Guide to Analysing Companies

Fiduciary deposit
A Swiss speciality in which a bank takes a deposit for the
purpose of lending it to someone else, entirely at the depositor’s
own risk. One of the big benefits for the bank is that the deposit
remains off its balance sheet (so it does not have to set aside ex-
pensive reserves in order to meet capital ratio require-
ments). Yet the bank still makes a turn on the transaction. The
advantage for the depositor is a higher rate of interest and
the veil of Swiss secrecy. Most fiduciary deposits are simply
passed on to other banks and become straightforward euro-
currency deposits. 
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Financial centre
Any place, for historical or fiscal or political reasons, in which
a large amount of financial business is transacted. Well-
established financial centres include London, New York, Tokyo,
Frankfurt and Paris. They have been joined by others in East
Asia such as Hong Kong and Singapore. Then there are “special-
purpose” centres, such as the Cayman Islands, where the attrac-
tions are low or no tax and greater opaqueness. Two things that
most financial centres have in common are light regulation and
a willingness on the part of the authorities to see international
business grow. It also helps – as with Hong Kong – to be near a
much bigger place such as Mainland China, which, by and
large, has yet to realise the benefits of such an approach.
Financial instrument
Documentary evidence of the ownership of a financial asset;
for example, a bill of exchange, certificate of
deposit, government bond, stock and so on.
Financial intermediary
An individual or institution that mediates between savers (that
is, sources of funds) and borrowers (that is, users of funds).
The chain from original source to ultimate use can be a long
one, with many intermediaries along the way.