Fill each gap with a suitable word from the box. Sum up the text in 5-7 sentences. Present your summary in class.

 

institutions

impact

banks

apply

operating

legislation

engage

branches

responsibilities

conduct

activities

powers

 

US Activities of Foreign Banking Organizations

 

The International Banking Act of 1978 (IBA) provided for federal regulation of the US operations of foreign banks and granted important new responsibilities to the Federal Reserve for the supervision and regulation of such operations. Enactment of this __________ followed rapid growth in the activities of foreign banks in United States and an increase in their competitive _________ upon domestic markets.

The IBA created a federal regulatory and supervisory structure for the US branches and agencies of foreign __________, similar to that applicable to US banks. This policy of “national treatment” promotes competitive equality between domestic and foreign banks operating in this country the same __________ and subjecting them to the same restrictions and obligations that _________ to US banks. As part of the implementation of national treatment, the IBA limited expansion of interstate deposit-taking and domestic non-banking ____________ of foreign banks, provided the option of federal licensing for agencies and branches that _________ in retail deposit-taking.

At the federal level, the IBA apportioned primary supervisory responsibility for US ________ and agencies of foreign banks among the three federal banking agencies, according to the type of license and whether the banking office has deposit insurance. In addition, the Federal Reserve was given broad authority for the supervision of all federal and state-licensed branches and agencies of foreign banks ____________ in the United States. In fulfilling this responsibility, the Federal Reserve must assess the impact and condition of foreign banks operating across state lines. To carry out its ___________, the Federal Reserve has statutory authority to examine the assets and liabilities of all branches and agencies, but it generally relies upon examinations that state and other federal banking authorities ___________. Under the Bank Holding Company Act and the International Banking Act, the Federal Reserve also has responsibility to approve, review, and monitor the US non-banking activities of foreign banking organization.

 

Words you may need:

enactment – введення закону в силу

applicable – застосовуваний

“national treatment” – національний режим

(retail) deposit-taking – прийом внесків від населення

option – вибір, право вибору

apportion – розподіляти

statutory authority – право, надане законом

assets and liabilities – активи та пасиви

 

5.a) Read and discuss the text.

b) Single out the main facts from the text and present them in short essay.

c) Give your answer to the question in the title.

 

Is Monetary Policy Needed?

 

Many people believe that central banks should conduct an active, interventionist monetary policy even through most countries are abandoning other forms of state intervention in their economies, such as price controls, income policies, and industrial planning. These and other forms of invention, such as agricultural policies and state ownership of business enterprises, waste economic resources and distort markets.

Monetary policy, which represents government intervention in the marketplace for credit, exhibits the same negative effects. The time has come to challenge the need for monetary policy as practiced by central bankers (often with finance ministry guidance). The financial markets, operating under appropriate tax and structural policies, will produce far greater price stability and smoother economic growth than central bankers can.

Some people still believe that controlled growth of the money supply will minimize inflation. In fact, the quantity of money in the industrialized nations today is essentially demand-driven. Currency, a key component of the money supply, is demand-driven when people can easily exchange unneeded currency for interest-bearing financial assets, such as bank deposits and bonds. Currency-driven inflations occur only when governments finance their obligations in currency that cannot be converted easily into other assets.

Bank deposits, the main component of the money supply in the industrialized countries, are demand-driven as well. This demand reflects the willingness of individuals and businesses to provide credit to the economy in which they operate, versus investing in real assets or moving funds to other countries.

Reserve requirements on bank deposits, still a favoured monetary policy tool of some central bankers, do not restrict bank lending.

As a practical matter, monetary policy in the industrialized world today essentially takes the form of announced official rates for lending to banks and central bank “steering” of short-term rates.

In effect, civil servants, called central bankers, tell participants in the highly competitive and increasingly internationalized financial marketplace what they, the civil servants, believe short-term interest rates should be.

 

Words you may need:

interventionist policy – інтервенціоналістська полїтика

abandon – відмовлятися від чого-небудь

exhibit – проявляти, показувати

demand-driven – той, що залежить від попиту

interest-bearing – той, що приносить процентний дохід

currency-driven inflation – інфляція, що є наслідком об’єму валютних засобів

convert – конвертувати

versus – проти, у порівнянні з

“steering” – управління, керівництво

civil servant – державний службовець

credit market – ринок кредитів

to clear the market – регулювати ринок

6.a) Read and discuss the text.

b) Single out the main facts from the text and present them in short essay.

c) Say why the CBR is interested in the development and improvement of the payment system of Russia.

Payment Systems

 

Public policy responsibility for the payment system usually rests with central banks. Central banks are naturally interested in the payment system because it is a key component of the operation of financial markets and has important implications for the trading efficiency of the real economy. Of particular concern to central banks is clearing and settlement in financial markets where trading results in large payment obligations, such as the securities, commodity, interbank funds, and foreign exchange markets.

The central bank also participates in the payment system as a provider of interbank payment services. The role of the central bank in operating the interbank system depends on the development of a nation’s payment system.

The Central Bank of Russia, with the assistance of international experts, has taken steps to raft legislation and oversee the decentralized expansion of Russia’s domestic payment system. Progress has included improvements in the Interbank Payments System, involving the use of computer-generated instructions with specialized software. An electronic payments system for cash settlement was installed in Moscow, where 65 per cent of total document urnover in Russia occurs. The so-called automatic payments system began with eight banks in September 1993. As of July 1994, about 60banks and two cash settlement centers (all in the Moscow area) participating in the automatic payments system. Eventually, all banks will be part of this system. Efficiency at other cash settlement centers was improved, and growth was recorded in the number of both interbank settlement centers and networks of banks with cross-connecting correspondent accounts that act as settlements agents for associated groups of smaller banks.

 

Words you may need:

rest – покладати (про зобов’язання)

software – комп’ютерне програмне забезпечення

document turnover – документообіг

cash settlement center – розрахунково-касовий центр

cross-connecting correspondent accounts – перехресні кореспондетнські рахунки

 

ž Tests:

I. For each word or sentence choose the correct definition:

1. The central bank in Ukraine is called:

a) Federal Reserve Board;

b) Bundesbank;

c) National Bank

 

2. The board of governors of the Fed has its headquarters:

a) in Washington D.C.;

b) in New York;

c) in Chicago

 

3. The Fed consists of:

a) twelve federal reserve banks;

b) eleven reserve banks;

c) twelve reserve banks and a board of governors

 

4. The banking system in Ukraine is organized as:

b) 1-tier system;

c) 2-tier system;

d) 3-tier system

 

5. The National Bank pays:

b) tax on profit;

c) tax on property;

d) charges to the Pension Fund;

e) it is exempt from taxes

II.Match what statements are true and what are false. Results write to the table:

 

1. The central banking system plays a very important role in the fiscal policy of national government.
2. Central banks act as lenders of last resort to commercial banks with liquidity problems.
3. The Federal Reserve System, is known as an independent agency of Congress of Russia.
4. Check clearing means that check written on one bank can not be accepted at any other bank.
5. The main reason for setting up the Fed was preventing of the banking panics.
6. Refinancing of commercial banks is one of the main instruments of the national bank of Ukraine.

Table

True
False

 

III. Fill the tables:

a)

 

 

ì Unit 5

BANKING SYSTEM

I. READING

 

1. Stress the first syllable:

banking, clearing, current, ultimate, margin, overdraft, valuables, custody, retail, wholesale, cautious, treasury.

2. Stress the second syllable:

advance, deposit, inherent, collect, facility, discount, redeem, investment, offshore, denominated, transact, withdrawal, percentage.

 

3. Stress the third syllable:

definition, intermediary, underwriting.

 

4. Read the text:

COMMERCIAL BANKS

 

By definition, banks are institutions which accept money from people for safe keeping, lending it out to others, but particularly creating money by lending their credit, i.e. by making loans and advances to customers. Banks make money work at all levels in industry and commerce.

Thus, commercial (or in the UK clearing) banks are providers of payment services and they act as financial intermediaries. They offer a variety of services such as deposit and current accounts tailored to fit particular savers’ preferences¹ and they lend the funds they receive on a variety of terms which satisfy the needs of a range of borrowers.

By pooling risks, by studying the experience of many individuals and by acquiring the expertise to assess the prospect of profit and loss inherent in lending, banks are able to provide their savers with a combination of interest, ease of repayment and protection against loss that are better than these savers could obtain by lending directly to the ultimate borrowers. Banks mediate between these borrowers and savers to achieve a profit. In this intermediation process costs are incurred which must be met out of the bank’s margin between the borrowing and lending interest rates.² Banks are able to achieve these margins through economies of scale. But the margin is always under pressure from the basis costs of the business and from competition. They make their profit by paying a lower rate of interest for the money they lend.

Later, other activities were added to the original function of the banks. A modern joint-stock bank is expected to supply³ the following services: to accept deposits; to provide cheque facilities;⁴ to collect and pay cheques, bills and dividends; to grant loans to customers and arrange for overdraft facilities; to discount bills; to open letters of credit; to issue travellers’ cheques; to transact foreign exchange business;⁵ to provide safe-deposit strong-room facilities for clients’ valuables; to transact stock and share business⁶ on behalf of their clients and hold securities in safe custody.

Banks write “insurance” type contracts⁷ with depositors and borrowers. Thus, personal, corporate and bank depositors are assued that their deposits can be redeemed at full value.

Retail banking involves business with individuals and small businesses. Wholesale banking involves business primarily with other large banks, as well as some business with governments and very large multinational companies.

The more recent development in banking is the merging of investment and commercial banking, investment banking involves information intermediation and underwriting roles.

In addition, offshore banking, which is a part of a country’s banking business that is denominated in foreign currencies and transacted between foreigners, is developing too.

Since banks must always be able to meet demands for individuals, either immediately or at short notice, they keep a certain percentage of their deposits in actual cash with the National Bank/ this so called Cash Ratio is carefully guarded by banks through their credit policy. Bankers are cautious men and, besides organizing the first line of defence – maintaining the Cash Ratio, they guard carefully another percentage, which is the liquidity ratio, or near money i.e. cash, money at call and Treasury Bills, in their assets.

 

NOTES:

¹accounts tailored to fit particular savers’ preferences – рахунки, що відкриваються з урахуванням потреб вкладників

²In this intermediation process costs are incurred which must be met out of the bank’s margin between the borrowing and lending interest rates. – Ця посередницька діяльність потребує витрат, які повинні бути покриті за рахунок різниці між відсотковими ставками на позиковий та позичковий капітал.

³A modern join-stock bank is expected to …– Вважається, що сучасний акціонерний банк повинен...

⁴check facilities – послуги по обробці чеків

⁵to transact foreign exchange business – укладати угоди із іноземною валютою

⁶to transact stock and share business – укладати угоди із цінними паперами

⁷banks write “insurance” type contracts – банки беруть на себе зобов’язання по „страховим контрактам”

 

¤Vocabulary list

 

by definition – за визначенням

to lend – позичати

loan – позичка, позика, кредит

advance – аванс, позичка

clearing bank – кліринговий (комерційний) банк

intermediary – посередник

deposit account – депозитний рахунок, строковий вклад

current account – поточний рахунок

to pool risks – об’єднувати ризики

acquire – набувати

expertise – професійний досвід

assess – оцінювати

inherent – властивий

ultimate borrower – кінцевий, основний позичальник

margin – різниця, маржа

borrowing interest rate – процентна ставка на позичковий капітал

lending interest rate – ставка позичкового відсотку

to collect cheques – інкасувати чеки

bill – вексель

overdraft facility – послуги по овердрафту (перевищенню кредиту)

discount – враховувати (векселя)

letter of credit – акредитив

traveller’s check – дорожній чек

strong-room facilities – сейфові приміщення, сховище

valuables – цінності

safe custody (of securities) – зберігання (цінних паперів) у сейфі

redeem – викуповувати, погашати, повертати

retail banking – операції банків з широкою клієнтурою

wholesale banking – операції великих банків між собою

merging – злиття, об’єднання

investment banking – інвестиційна діяльність банків

intermediation – посередництво

underwriting – андеррайтинг, поручительство

offshore banking – офшорна діяльність банків

denominated – деномінований, названий

transact – укладати (договори), вести (справи)

withdrawal – зняття з коштів з рахунку

at short notice – з короткотерміновим повідомленням

percentage – процент; частка, виражена у відсотках

cash ratio – норма касових резервів (відношення касових активів банку до депозитів)

guard – охороняти, зберігати

cautious – обережний

liquidity ratio – коефіцієнт ліквідності (відношення ліквідних засобів до суми активів)

“near money” – “майже гроші“ (активи, що легко перетворюються в готівку)

money at call – гроші до запитання

treasury bill – казначейський вексель

 

? ІІ. VOCABULARY EXERCIES

Ex.1. Find equivalents:

 

 

 

Ex.2. Find English equivalents for the following Ukrainian phrases:

за визначенням; приймати гроші на зберігання; надавати позики; фінансовий посередник; поточний рахунок; на різних умовах; задовольняти потреби; набувати досвіду; оцінювати перспективи; виступати в ролі посередника; покривати витрати; різниця між процентними ставками; процентна ставка на позичковий капітал; ставка позичкового відстотку; економія, що обумовлена зростанням масштабу діяльності (виробництва); зазнавати впливу чого-небудь; приймати внески; Інкасувати та оплачувати чеки; враховувати векселі; відкривати акредитиви; виписувати дорожні чеки; надавати овердрафт; здійснювати операції з іноземною валютою; надавати сейфові послуги; за дорученням клієнта; зберігати в сейфі; відшкодовувати за повною вартістю; мати резерви; операції банків з широкою клієнтурою; операції великих банків між собою; злиття банків; задовольняти вимоги; зняття коштів з рахунків; з короткотерміновим повідомленням; норма касових резервів; коефіцієнт ліквідності; гроші до запитання; казначейські векселя.

Ex.3. Fill in the blanks with prepositions, pronouns or conjunctions if necessary:

1. Banks are institutions which accept money … people … safe keeping, lending it out … others.
2. Commercial banks lend their funds they receive … a variety … terms which satisfy the needs… borrowers.
3. Banks are able to provide their savers … a combination … interest, ease … repayment and protection against loss.
4. They make their profit … paying a lower rate … interest … the money they lend.
5. Retail banking involves … business … individuals and small business.
6. The more recent development … banking is the merging … investment and commercial banking, investment banking involves information … intermediation and underwriting roles.
7. Banks keep a cetain percentage … their deposits … actual cash … the National Bank.
8. Cash Ratio is carefully guarded … banks … their credit policy.

Ex4. Fill in the blanks below with the appropriate terms from the list:

1. Banks make money work at all levels in industry and _________.
2. Commercial banks are providers of _________ services and they act as financial __________.
3. Banks mediate between borrowers and _________to achieve a _________.
4. In intermediation process _________ are incurred which must be met out of the bank’s _________ between the borrowing and lending interest rates.
5. Banks write “insurance” type contracts with _____________ and borrowers.
6. Wholesale banking involves _________ primarily with other large banks.
7. Investment banking involves __________ intermediation and underwriting roles.
8. Offshore banking, which is part of a country’s banking business that is denominated in foreign __________ and transacted between foreigners.

Ex.5. Complete the following sentences:

1. Banks are institutions which ….
2. Commercial banks are providers of ….
3. Commercial banks offer a variety of services such as ….
4. A modern join-stock bank is expected to supply such services ….
5. Retail banking involves business with …, and the wholesale banking involves business with ….
6. Investment banking involves ….
7. Cash ratio is guarded by ….
8. Banks guard carefully another percentage ….

Ex.6. Answer the following questions:

 

1. What institutions are bank like?
2. What services do commercial banks offer?
3. How can commercial banks provide their savers against loss?
4. How do banks earn profit in the intermediation process?
5. What activities were added to the original function of the banks?
6. What business does retail/wholesale banking involve?
7. What are the more recent developments in banking?
8. What is offshore banking?
9. What is Cash Ratio?
10. What is liquidity ratio?
11. Do commercial banks play a very important role in an economy?

 

Ex.7. Translate into English:

1. Комерційні банки – установи, які приймають гроші на збереження та надають позики споживачам.

2. Банки пропонують депозитні та поточні рахунки, позичають та отримують кошти на різних умовах.

3. Банки займаються посередницькою діяльністю між кредиторами та дебіторами, щоб отримати прибуток.

4. Сучасний акціонерний банк повинен приймати вклади, отримувати та оплачувати чеки, векселі та дивіденди, надавати позики клієнтам упорядковувати послуги по овердрафту (перевищенню кредиту), здійснювати угоди з іноземною валютою, цінними паперами.

5. Банки беруть на себе обов’язки по „страховим” контрактам з вкладниками та кредиторами.

6. Операції банків з широкою клієнтурою включають комерційну діяльність із окремими людьми та малим бізнесом.

7. Найближча перспектива розвитку банків це злиття комерційної та інвестиційної діяльності банків.

8. Інвестиційна діяльність банків включає інформаційне посередництво та андерайтінг.

9. Норма касових резервів обережно охороняється банками через ведення ними кредитної політики.

 

Ex.8. Match each term in Column A with its definition in Column B:

 

 

Ex.9. Write several paragraphs on the following using given words and word combinations:

a) commercial banks

provider; intermediary; variety of services; deposits; current accounts; to fit; saver’s preferences; to lend; the funds; to satisfy needs; borrowers.

 

b) main functions of the commercial banks:

to pool risks; to acquire the expertise; to assess; the prospect of profit; loss inherent; to provide; repayment; protection; to obtain; ultimate borrowers; to mediate; to achieve.

 

c) retail and wholesale banking:

retail banking; to involve; individuals; wholesale banking; large banks.

 

d) investment and offshore banking:

merging; investment banking; to involve; information; intermediation; offshore banking; banking business; to denominated; foreign currencies; to transact.

— III. ORAL PRACTICE

A. DIALOGUE

1. Read and translate the dialogue in pairs:

 

Reporter: As far as I know, last year was a year of substantial progress for your bank, wasn’t it?

Banker: Yes, our bank made excellent progress. We increased market share and profitability. At the same time we continued to develop business infrastructure.

Reporter: What would you attribute this success to?

Banker: This significant improvement arose mainly from higher operating income reflecting improvement in net interest and non-interest income. Retail customer deposits increased progressively during the year. Loans and advances to customers increased during the latter months of the year and at year end were 4% higher than the prior year.

Reporter: Is retail banking your specialist area?

Banker: Not only. Like many banks we offer a combination of wholesale and retail banking. We continued to increase our presence in the health, education and charity sectors, the sectors where we have developed specialized expertise.

Reporter: Many banks follow this policy. They stay in a global niche, focusing on particular areas.

Banker: I don’t think it’s fair to compare us to an ordinary clearing bank. We are completely different.

Reporter: Why?

Banker: We’re cooperative bank, and our mission is to increase customer value, not shareholder value.

Reporter: Is your police bearing fruit?

Banker: Definitely. We constantly develop and introduce new services and products to match our customers’ needs. The number of customers is increasing.

 

Vocabulary:

substantial – значний

profitability – прибутковість, рентабельність

substantiate – приводити докази, підтверджувати

pre-tax profit – прибуток від оподаткування

operating income – прибуток від основної діяльності

net income – чистий прибуток

non-interest income – прибуток, за виключенням процентного прибутку

prior – попередній

loan portfolio – портфель позик, що видані банком

charity – благодійність

niche – ніша

focus – зосереджувати

to bear fruit – приносити плоди

 

 

2. Read the dialogue, translate the Ukrainian remarks into English and act it out:

 

Foreigner: In my opinion, the main objective of your crisis-hit banks is to achieve financial recovery. How do they set about this task?

Ukrainian: Багато наших банків знаходяться нині в складному становищі. Число вкладників значно скоротилось. Люди не довіряють банкам. Крім того, банки повинні більш серйозно відноситися до кредитної політики. Яку вони проводять.

Foreigner: First of all, your banks should restore confidence of their clients by honouring their obligations. Then they must make their services more attractive to their clients.

Ukrainian: Що стосується послуг, то наші банки, як правило, пропонують широке коло послуг: вони приймають кошти у вклади, приймають та оплачують чеки, здійснюють позики, надають кредит по овердрафту, продають та оплачують дорожні чеки, проводять операції із іноземною валютою, надають сейфові послуги, здійснюють операції з цінними паперами, приймають на зберігання цінні папери своїх клієнтів.

Foreigner: In my country the customers’ service requirements are changing. Increasing numbers of customers prefer the convenience of telephone banking. What about your country?

Ukrainian: Мені здається, що наші вкладники більш консервативні в цьому відношенні, хоча банкомати та кредитні картки також широко використовуються. Крім того, багато банків також розширюють мережу своїх філій, що дозволяє їм приділяти більше уваги безпосередньому обслуговуванню клієнтів та надавати їм різноманітні консультації.

Foreigner: It also seems to me that your banks must be more flexible, must pay more attention to the improvement of management.

Ukrainian: Повністю з вами згоден. Приймаючи до уваги посилення конкуренції в банківському бізнесі, банки повинні більш активно займатися управлінням своїми портфельними інвестиціями, угодами з іноземною валютою.

Foreigner: Yes? It’s the biggest challenge for the world banking community.

 

3.Make up a dialogue on the following:

1. You have a business trip to Russia. You have an opportunity to speak with one banker. Speak with him about the nature of the commercial banks in Russia.

2. Speak with your friend about the modern banking services. Do you use it and how?

B. COMMUNICATIVE SITUATIONS

1. Round-table discussion. The question on agenda: “The services that banks offer”. Open such questions:

· What services do banks offer to individuals/corporations?

· What kinds of banks exist? Describe their activities.

· How can an individual get a bank loan?

 

2. Explain how banks earn profit, how they act as financial intermediaries, how they create new money.

 

1. Do you have a credit card or a debit card? What was the most recent purchase you made your cards? Describe the sequence of connected events with the use of the cards.

 

1. Make a short essay on the following:

a) Services provided by banks.

b) Your attitude to the bank’s work.

c) Different kinds of accounts opened by banks.

d) The influence of modern technology on banking.

¨READ AND DISCUSS

1. a) Supply the articles where necessary.

b) Write down 3-5 questions about the texts.

c) Say a few words about services provided by commercial banks.

 

a) A bank was originally... bench set up in the marketplace for... exchange of money. In a commercial sense, a bank is... establishment where money is received on deposit to be repaid on demand or at notice, as may be arranged, and where loans are negotiated, bills discounted, and general financial business transacted. The main functions of... modern commercial bank are:

= to receive money on current accounts repayable on demand, or
on deposit accounts repayable subject to an agreed notice;

= to lend money by granting... loans and... overdrafts or
discounting bills of exchange and... promissory notes.

Apart from these two chief functions – linking up lenders and borrowers of capital – the bank performs many other functions:

=... obtaining and giving information as to... financial standing of
customers:

= transferring funds for... payments or... investments;

= making foreign currency transactions;

= issuing letters of credit, drafts and traveler’s cheques;

= undertaking duties of... agents, trustees and guarantors;

= performing leasing and factoring operations and others.

A very important part of any efficient banking system is... inter­bank market.

Some banks get more... deposits than requests for loans, and vice versa. The interbank market smooths out these imbalances by providing... way for … bank with too many deposits to pass them on to... bank with too many losin requests. In London there are different interbank markets for different currencies and for deposits with different maturities. Of these,... Eurodollar interbank market is particularly important, and LIBOR (the London interbank offered rate) is … key dollar rate for all the world's international borrowing and lending.

 

Words you may need:

sense – зміст, смисл

establishment – заклад

on deposit – на депозит

on demand – за вимогою

negotiate – вести переговори

bill – вексель

repayable – який підлягає оплаті

bill of exchange – переказний вексель

promissory note – простий вексель

apart from – окрім

link up – зв’язувати

financial standing – фінансовий стан

to issue a letter of credit – виставляти/виписувати акредитив

draft – тратта, переказний вексель

trustee – попечитель

guarantor – гарант

leasing and factoring operations – операції по лізингу та факторингу

interbank market – міжбанківський ринок

vice versa – навпаки

to smooth out imbalances – згладжувати диспропорції

maturity – термін погашення зобов’язання

LIBOR – ставка пропозиції (продавця) на лондонському міжбанківському ринку депозитів

 

2. a) Supply the articles where necessary.

b) Write down 3-5 questions about the texts.

c) Say a few words about services provided by commercial banks.

 

Bank Accounts

 

When money in placed in … bank it is said to be “deposited”.

The money may be put into... account from which it can be drawn at any time, or into ... account which can only be drawn upon after certain notice has been given. In British banking, these types of accounts are known as current accounts and deposit accounts respectively. In... USA, the corresponding terms are "demand deposits" and "time/or notice deposits".

A person uses a current account to provide … safe way of keeping his money, and having it easily available when he wishes to spend it.

Payments are made from current accounts, and money is withdrawn from them by means of cheques (... very small interest is paid on these accounts).

A deposit account is used for saving money, and … period of notice must be given before money can be withdrawn from a deposit account, especially when... amount to be withdrawals is fairly big. A higher rate of interest is paid by the bank on money on deposit accounts compared with current ones. A cheque book is provided for the customer when he opens this account. The terms "cash deposits" and “savings deposits” are sometimes used to denote the deposits continually turned over in... settlements of debts and those not held for current business, but as investments or savings.

 

Words you may need:

place – розміщувати, поміщати

respectively – відповідно

demand deposit – безстроковий вклад

available – доступний

time deposit – терміновий вклад

denote – позначати

turn over – обертатись

 

3.a) Supply the prepositions where necessary.

b) Write down 3-5 questions about the text.

The Nature of Banking

The nature... banks can best be understood... examining both their long-established functions and new emerging roles. The former include the provision of payment services and intermediation services. The latter include the merging... investment and commercial banking activities. The banking firm is recognized as a major force … the financial markets. As intermediaries they collect the deposits of the household sector, held... the form of demand and savings deposits, and recycle them... real investment capital. They perform maturity transformation – lending long and borrowing short. Banks provide the real sector... funds, the major source of financing for the industrial sector. Besides, banks are viewed now as evaluators of investment opportunities available... both the primary and secondary markets. The bank's role is to screen potential projects, to determine expected return and risk... the not-always-objective data presented... the demanders of funds.

What differentiates banks from other financial intermediaries? First, banks issue liabilities that are media of exchange in that the transactions velocities of chequable deposits tend to be much higher than the transactions velocities of other assets. Second, banks differ... other financial intermediaries with regard... the nature of the assets they hold. While most of the assets held... mutual funds are publicly traded, bank assets tend not to be traded... securities markets.

Words you may need:

nature – природа, характер

emerge з’являтись, виникати

the former/the latter – перший /останній з двох

savings deposit – ощадний вклад

to lend long – надавати довгострокові позики

to borrow short – отримувати короткострокові позики

real sector – реальний сектор

evaluator – оцінювач

screen – сортувати, проводити перевірку

expected return – очікувана прибутковість

to issue liabilities – видавати боргові зобов’язання

media of exchange – засоби обміну

velocity – швидкість

chequable deposit – депозит, який може вилучатись за допомогою чеків

publicly traded – ті, що продаються та купуються на фондовій біржі

4. a) Open the brackets putting the verbs in the correct form.

b) Say what you have learnt from the text about international banks.

 

Basic principles of commercial banking best (to demonstrate) in the case of international banks. These institutions are the dominant traders in the Euromarkets and the foreign exchange markets and are very active in some domestic credit and bond markets. The Eurocurrency market (to consist) of banks, commonly referred to as "Eurobanks", which accept deposits and ((to lend) in foreign currencies. Most of the banks active in the Eurocurrency market also (to trade) extensively in the foreign exchange markets. The Eurobanks concerned include some of the largest banks in the world.

Eurobanks are typically London branches of these large international banks and primarily (to engage) in intermediation in short-term deposits denominated in currencies other than Sterling. Eurosterling dealing (to take) place outside of British jurisdiction. The large American and Japanese banks (to dominate) the Eurocurrency business, but major British banks also (to be) very active throughout the 1980's. Some of the large world commercial banks also (to form) "consortium" banks as special purpose joint ventures set up to deal in the Eurocurrency market. From the parent bank's point of view, the Eurobank branch or consortium (to be) able to operate outside the range of domestic banking regulations and therefore (to achieve) considerable cost economies due to the absence of reserve requirements and other regulatory costs. International cooperation on capital adequacy standards (to begin) to erode this privileged position. As a result, the global financial intermediation activities of international banks are now increasingly subject to some form of international control. A further advantage of Eurobanking (to stem) from the scale of borrowing and lending in this market. This means that major economies of scale can be realized by banks. These factors explain why Eurocurrency deposit and lending rates fall within the equivalent domestic values. Thus the Eurosterling loan rate (to be) lower than the British domestic bank loan rate and the Eurosterling deposit rate (to be) higher than the British deposit rate. The resulting very narrow profit margin in the Eurocurrency market is only possible due to the transaction and regulatory cost savings achievable in this market compared with equivalent domestic markets.