Discuss the kinds of banks described in the text and their functions.

In a country with a developed banking system there are different kinds of banks with widely varying activities. They are:

1. The Universal banks. Those banks (commonly found in Switzerland, West Germany and the Netherlands) are allowed to do almost anything financial, from lending other people's money to underwriting, advising on investments, stockbroking, etc. Some frown on universal banking in the belief that it creates too many conflicts of interest within one bank. Can a bank give advice on a share for which it is the underwriter and also broker and banker to the issuer? That question has not stopped foreigners from wanting a Swiss bank account and taking their Swiss banker's investment advice.

2. The ordinary deposit banks. These include the commercial or joint-stock banks, large and small, some private banks. All these have direct contact with the public which deposits money with them and draws cheques on them.

3. The savings banks. The chief function of these banks is explained their name. In old times savings banks were banks which accepted onlу the deposits of small savers. They did no business with industry and provided no money-transmission service, had no cheque-drawing facilities. These distinctions between savings banks and other banks now being eroded.

4. The merchant banks, or "acceptance houses". Merchant banks are British banks which concentrate on advising companies about raising new capital and about buying or selling other companies. They do a bit of lending too. Some of them also specialize in fund management. Merchant banking is the business carried out over the last two hundred years or so by a small number of London-based institutions. The origins of merchant banking in London lie in the 18th century.

The name "merchant bankers" refers to their origin as mercantile houses specializing in the export of British products and the import of products from foreign countries. This involved remitting money from one country to another, and the bill of exchange on London became the means of financing the import and export trades, which

allowed the vendor and purchaser of traded goods to achieve liquidity; the role of the merchant was to put its name to or to "accept" a bill, which was then discounted in the market. The skill of the general merchant was to assess the credit of the purchaser whose bill it had accepted. Trade and its finance continued to form the backbone of their business and the growing significance of their ability to provide credit transformed a number of general merchants into merchant banks, specializing in accepting bills. In doing so they assisted London to become the world's financial centre: the bill of exchange on a London accepting house, denominated in sterling, became a means of settlement in trade throughout the world.

Merchant banks maintained excellent connections with leading British companies and frequently joined their boards. As a result, from the 1950s a small number of merchant banks, in addition to their acceptance business, came to dominate the business of corporate issues in the form of offers for sale of formerly private companies to the public, rights issues of equities and debenture issues. In these issues merchant banks acted both as advisers and as primary underwriters in guaranteeing a sale price to the vendor. Merchant banks took full advantage of the development of the Eurocurrency markets in London in 1970s, and were amongst the most active syndicators of currency loans to the international banking community. Merchant banks have built up a substantial business as investment managers on behalf of UK institutions, such as pension funds, as well as overseas governments and major institutions worldwide. They played a leading role in developing the international investment management industry in London.

5. The consortium banks. A consortium bank is a bank owned by a group of other banks from a number of different countries, no one of which owns a majority share. Consortium banks were children of the Euromarket. Born in the 1970s they gave smaller banks a way into the Euromarket hand in hand with bigger bank partners. The advantage to the bigger banks lay in their easier access to the big domestic customers of the smaller banks.

Some consortium banks continue to thrive by staying at the forefront of new financial techniques, acting as a type of merchant bank, some other were gobbled up by one or other of their shareholders.

Words you may need:

universal bank універсальний банк

underwriting n андеррайтинг, гарантоване розміщення (цінних паперів)

frown не схвалювати, відноситися негативно

erode розмивати(ся), руйнувати

fund management керування фінансовими коштами

London-based який знаходиться у Лондоні

mercantile комерційний, торговий

to remit money переводити гроші (по телеграфу)

vendor торговець, продавець

backbone хребет, основа

rights issues of equities випуск нових акцій, які пропонуються акціонерам компаній

debenture облігація (акціонерної компанії)

consortium bank консорційний банк

majority share контрольний пакет акцій

thrive процвітати

gobble поглинати (букв. пожирати)