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Glossary

Glossary

    Administrative state agency

    A legal entity established under public law distinct from the central or local government system and whose object is neither industrial nor commercial.

    Auction system  

    The procedure adopted by the French Treasury for issuing government securities. Under the bid price or Dutch auction system securities are supplied in accordance with the price or rate offered by the bidders in a sealed bid auction: the participants do not know the terms offered by the other bidders.

    Back Office

    The administrative department of a financial institution. It monitors market transactions, sees to accounting records and checks compliance with regulations. (See also Front Office )

    Banking Commission

    This commission, which was established by the January 24 1984 Act, is chaired by the Governor of the Bank of France. It exercises prudential control over investment service providers, and may take disciplinary measures.

    Basis Point

    One basis point is 0.01% of the nominal value of each contract.

    BMTN (Tradeable medium-term note)

    A tradeable medium-term debt instrument with a life of one year or more.

    Bond

    A tradeable security issued by a government or a limited liability company.

    Bridge Loan

    A loan designed to ensure the transition between two syndicated loans.

    Comité de Réglementation bancaire et financière (CRBF)

    Established by the Act of 24/01/1984, this committee is chaired by the Minister of the Economy. It sets the general rules governing financial institutions, notably prudential rules.

    Commercial Paper

    Short-term instruments with maturities ranging from 1 day to seven years. They are issued in minimum amounts of euros 150 000. Their rates are freely negotiable on the day of issue and ratings are assigned to commercial paper programmes by credit rating agencies.

    Cooke ratio

    It is the ratio of commitments (assets weighted by risk of default) to total assets. Also known as the solvency ratio, it subjects financial institutions to compliance with prudential rules. With a Cooke ratio of 0%, CADES is therefore considered as an issuer of the highest quality. Bank bond issues, for example, are subject to a Cooke ratio of 20%.

    Forward contract

    Purchase or sale of an asset at the current price for delivery and settlement at a specified future date. A forward contract can be used to hedge against foreign exchange or investment risk.

    Front Office

    The department of a financial institution directly involved in trading and placing orders on a market. (See also Back Office)

    Government Order

    An order or edict issued by the government (under article 37 of the constitution) at the request of parliament (authorisation to issue orders under article 38 of the constitution).

    OAT

    A fungible bond issued by the French Government since 1985, notably to finance government debt. It is so named because each issue represents a new tranche of an existing issue to which it is assimilated. OATs may have fixed or floating interest rates, and maturities ranging from five to 30 years.

    Rating Agencies

    These are private companies that evaluate issues by assigning them ratings. The criteria applied include: the financial results of the issuer, its management team, the guarantees offered etc. The major rating agencies recognised in France are: FITCH IBCA, Moody's and Standard & Poor's.

    Social Security Finance Act 

    This Act enshrines in law the obligation to balance the books of the French social security system. It was introduced with the 1996 social security reform.

    Spread 

    For CADES, the spread is the difference between the rate in France applied to CADES' issues and that applied to OAT (government bond) issues.

    Syndicated Loan 

    A loan which is underwritten (guaranteed) by several banks. If a loan is issued in several tranches several groups of banks may participate in it.

    Treasury 

    A government department charged with maintaining the general equilibrium of the economy's major monetary and financial balances. It does so by carrying out the cash management and accounting procedures required to manage public finances. It also acts as the government's financial regulator and economic and financial advisor.