Key Terminology Used in Banking Industry

It is important to be familiar with the basic terminology and acronyms used in the banking industry:

Return on equity (ROE) is a measure of financial performance calculated by dividing the net income by shareholders’ equity. It essentially measures the rate of return that the owners of common stock of a company receive on their shareholdings. Return on equity signifies how good the business is in generating returns on its shareholders’ investment.

A capital requirement (also known as regulatory capital or capital adequacy) is the minimum amount of capital that financial regulators require the bank or financial institution to hold in liquid assets.  

Interest Spread is the difference between yield and cost of borrowing (where yield the is net interest income).