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Glossary

A tool to interpret and understand the language associated with finance, corporate social responsibility and environmental sustainability.

sustainability iconSustainability terminology

LBG

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The LBG is a network of companies committed to measure and report the value and impact of their investment in the community. The LBG created a structured reporting model that has become an internationally recognized standard, also by the main sustainability indexes (such as the Dow Jones Sustainability Index).
LBO (Leveraged buyout)   The acquisition of one company by another through debt, such as bank loans and bonds.
LDA - Loss Distribution Approach   Model used for assessing exposure to operational risk that makes it possible to estimate the amount of expected and unexpected loss for any combination of event/loss and business line.
Lead manager/Book-runner   Leading figure of the issuing syndicate of a bond; he deals with the debtor, is responsible for choosing the co-lead managers and the other members of the underwriting syndicate in agreement with the same debtor; he determines the terms and conditions of issue, manages the execution thereof (almost always undertaking to place the most relevant portion on the market) and keeps the books (book-runner); in addition to the reimbursement of expenses and usual fees, he receives a special commission for this service.
Lease   A long-term rental agreement between the owner of a specific asset, the lessor, and another party, the lessee, who can be entitled to purchase the good at the end of the contract.
Lending risk-based   A methodology applied to a credit portfolio that makes it possible to identify the most suitable pricing conditions, taking into account the risk factor of every single credit.
Leveraged & acquisition finance   See "Acquisition finance".
Life Cycle Assessment (LCA)

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This is a process for assessing the effects that a product has on the environment over the entire period of its life thereby increasing resource-use efficiency and decreasing liabilities. It can be used to study the environmental impact of either a product or the function that the product is designed to perform. LCA is commonly referred to as a "cradle-to-grave" analysis. LCA's key elements are:
- identify and quantify the environmental loads involved; e.g. the energy and raw materials consumed, the emissions and wastes generated;
- evaluate the potential environmental impacts of these loads;
- assess the options available for reducing these environmental impacts.
Loss Given Default (LGD)   It indicates the estimated loss rate in the event of the default of a debtor.
Lower Tier 2   It designates subordinate liabilities that have the features to be included in supplementary capital and reserves or Tier 2.
LSE   London Stock Exchange.
M-Maturity   Residual life of an exposure, calculated according to the prudence principle. For banks authorised to use internal ratings, it is explicitly considered if the advanced method is adopted, while it is fixed at 2.5 years if the basic approach is used.
Margin of contribution of collection on demand   Difference between 1-month Euribor and the rate applied to current accounts of families and businesses.
Mark to market   Process of evaluating a portfolio of securities or other financial instruments on the basis of the prices expressed by the market.
Mark-up   Difference between the rate applied to the whole of families and businesses on loans with a duration of less than one year and the 1-month Euribor.
Market capitalisation   The value of a company obtained by multiplying the number of its issued shares by their market price.
Market maker   A financial intermediary who offers to buy and sell securities disclosing such offers throughout the mandatory quote period.
Market making   Financial activity carried out by specialised intermediaries, whose task consists of guaranteeing market liquidity and depth, both through their continuous presence and by means of their role of competitive guide in determining prices.
Market neutral   Operating strategies involving securities designed to immunise the relevant portfolios from risk in connection with market variations.
Market risk   Risk of loss due to unfavourable price changes on the financial markets.
MBO (Management buyout)   Leverage buyout whereby the acquiring group is led by the firm's management.
Merchant banking   Involves a range of activities including the underwriting of securities - both equities or bonds - issued by corporate clients for subsequent offering on the market, the acquisition of shareholdings for longer periods but with the same aim of transferring them later, and the providing of business consulting services in the matter of mergers and acquisitions or reorganisation.
Mergers   In a merger, two companies come together to become one. The shareholders of the merging companies often become joint owners of the combined entity.
Mezzanine   In a securitisation transaction it is the tranche ranking between the junior tranche and senior tranche.
Mib bancario   Stock exchange index of the banks listed on the Milan Stock Exchange.
Microcredit   Programmes granting small, easy-term loans to enterprises which are usually excluded from the banking circuits and aimed at job creation and entrepreneurship.
Microcredit and microfinance

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Microcredit is a tool that provides for the granting of loans to individuals and to small businesses who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral. The original and principal objective of this instrument is to exceed the limits of financial services posed by the poverty conditions of a large part of the population in developing countries. This is the granting of small sums of money for investment in equipment, machinery or livestock to start a family-run business; where it is addressed to small businesses, it is often accompanied by a valuable series of additional services, such as technical and managerial training or the creation of commercial networks. These experiences are also spreading in industrialized countries, obviously with different characteristics, but always according to the principle of encouraging the inclusion for financial services.
Mission, vision and corporate values

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The mission is the basic aim for which an organization exists. It is the justification of its existence. It expresses the reason why the organization is different from the others. The vision, instead, expresses "the company idea for the future", the horizon towards which the organization must strive in respect of its values. The values are the moral principles that the business community recognizes as worthy of appreciation. When they are expressed consistently, they form a body of ideas and ways of acting that on the one hand guides and the other forms the corporate culture.
Mobility management

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The Mobility Management function is responsible for coordinating personal travel, offering the most efficient solutions and integrating the different mobility tools. The figure of the Mobility Manager was established by the 27/1998 decree of the Ministry of Environment (Ronchi Decree).
MSCI Europe Index (Morgan Stanley and Capital International Europe Index)   Index designed to measure market equity performance in Europe.
Multistrategy/funds of funds (Funds)   Funds that do not invest in a single strategy but in a portfolio reflecting different strategies or in a portfolio of investment funds managed by third parties.
Mutual fund   A portfolio of stocks, bonds, or other securities administered by an investment company. Capital is contributed by smaller investors who buy shares in the mutual fund rather than the individual stocks and bonds in its portfolio. There are two types of mutual funds: open and closed-end. Shares in closed-end funds, some of which are listed, are readily transferable in the open market and are bought and sold, like other stocks. These funds do not accept new contributions from investors, but only reinvest the return on the existing portfolio. Open-end funds sell their own new shares to investors, stand ready to buy back their old shares, and are not listed on exchanges. Open-end funds are so called because their capitalisation is not fixed: they issue more shares according to demand.
Nasdaq Composite Index   Index of over 3,000 companies; mainly used to track technology stocks.
Non-performing   Term generally referring to loans characterised by unsteady performance.
NYSE   New York Stock Exchange.
OPA (Public Offering -   An offer made to the shareholders of a company by an individual or an organisation to buy their shares at a specified price in order to gain control of that company.
OPS (Share Exchange Offer)   A share exchange offer is a public offering in which the price is not paid through security transfer.
Option   Upon payment of a premium, the buyer acquires a right, but not an obligation, to purchase (call option) or to sell (put option) a financial instrument at a set price (strike price) within (American option) or on (European option) a given future date.
Ordinary share   Certificate representing one unit of ownership in a company. Ordinary shares have no guaranteed amount of dividend but carry voting rights.
Other related parties - close relatives   Close relatives of an individual is understood to mean family members predictably able to influence or be influenced by the individual interested in their relations with an entity. They include a cohabitant/common-law spouse (as well as a spouse not legally separated) and the individual's children, the cohabitant/common-law spouse's children, and the individual's or cohabitant/common-law spouse's dependents.
Outsourcing   Resort to operative support activities performed by outside companies.
Outstanding shares   Shares that are currently owned by investors.
Over-the-counter (OTC)   It designates transactions carried out directly between the parties and not in an organised market.
P/E ratio (price-earnings ratio)   The current market price of a company share divided by the earnings per share (EPS) of the company. The P/E ratio is one of the main indicators used to decide whether the shares in a company are expensive or cheap, relative to the market.
Partnership

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Among the initiatives and practices relating to social responsibility, the company may choose to invest in strategic relationships with civic and voluntary organizations, with Public Administration and Third Sector structures, creating forms of partnership. The term partnership indicates a close relationship in which two or more organizations share certain goals and provide resources to achieve them.
Past due loans   Past due loans correspond to past-due and/or borderline receivables on a continuing basis for over 180 days, in accordance with the definition provided under the rules in force regarding the reporting of such situations.
Patriot Act   Law issued in the USA following the terrorist attacks of September 11 and including, among other things, a series of provisions aimed at controlling the financing world and, in particular, money laundering operations through foreign banks.
Payout ratio   Dividends paid divided by company earnings over some period of time, expressed as a percentage.
PCF

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Paper processed without the use of chlorine or chlorine compounds. The process applies only to recycled paper, and certify that no chlorine was used in the de-inking process.
Pension fund   A fund set up by a company or government to invest the pension contributions of members and employees. These are then paid out when the beneficiaries reach the retirement age.
Performing   Term generally referring to loans characterised by steady performance.
Plain vanilla (derivatives)   Products whose price depends on that of the underlying instrument, which is quoted on the regular markets.
Pool (transactions)   See "Syndicated lending".
Preference share   Certificate representing one unit of ownership in a company. Preference shares receive dividends (and/or repayment of capital on closure) before ordinary shares, but have no voting rights.
PRI - Principles for Responsible Investment

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The Principles for Responsible Investment are principles geared to achieving a sustainable global financial system, born from the partnership between the UNEP-FI and the UN Global Compact (see glossary entries). The Intesa Sanpaolo Group adheres as a signatory to the Principles through Eurizon Capital SGR and the Intesa Sanpaolo Group Pension Fund.
Pricing   Broadly speaking, it generally refers to the methods used to determine yields and/or costs of products and services offered by a bank.
Primary market   The market into which a new issue of bonds, or any other form of medium-long term money-market paper, is launched.
Prime rate   The interest rate at which banks lend to their best (prime) customers.
Private banking   Business designed to provide preferred customers with asset management, professional advice and other personalised services.
Private equity   Investments in the venture capital of non-listed companies, usually small and medium-sized.
Probability of Default (PD)   Represents the probability that, within the space of 1 year, a debtor will default.
Profit warning   An announcement made by a listed company that forecasted results will not be obtained.
Project finance   Financing method in which the lender mainly examines the profitability of one single project both as a source of reimbursement and as a guarantee of the loan. This type of loan is generally destined to large, complex and expensive infrastructure projects, for example in the energy, chemical, mining, transport, environmental and telecommunication sectors.
Put option (sell option)   An option contract that gives the holder the right to sell a certain quantity of an underlying asset to the writer of the option, at a specified price (strike price) up to a specified date (expiration date).
PV01   Measures the variation in the value of a financial activity following a change of the base point in the curves describing interest rates.
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