bad and doubtful debts.

Preference Convertible Bonds
A hybrid form of capitalisation: subordinated bond convertible into ordinary shares.This bond only entitles one to receive a fixed coupon if the issuing company distributes dividends.

Preference shares
Shares with compensation linked to market rates with particularly stringent forms of subordination, e.g. the failure to recover interest not paid by the issuer in subsequent financial years and sharing in the losses of the issuer itself should they lead to a significant reduction in capital requirements. Regulatory instructions establish the conditions on the basis of which preference shares can be counted as part of the Tier 1 Capital of banks and banking groups. Opposite: ordinary share

Price/Book value
Indicator which compares the price per share to the net asset value per share.

Price/Earnings
Ratio of the price per share to the net profit per share.

Primary market
Securities market in which newly issued shares and bonds are exchanged between issuer and first investor.

Private Banking
Financial services targeted at private "high end" customers for the overall management of their financial needs.

Private placement
Non-public placement process whereby issuing banks directly place large volumes of shares with institutional investors or investment companies.

Purchase Companies
Vehicle used by ABCP Conduits (q.v.) to purchase the assets to be securitized and subsequently financed by the conduit by means of commercial paper.

Quota azionaria (share)
Quota di partecipazione in una SpA, un fondo comune, ecc. La quota elementare è la singola azione la quale costituisce l'unità, non divisibile ulteriormente, in cui è ripartito il capitale sociale o il patrimonio del fondo.

Key Performance Indicators
Specific indicators to measure and detect the qualitative - quantitative data to provide the company's economic, social, environmental results.

Kyoto Protocol
An international agreement on the reduction of the atmospheric emission of the greenhouse gases responsible for global warming.

LBG (London Benchmarking Group Model)
The London Benchmarking Group (LBG) model is used by companies around the world to assess and report on the value and achievements of their corporate community investment. It takes its name from the London Benchmarking Group; the group of UK-based companies that have worked together to develop the model since 1994. The LBG model outlines four different types of cost that a company can incur in making community contributions: "cash contributions", "time contributions", "in-kind contributions" and "management costs". Moreover LBG Model enables community activities to be categorised according to three categories of motivation: charitable gifts, community investment, commercial initiatives in the community.

Management costs
Community investment programmes costs, staff salaries, research and communications costs.

MbO
Management by objective: an employee incentive system whereby specific performance objectives are set by employees and their supervisors, progress achieved with respect to such objectives are checked from time to time and rewards are given on the basis of the percentage of the objectives achieved.

Ombudsman
A unit set by ABI to settle disputes between banks and their customers.

OECD
The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world.

Organizational Model 231/01
Legislative Decree No. 231 of June 8, 2001 is the first Italian law on the administrative liability of incorporated and non-incorporated bodies, companies and associations (entities).

Rating
Assessment of the degree of risk that a specific debtor, company or public body will default. This assessment takes the form of a concise judgement expressed by a conventional value which reflects the debtor's creditworthiness.

Replenishments
Procedure which allows the arranger always to maintain the total amount of loans included in a securitisation transaction at the same level.

Residential Mortgage Backed Securities (RMBSs)
Asset Backed Securities (q.v.) with residential mortgages as underlyings.

Restructured loan
Situation in which the bank has agreed upon an extension of the repayment deadline with the debtor, renegotiating the exposure at lower interest rates than the market rates.

Retail
Customer segment which mainly includes individuals, professionals, shop-keepers and craftsmen.

Retail banking
Financial services aimed at the retail segment.

Revolving Credit
A form of financing in which the bank makes funds available to the customer up to a maximum amount. The customer can use the funds as required within a specific period of time.

ROE (Return on equity)
Profitability index that measures the ratio of net profits for the fiscal year to shareholders' equity (for the latter, the figure for the end of the period is considered, excluding net profit for the fiscal year).

Secondary market
Securities markets in which securities previously placed in the primary market are traded among investors.

Security
An instrument representing ownership (stocks), a debt agreement (bonds) or the rights to ownership (derivatives).

Security Agreement
Document issued by the debtor to the creditor, which gives the latter a right of pre-emption over specific property. This right ceases once the debtor has paid all monies owed to the creditor, as established in the loan agreement.

Securitisation
Transfer of credits or other nonnegotiable financial assets to a specialised company whose exclusive purpose is to perform these transactions and which converts these credits or assets into securities which can be traded in a secondary market.

Senior securities
Senior and subordinate refer to financial securities. The former award investor's the right to claim interest, dividend or principal prior to the investor's of the latter.

Senior Underwriter
Main underwriter who deals directly with the issuer. It normally subscribes to the whole issue, arranging for redistribution to secondary underwriters.

Servicing
In the context of a securitisation transaction, this is the collection of money for loans sold and management of the recovery procedures. The company assigned to perform this activity is known as the "Servicer".

Share
A share is one of a finite number of equal portions in the capital of a company, entitling the owner to a proportion of distributed, non-reinvested profits known as dividends and to a portion of the company in case of liquidation.

Shareholders' value
Is composed by dividends and capital gain (that reflect actual and future profitability of the firm). Creating shareholders' value means to generate, in the long run, returns (dividends and capital gain) on investment (capital) higher than expected (cost of equity) with a management approach in which value enhancement of the company is the main consideration in strategic and operational decisions.

Short-term loans (Italy)
Transactions maturing within a maximum period of eighteen months.

Sole agent
Manager of the financial flows of the transaction (disbursement of financing, payment of interest, etc).

Special Purpose Vehicles (SPVs)
An entity - partnership, limited company or trust - set up to carry out a set object, such as isolating financial risk or obtaining special regulatory or tax treatment for specific portfolios of financial assets. An SPV's operations are accordingly limited by a set of rules designed for this purpose. In general SPVs' sponsors (q.v.) do not hold equity in them. The equity is held by other entities in order to ensure that there is no shareholder relationship with the sponsor. SPVs are usually bankruptcy-remote, in that their assets cannot be claimed by the creditors of the sponsor, even if the latter becomes insolvent.

Sponsor
An entity other than the originator (q.v.) which sets up and manages an ABCP conduit or other securitization scheme where assets are acquired from a third entity for securitization.

Squeeze-out
Compulsory cash indemnification of existing minority shareholders of an acquired legal entity during or after a takeover bid.

STAR (Segmento Titoli ad Alti Requisiti)
Segment of the stock exchange dedicated to mediumcapitalisation companies which have specific requirements in terms of distribution to the public, governance, investor information mechanisms.

Step-up bonds
Fixed-rate bonds with coupons that grow over time.

Step-up issues
Issue of fixed rate bonds with coupon amounts growing over time.

Stock options
Company share purchase options, are issued under specific capital increases and grant the right to purchase the shares within a set term and for a fixed price. They are used as a form of supplemental compensation to provide incentives and obtain the loyalty of individual employees, specific categories or all employees.

Strike price
The price at which the securities in an option contract are sold or purchased on the established date. The price is set when the contract is drawn up.

Structured bonds
Bonds whose interest and/or redemption value depend on a real-value parameter (linked to the price of a basket of goods or services), currency parameter (linked to exchange rates), monetary parameter (e.g. ABI prime rate) or financial parameter (e.g. performance of securities issued by banks).

SIV (Structured Investment Vehicle)
A pool of investment assets that attempts to profit from credit spreads between short-term debt and long-term structured finance products such as asset-backed securities (ABS). Funding for SIVs comes from the issuance of commercial paper that is continuously renewed or rolled over; the proceeds are then invested in longer maturity assets that have less liquidity but pay higher yields. See conduits.

Structuring and arranging
Co-ordination and structuring of a complex financial transaction.

Subordinate securities
Senior and subordinate refer to financial securities. The former award investor's the right to claim interest, dividend or principal prior to the investor's of the latter.

Swaps (interest rate and currency swaps)
Transactions involving the exchange of financial flows between operators according to specific contractual methods. In the case of interest rate swaps, the parties exchange interest payment flows calculated on a notional reference capital on the basis of various different criteria (e.g. one party pays a fixed rate and the other a variable rate). A specific case is that of basis swaps for which both of the rates to which payments are tied are variable but based on different base rates. In the case of currency swaps, the parties exchange specific amounts of two different currencies, repaying them over time according to pre-established terms relating both to capital and interest.

Syndication
Co-operation aimed at carrying out a shared project, such as new share issues and financing of major projects.

Synthetic Securitization
Securitization (q.v.) in which the transfer of assets is by means of credit derivatives or similar security enabling the risk of the portfolio to be transferred.

Rating
Assessment of the default risk associated with a borrower, be it a company or a public authority. Such assessment translates into a rating that reflects the creditworthiness of a borrower.

Risk Management
The mission of our Risk Management (GRM) function is to control and steer Group risks by: managing and optimizing Group-wide asset quality and the cost of risk; determining (in concert with the CFO function), and monitoring, the Group's risk appetite and evaluating its capital adequacy; defining - in compliance with regulatory requirements - the Group rules, methodologies, risk limit types, policies and strategies for risk management; defining and applying the valuation, management, measuring, monitoring and reporting criteria of risks to ensure groupwide consistency and transparency; verifying the adequacy of the risk measurement systems adopted throughout the Group; quantifying the impact of changes in the economic cycle or stress events on the Group's financial structure; creating a Group-wide risk culture.

SRI (Socially Responsible Investing)
Investments that take into account the economic performance and social, environmental and ethical one. The portfolio selection is driven by negative criteria (exclusion) or positive criteria (inclusion). In the first case they exclude particular types of companies or countries that do not respect human rights and labor rights. In the second case the virtuous companies become part of investment.

Stakeholder
Parties that, one way or another, are concerned with the company's activities, partaking in its results, affecting its performance, assessing its economic, social and environmental impact.

Sustainability Report
Document that allows you to report to all stakeholders concerning the company's achievements on sustainable development and its sustainability performance.

Take-over
Acquiring control of a company.

TARP (Troubled Asset Relief Program)
$700 billion US financial rescue package aimed at restoring global financial stability. The main purpose of the plan shifted from its initial objective of taking toxic mortgage assets off the books of financial companies to injecting directly fresh capital in troubled but viable financial institutions.

Technical reserves
Provisions made by insurance companies to cover debts and commitments towards their insurance policy holders.

Tier 1 capital
This consists of paid-up capital, reserves and the fund for general banking risks, net of own shares, intangible fixed assets, losses recorded during previous financial years and/or the current one.

Tier 1 ratio
Ratio of T1 capital to total RWA, measuring adequacy of banking capital.

Tier 2 capital
This consists of revaluation reserves, hybrid capital instruments, subordinated liabilities and other positive elements, minus any net losses on securities and other negative items.

Type (of loan facility or deposit)
Pre-established contractual basis for a specific deposit or loan facility.

Traditional Securitization
Method of securitization (q.v.) whereby transfer of the assets is by means of sale of the portfolio to the Special Purpose Vehicle (q.v.).

TSR (Total Shareholder Return)
Is the most common indicator used to evaluate the ability to create value synthesizing the return earned by the shareholder through price gains plus dividend payments.

TUF (Italian Legislative Decree no. 58 from 24/02/1998)
TUF regulates investor protection and financial market discipline.

Unit-linked
Life insurance policies with performance linked to the value of investment funds.

Upper tier II
Hybrid capital instruments (e.g. perpetual loans) which constitute the highest level of Tier 2 capital.

Unsecured lending
Lending not backed by mortgage or other type of collateral.

US Subprime Residential Mortgages
Subprime has no univocal definition. The category includes mortgages granted to borrowers who have had repayment difficulties in the past, e.g. delayed installments, insolvency or bankruptcy, or who are more likely to default than the average due to high loan-to-value and installmentto- income ratios.

VaR (Value at Risk)
Method used to measure market risk, based on probabilities, quantifying risk on the basis of the maximum loss which may be expected with a certain degree of probability, based on historical variations in the price of an individual position or an entire portfolio and with reference to a specific time period.

Vintage
The year of issue of the collateral underlying bonds created by securitization. In the case of subprime mortgages this information is an indicator of the riskiness of the bond, since the practice of granting mortgages to subprime borrowers became significant in the US starting in 2005.

Warehousing
A stage in the preparation of a securitization transaction whereby an SPV (q.v.) acquires assets for a certain period of time until it reaches a sufficient quantity to be able to issue an ABS.

Writedown
Reduction in the book value of an asset.

Writeup
Increase in the book value of an asset.

Time contributions
Monetary equivalent of company's employees in community's projects.

UNEP - FI
UNEP - FI is a global partnership between UNEP and the financial sector. Over 200 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance.

UNPRI
The United Nations-backed Principles for Responsible Investment Initiative (UNPRI) is a network of international investors working together to put the six Principles for Responsible Investment into practice.