Banking Terms - Set 8 (Payment Hub, Tax loss carry back, Tax Opinion, TARGET)

Trans-European Automated Real-time Gross settlement Express Transfer (TARGET)

The TARGET system is defined as a payment system composed of the RTGS system (in countries with 'Euro' currency) and the European Central Bank (ECB) payment mechanism. RTGS systems of non-participating countries may also be connected, provided that they are able to process the Euro alongside their national currency. The domestic RTGS systems and the ECB payment mechanism are interconnected according to common procedures to allow cross-border transfers throughout the European Union to move from one system to another system.

Tax loss carry forward

Tax benefit allowing an individual or organization to reduce a tax liability by applying net operating losses incurred in the previous year against income reported in current years. IRS tax rules permit carrying forward losses over next five years, resulting in a less tax.

Ex: For year 2011, Mike had loss in business of -$3000. In year 2012, he made profit of $5000. While filing tax, he can show 2011 loss and pay tax amount for $2000 only.

Tax Opinion

Legal opinion issued by a bond issuer's tax attorney stating, for computation of federal income tax, how a collateralized mortgage obligation will be treated by its holders. In municipal bonds, the tax opinion also states that the bond conforms to statutes making the bond interest exempt from federal income taxes.

Ex: section 80C states Government issued NSC bonds are tax-free.

Tax loss carry back

Tax benefit allowing an individual or organization to reduce a tax liability by applying net operating losses incurred in the current fiscal year against income reported in earlier years. IRS tax rules permit carrying back losses (the excess of allowable deductions over gross income) over the three prior years, resulting in a tax refund

Ex: For year 2011, Mike has paid $3000 as tax for his profit. But in year 2012, his business went down. He can recover it by refilling 2011 tax by showing current year loss.

Payment Hub

A Payment Hub enables financial institutions to implement a centralized payments infrastructure that facilitates origination through instruction management to execution across the enterprise. It enables the bank to have a centralized release of RTGS payment instructions and to intervene when necessary before a stipulated cut-off time to transmit the instructions on a timely basis. The Payment Hub enables Financial Institutions to move away from the silo approach in a controlled manner to significantly reduce time-to-market, migration risk and maintenance costs whilst providing a future proof, component based payment infrastructure.