Glossary

B

BAD LOAN

For the purposes of the Central Credit Register (CR), a customer is classified as having a bad loan when the bank or financial company determines that the customer is insolvent and consequently incapable of repaying his or her debt. This classification is the result of an assessment of the customer’s overall financial situation and is independent of whether the customer has officially filed for bankruptcy. Therefore, a customer can be classified in the CR as having a bad loan in the absence of an official bankruptcy proceeding.

BAIL-IN

A bail-in for a bank is the legal mechanism introduced in 2016 by the European Union for the recovery and resolution of credit institutions and investment firms in the event of a crisis. The mechanism obliges savers/investors to participate in a bank’s capital losses to avoid using public funds to rescue the bank and to maintain market confidence.

Shareholders and creditors cannot, under any circumstances, suffer greater losses than they would in the event of a bank being liquidated under normal proceedings.

Deposits of up to €100,000 are excluded from bail-ins.

BALANCE (BANK ACCOUNT)

The balance is the amount of money in a bank account on a given date. It is the net difference between payments into and payments out of a bank account. The current (or account) balance includes only fully processed transactions. The available balance may be different from the current balance, as it also includes initiated but still pending transactions and possible available credit. It is therefore the amount that can actually be used. The liquid (or value) balance is the sum of all the account movements in order of the value date on which interest is then calculated (see also 'Statement - Bank statement').

BANCOMAT

A national ATM network regulated by an agreement and managed by a consortium, Consorzio Bancomat. It enables Bancomat card holders (see Debit card) to withdraw cash from any ATM (see ATM - Automated Teller Machine) that is part of the network and to directly pay for goods and services from merchants through POS terminals (see Point of Sale - POS). A Bancomat card that bears the logo of an international circuit (for example, VISA, Maestro, etc.), can be used to perform transactions at authorized terminals in both Italy and abroad.

BANK

Under Italian law banking is defined as fund-raising on a public basis and the granting of credit (Article 10 of Consolidated Law on Banking, Legislative Decree 385 of 1 September 1993 as amended). Fund-raising on a public basis is the prerogative of banks and is defined as the acceptance of repayable funds in the form of deposits or in other forms.

The primary economic role of banks is to transfer financial resources (i.e. money) from persons who have such resources to those who lack them, acting as the counterpart for each transaction. This function, which is called intermediation, is carried out by raising funds from savers and granting loans to firms and households, to help them satisfy their investment and consumption needs.

In accordance with European law, banks may engage in other financial activities in addition to banking, subject to the restrictions established by law on such activities.

Bank account

See CURRENT ACCOUNT

BANK ACCOUNT NUMBER

Generic term for the numeric or alphanumeric code that unequivocally identifies a current account. The code currently used to identify a current account is the International Bank Account Number (IBAN).

BANKING AND FINANCIAL SUPERVISION

The Bank of Italy supervises banks and non-banking intermediaries entered in specific registers. Since November 2014 this supervision has been conducted within the framework of the Single Supervisory Mechanism (see Single Supervisory Mechanism - SSM). The supervisory actions consist of on- and off-site inspections and the adoption of administrative measures such as authorizations, sanctions and those relating to the management of problematic situations. As national supervisor, the Bank of Italy also provides services directly to the public: it handles complaints submitted to it by the public, it assists the panels of the Banking and Financial Ombudsman (see ABF - Banking and Financial Ombudsman) and it promotes financial education.

BANKING UNION

The need for a banking union emerged from the financial crisis of 2008 and from the subsequent sovereign debt crisis, when it became clear that close links between public sector finances and the banking sector could easily spill over national borders and cause financial turbulence in other EU countries. The three pillars of the banking union are the Single Supervisory Mechanism (see Single Supervisory Mechanism - SSM), the Single Resolution Mechanism (see Single Resolution Mechanism - SRM), and a common deposit guarantee scheme, which has not yet been established.

BANKNOTES

The Bank of Italy issues euro banknotes in accordance with the principles and rules established within the Eurosystem. It produces the quantity of euro banknotes assigned to it, puts them into circulation, withdraws worn notes, takes part in the search for and experimentation of new security features and contributes to the definition of common standards for the quality of the notes in circulation and the fight against counterfeiting. Euro coins are minted in Italy by the State Printing Works, Stationery Office and by the Mint on behalf of the Ministry for the Economy and Finance.

BASIC ACCOUNT

See "Payment account with basic features".

BECKER

Gary S. Becker received the Nobel Prize in Economics in 1992 for extending the domain of microeconomic analysis to a wide range of human behaviour and interaction, including non-market behaviour.

BENCHMARK

Reference index or parameter. In finance, benchmarks are used as standards to measure the risk and return of financial investments and to assess the manager's skills. Benchmarks are often market indices, which are hypothetical investment portfolios composed of a homogeneous set of financial instruments with specific characteristics that are carefully selected (e.g. Italian shares, government securities, etc.).

BLOCKCHAIN

Crypto-assets work thanks to blockchain or distributed ledger technology; we can think of it as a kind of ledger or public register, where transactions between two users are stored in a safe, verifiable and permanent way.

Data on exchanges are saved inside cryptographic blocks (so they are safe and anonymous), which makes it possible to trace and check all the transactions made with the virtual currency. These encrypted blocks, a kind of virtual currency DNA, are generated by an algorithm shared by everyone in the community that uses the same currency.

BOND

Bonds are instruments that give their holders the right to receive repayment of the face value at maturity and income in the form of interest ('coupon'). The issuer, for whom the bond is a debt since the proceeds of its sale are used for funding purposes, can be:

• a State (see Government bonds) or other government entity

• a bank or other type of company (in this case, they are referred to as 'corporate bonds')

• a supranational institution (which issues 'supranational bonds').

BTPs

These are fixed-rate Italian government securities. They have maturities ranging from two to 50 years and provide for the payment of interest every six months. Green BTPs have the same characteristics, but the proceeds are specifically earmarked for funding public expenditure with a positive impact on the environment.

On the other hand, for BTP Valore and BTP Futura, the interest increases by a predetermined amount, while for BTP€i and BTP Italia, yields are linked to European and Italian inflation trends, respectively. For BTP Valore, BTP Futura, and BTP Italia purchased at issuance, there is a premium for holding them until maturity (in the case of BTP Futura, the premium can also be paid before maturity and depends on Italian GDP growth).

BUDGET (see PLANNING)

A record of the income and expenses that can be very useful to households in planning how to best manage their money by helping them check whether their spending is sustainable and therefore whether there is a balance between money coming in and going out. It is important to verify and update the projections made since frequently families tend to underestimate their expenses and overestimate their income. Appropriate planning can help households determine their savings goals.

BUDGETING

Financial planning serves to help you best manage your money by enabling you to check whether your spending is sustainable and therefore whether there is a balance between money coming in and going out. A personal or household budget is a very useful planning tool. It is a record of all projected expenses and income for a certain period of time. It is important to verify and update the projections made since frequently families tend to underestimate their expenses and overestimate their income.

Appropriate planning entails determining a household's savings goals.