Bank Glossary - R

RAROC

Risk Adjusted Return On Capital is a key figure for measuring the risk/return ratio of banking operations. The risk-adjusted result, i.e. net earnings minus standard risk/costs is related to necessary or allocated risk capital. Risk capital requirements arise separately from the credit, market and operative risks associated with the respective business operation.

Rating

Standardised evaluation by specialist agencies of the credit standing of the issuer and his instrument of indebtedness.

Real-estate credit institutions

Land credit, real-estate credit and property credit institutions provide long-term real-estate loans (loans to purchase land, for example). Real-estate credit is a loan which is specially secured by property or in law. Real-estate credit institution is the generic term for all private mortgage banks and credit companies which are subject to public law.

Real-estate loan

Long-term loan, secured by a land charge.

Recession

see Depression

Reconstruction Loan Corporation

Founded by law as a statutory corporation in 1948, with its head office in Frankfurt. The shares are owned by the Federal Government and the Federal States. The Reconstruction Loan Corporation supports the German economy through investment loans and export credits. In addition, on behalf of the Federal Government, it grants loans and subsidies in the context of financial collaboration with developing countries.

Reconstruction Loan Corporation (KfW)

The KfW is a specialized commercial bank founded in 1948 as a statutory body and based in Frankfurt am Main. The key aspects of its activities are the granting of capital and environmental loans to medium-sized companies under the most favourable conditions and also export financing principally for exporting capital goods to developing countries. In this connection the Institute, which is not permitted to carry out normal banking activities, works closely with other banks.

Recourse guarantee

Loan which is guaranteed by a credit institution by assignment of a suretyship, based on §§ 765 et seq of the German Civil Code, or by submission of a guarantee. This signifies that the credit institution does not provide any liquid funds but only its own creditworthiness - in other words, its good name. In accepting a suretyship, the bank undertakes to assume responsibility for the liabilities of the borrower with respect to third parties. It is incidental, i.e. it is strictly committed to the underlying debt. In the case of a guarantee, the bank undertakes, with respect to third parties, to assume responsibility for any specific future success. It is isolated from other transactions and, therefore, is not committed to the underlying debt. In both forms, these are contingent liabilities which are itemised on the balance sheet.

Redemption

Facility, stipulated in the loan conditions, for the premature repayment (settlement) of loans. Premature redemption or redemption are not permitted until after five years have elapsed since the date of issue. In the case of redemption, in contrast to settlement of the premature redemption, the issue of securities is revoked.

Redemption price

Price at which the investment share certificates are redeemed by the investment companies. The redemption price is less than the issue price on the same date. The redemption price is also referred to as the inventory value. The difference between the redemption price and the issue price is the issue surcharge.

Redenomination

Against the background of the Euro Directive issued by the European Council of Heads of State or Government, the term redenomination or conversion refers to the conversion from the domestic currency to the euro currency of the unit in which outstanding debts are specified.

Rediscount

Selling-on a discounted security. The bank sells to the Deutsche Bundesbank or to one of the Federal State central banks. The following conditions must be fulfilled:

Regional banks

Credit institutions which, while they (are able to) conduct all types of banking transactions, nonetheless restrict their activities to certain regions. The statistical survey issued by the Deutsche Bundesbank classifies regional banks as groups of credit banks. However, the term regional bank is a traditional one, since, for example, the BFG Bank is classified as a regional bank despite the fact that it operates a national network of branches. The same applies to the Bayerische Hypotheken- und Wechselbank and the Bayerische Vereinsbank, which have developed well beyond the status of regional banks.

Registered debts

Loan accounts outstanding against the State, for which no debenture bonds are issued, but which are only officially recorded by entry in the Federal Debt Register.

Registered mining shares

Shares in a mining company subject to mining law. Registered mining shares are securities with no par value, which incorporate a share in the assets of the mining company. Nowadays, the registered mining share type of security is no longer relevant, since the legal form of the joint-stock company is preferred to the mining company subject to mining law.

Registered security

Securities, issued in the name of the creditor (in Germany, personal shares in joint-stock insurance companies are common practice but are seldom used in other circumstances). Securities which are not issued by name are known as 'bearer papers'.

Regular earnings

In the case of credit institutions: the balance after interest surplus, surplus on commission and trading results at the local level.

Regulated market

New market sector on the stock exchange, created in 1987 by the [German] Stock Exchange Licensing Act, for dealing in shares and annuities. The regulated market and official dealing together represent the statutorily-regulated part of stock exchange business. In comparison with official quotation, the licensing regulations are less stringent. Prices are set by independent brokers. With regard to official quotation, there are no other major differences as far as the investor is concerned.

Renewal certificate

see Talon

Renominalisation

Renominalisation describes the process of a change in the minimum nominal value of a bond, resulting in new tradable units after a conversion. Accordingly, fractional nominal euro amounts arising from conversions are adjusted in order to subsequently operate with customary round amounts, e.g. 100 euros.

Repurchase transaction

Repurchase agreement in connection with securities transactions (real pension transactions in which the article continues to be attributable to the pension provider). As far as the recipient of the pension is concerned, the term is reverse repurchase transaction.

Restricted-transfer registered security

Registered security which cannot be transferred to a third party without the consent of the issuer.

Return

Also Net interest return. Signifies the profitability, of securities in particular, i.e. the actual annual return on the invested capital. Return is usually expressed as a percentage. It is almost always different from the nominal interest rate or the dividend, because the purchase price does not correspond to the face value. The calculation involves multiplying the return (dividend, interest), say 6 %, by the market price, say 150 %. (6 x 100) ¸ 150 = 4 % return; see also Fixed-interest securities.

Return on equity (RoE)

Basically a code used to define the earning capacity of a company or credit institution, which presents the result (annual surplus) in relation to the equity invested. In this case, the annual (pre-tax) surplus as a percentage of the average annual equity invested - excluding the shares of partners outside the group.

REX

German abbreviation for Deutscher Rentenindex. An index representing the market of government paper on the German bond market. The index includes all bonds and Treasury notes issued by the Federal Republic of Germany, the German Unity Fund and the Treuhandanstalt privatization agency with fixed rates of interest. It includes indices for 1-10 years.

Rho

Rho is an indicator for assessing option risks. It explains the influence of changes in the interest rate of the basic instrument on the option price.

Right to cancellation of an entry

Cautionary entry to ensure future cancellation.

Right to demand information

Right of any shareholder to obtain information from the management of the joint-stock company in which he is a shareholder. The place of information is the stockholders' meeting. Under the terms of the [German] Corporation Act, the management board of the joint-stock company is required to divulge information about economic, financial or personal matters, provided that the information is required in order to properly evaluate the agenda for the stockholders' meeting.

Risk controlling

Independent determination, separate from trading activities, of risks assumed together with their assessment and monitoring with regard to observing certain specified limits.

RoE

Abbreviation for Return on equity

Roll over credits

Roll over credits are longer-term loans whose interest rate is matched in the short term to market developments - mostly every six months. This form of financing is mainly used on the Euromarket. Borrowers are large companies and governments. Where comparatively large loans are involved, they are granted by several banks together ("consortium"/syndicate). For refinancing six-monthly deposits are generally raised on the international money markets. Accordingly, the bank providing the loan fixes the interest rate anew at regular intervals; the money-market rate valid in London or Frankfurt is generally taken as a basis. To this is added a fixed surcharge which is determined among other things according to the creditworthiness of the borrower.