Banking and financial services

IN GREAT BRITAIN

Lead-in: Why do you think the UK has been one of the main centres of financial activity? Key words and phrases 1. insurance – страхування 2. building societies –житлово-будівельні товариства 3. Stock Exchange –фондова біржа 4. commodity market –товарний ринок 5. capital flow –приплив капіталу 6. securities trading – торгівля ціними паперами 7. International Stock Exchange –Міжнародна Фондова Біржа 8. brokers and jobbers –брокери та джобери 9. annual national income –річний національний дохід 10. retail banks –банки, що обслуговують дрібну клієнтуру 11. merchant banks –торгові банки 12. discount houses –вексельні контори, облікові доми 13. Minimum Lending Rate –ставка мінімального позичкового відсотка 14. savings banks –ощадні банки 15. financial derivative markets –фінансові похідні (вторинні) ринки 16. factoring companies –факторингові компанії 17. Unlisted Securities Market –позабіржовий ринок цінних паперів (паперів, недопущених до обігу на фондовій біржі)

The United Kingdom has traditionally been a focus of financial activity worldwide and the 1980s saw considerable changes in the structure, composition, and regulation of financial institutions. These embrace banking, insurance, building societies, the Stock Exchange, and commodity markets.

London has continued to grow in size as a centre of financial operations. Capital flows and foreign exchange and securities trading have increased. Due to increased competition and developments in technology the International Stock Exchange was reorganized. As a result, new companies have been created to link British and foreign banks with former brokers and jobbers. The Financial services Act of 1986, the Building Societies Act of 1987, the Banking Act of 1987 regulate these new financial organizations.

Banking and financial services have always played in important role in the country’s economy. London is the world’s leading centre of insurance and handles 20 per cent of the world’s insurance business. It is also the world’s largest centre for foreign exchange. In the 1990s financial institutions and insurance accounted for 7 per cent of Britain’s annual national income.

The Bank of England is the only bank that issues banknotes in England and Wales. Several banks in Scotland and Northern Ireland issue currencies in limited amounts. There are more than a dozen commercial banks in Britain, including Lloyds, Barclays, National Westminster, and Midland.

All commercial banks are supervised by the Bank of England. The Bank of England licenses retail banks, merchant banks, discount houses, and other British or foreign banks. The Bank of England also controls the Minimum Lending Rate, which influences the general structure of interest rates. Savings banks, building societies also provide some banking services. Historically, the financial services industry has been based in the City of London. One of the world’s largest financial derivative markets is in the City as well. Saving by individuals is channeled into investments through insurance companies, pension funds, investment and unit trusts. Institutions that specialize in particular types of financing are finance houses, factoring companies, finance corporations. The UK has a number of organized financial markets. The securities markets consist of the International Stock exchange, which deals with officially listed stocks and shares, the Unlisted Securities Market, for smaller companies, and the Third Market, for unlisted companies. The London Stock Exchange is one of the biggest in the world. In 1986 an event known as the ‘Big Bang’ changed it significantly. This led to the rapid expansion of products, markets, and number of employees.

Ø Comprehension:

1. What changes took place in the financial life of Great Britain in the 1980s?

2. What is the percentage of the world’s insurance business that London handles?

3. Name the functions that the Bank of England performs.

4. What do securities markets consist of?

Ø True-false questions:

1. The 1990s saw considerable changes in the structure of financial institutions.	
2. After the 1990s the International Stock Exchange was reorganized.	
3. In the 1990s financial institutions and insurance accounted for 10 per cent of Britain’s annual national income.	
4. There are many banks that issue banknotes and coins in England and Wales.	
5. The Bank of England licenses retail banks, merchant banks, discount houses, and other British or foreign banks.	

Ø Text organization:

The Nationalments below express the main ideas of the text. Number them so that they are in the same order as the ideas in the text. The first one is given for you:

	Nationalment	Order
a.	The UK has a number of organized financial markets.
b.	Historically, the financial services industry has been based in the City of London.
c.	The United Kingdom has traditionally been a focus of financial activity worldwide.
d.	The 1980s saw considerable changes in the structure of financial institutions.
e.	There are more than a dozen commercial banks in Britain, including Lloyds, Barclays, National Westminster, and Midland.
f.	All commercial banks are supervised by the Bank of England.
g.	In 1986 an event known as the ‘Big Bang’ changed the London Stock Exchange significantly.

Ø Viewpoint:

Were there any changes in the financial life of Ukraine after the collapse of the Soviet Union?

 

 

MANAGEMENT

Lead-in: Why do you think management is so important in a company’s performance? Key words and phrases 1. top management – вище (виконавче) керівництво 2. long – range plans – перспективні плани 3. to make decisions – приймати рішення 4. middle management – керівники середньої ланки 5. responsible for – відповідальний 6. to put plans into action – приводити плани у дію 7. managerial skills – управлінські здібності, талант 8. human relations – людські відносини 9. to acquire information – набувати інформацію 10. to set and accomplish goals – ставити та виконувати цілі 11. to evaluate performance – оцінювати стан, роботу

“Management is tasks. Management is discipline.

But management is also people.”

(Peter Drucker, Austrian-American management guru)

Management is the achievement of organizational objectives through people and other resources. The manager’s job is to combine human and technical resources in the best way possible to achieve these objectives.

There are three levels of management in most organizations. Top management, the highest level of the management pyramid includes the president, executive vice-president, and other key company executives. These people devote their time to developing long-range plans for the company. They make broad decisions such as whether to manufacture new products, to purchase other companies or to begin international operations.

Middle management, the second level of the management pyramid, includes plant managers and division heads. They are responsible for developing detailed plans and procedures to put into action the general plans of top management.

Supervisory management, or first-line management, includes supervisors, foremen, department heads, section leaders who are directly responsible for daily and even hourly performance.

Every manager must possess basic managerial skills: technical skills, human relation skills and conceptual skills.

Technical skills refer to the manager’s ability to understand and use techniques, knowledge and tools of a specific discipline.

Human relations skills involve the manager’s ability to work effectively with and through people. The ability to create a work environment in which employees will contribute their best efforts to achieve objectives is a crucial managerial skill at every level.

Conceptual skills refer to the ability of the manager to see the organization as a whole and to understand how all parts fit together. These skills involve a manager’s ability to “see the big picture” by acquiring, analyzing, and interpreting information.

Managers at every level perform four basic functions: planning, organizing, directing and controlling.

Planning is the process of setting goals for the organization and developing strategies to accomplish them. It includes decisions about the production, marketing, financial strategies and the resources needed to accomplish them.

Organizing involves coordinating the efforts of employees in such a way that the goals of the organization can be accomplished.

Directing is the process of supervising and guiding employees so that plans are completed and the goals accomplished. It involves motivating people to do their best, explaining procedures, issuing orders.

Controlling is the function of evaluating the organization’s performance to determine whether it is accomplishing its objectives. It is closely linked to planning: the basic purpose of controlling is the determination of how successful the planning function has been.

 

Ø Comprehension:

1. What is management?

2. What does the manager’s job involve?

3. How many levels of management do you know?

4. What functions are performed by top management?

5. What are middle managers responsible for?

6. Name the functions of supervisory management.

7. Characterise four basic functions of management.

 

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. Management is the achievement of ….

2. There are… levels of management in most organizations.

3. Top managers make broad decisions as ….

4. Middle management is responsible for ….

5. Supervisory management includes ….

6. Basic managerial skills are ….

 

Ø Viewpoint:

Which, in your opinion, is the most important managerial skill?

 

 

INTERNATIONAL BUSINESS

Lead-in: Is there any difference between international business and international trade? Key words and phrases: 1. business transactions –ділові операції 2. balance of trade –торговий баланс 3. balance of payments –платіжний баланс 4. inward and outward cash flow –потік готівки 5. merchandise and services –товари (торгівля) та послуги 6. tangible goods –матеріальні, реальні товари 7. assets –майно, актив 8. joint venture –спільне підприємство 9. debt –борг, зобов’язання 10. equity –звичайна акція, частка акціонера в капіталі підприємства

International business is characterized by all business transactions that involve two or more countries and may be of governmental or private character.

The concept of international business includes the balance of trade (the relationship between exporters) and balance of payments (the difference between inward and outward cash flow). A company can engage in international business through various means, including exporting and / or importing merchandise and services, direct and portfolio investment, and strategic alliances with other companies.

Merchandise exports are tangible goods sent out of the country; merchandise imports are tangible goods brought in. Since these goods visibly leave and enter they are sometimes referred to as visible exports and imports.

Service exports and imports are international earnings other than those derived from goods sent to another country. Receipt of these earnings is considered a service export, whereas payment is considered a service import. Services are also referred to as invisibles.

International business comprises a lot of services: travel, tourism and transportation; performance of activities abroad; use of assets from abroad.

Foreign investment is the ownership of property abroad. Direct investment is a subset of foreign investment that takes place when control follows the investment. When two or more ownership share a direct investment, the operation is known as a joint venture.

Portfolio investment can be either debt or equity. The factor that distinguishes portfolio investment from direct investment is that control does not follow this kind of investment.

Countervailing forces influence the conditions in which companies operate their options for operating internationally. The main factors causing changes in the world trade and investment patterns are economic conditions, technology, wars and political relationships.

Ø Comprehension:

1. What is international business characterized by?

2. What does the concept of international business include?

3. What is the difference between merchandise exports and merchandise imports?

4. Describe services that comprise international business.

5. Give the definition of a joint venture.

6. Is there any difference between portfolio investment and direct investment?

7. What are the main factors that cause changes in the world trade?

 

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. International business is characterized by ….

2. Companies can engage in international business through ….

3. Exports and imports are ….

4. Travel, tourism and transportation, … comprise international business.

5. Foreign investment is ….

6. There are many factors that cause changes in the world trade: economic conditions, ….

 

Ø True-false questions:

1. International business is characterized by all business transactions that involve two or more countries and may be of governmental or private character.	
2. A company can engage in international business through various means: exporting and/or importing merchandise and services, direct and portfolio investment, and strategic alliances with other companies.	
3. Merchandise imports are tangible goods sent out of the country.	
4. International business doesn’t comprise performance of activities abroad.	
5. Portfolio investment doesn’t differ from direct investment.	
6. Economic conditions, technology, wars and political relationships are the main factors causing changes in the world trade and investment patterns.	

 

Ø Viewpoint:

As part of international business, does tourism play an important role in the economy of our country?

 

 

INTERNATIONAL TRADE

 

Lead-in: Why do most countries exchange goods and services? Key words and phrases 1. to merit special attention –заслуговувати особливої уваги 2. to impose restrictions –накладати обмеження 3. currency –валюта, гроші 4. comparative costs –порівняльні витрати 5. demand and supply –попит та пропозиція 6. terms of trade –умови торгівлі 7. average price– середня ціна 8. foreign demand –зовнішній попит 9. domestic inflation –внутрішня інфляція 10. deterioration of trade– погіршення торгівлі

 

International trade merits special attention because it differs in several crucial respects from the exchanges of goods and services that take place within a country. First, there are more obvious “barriers” to trade between countries than to trade within countries. These can be simply the result of differences in economic structure, tradition, language or natural resources, or they can be restrictions imposed by governments on the movement of imports, exports, labour and capital. Secondly, different countries use different currencies, and trade is only possible where the currency of one country can be exchanged for the currency of another one. This fact alone is of little consequence where the relationship between currencies is fixed, but in practice the relative values of currencies often change, presenting us with a whole series of additional economic problems. Finally, economic conditions and government policies normally vary more significantly between countries than between regions of a country. Thus buoyant demand in the UK might cause the purchase of more goods and services from abroad than foreigners buy from the UK, resulting in balance of payments problems in the UK.

Terms of trade

We have seen that gains from trade are possible when comparative costs differ, and that the size of the overall gain and how it is distributed between countries will depend on the prices at which trade takes place. These prices (the terms of trade) will depend on the demand and supply for products of international trade. The country with the most highly desired goods on offer will receive the most advantageous terms of trade.

We define a country’s terms of trade as the quantity of that country’s exports that have to be sold per unit of imports. The terms are expressed as an index, and they are estimated by comparing the average price of exports with the average price of imports. Thus: T = px x 100 pm, where T = terms of trade, px = an index of the average price of exports and pm = an index of the average price of imports.

An ‘improvement’ in the terms of trade means that the country is able to obtain more imports for a given quantity of exports than before. This appears to be a good thing, but a country’s export prices can be driven up either by strong foreign demand or by domestic inflation. The former reason is wholly beneficial and can be regarded as a genuine improvement in that country’s external position. However, if prices are running ahead of other countries’ export prices, the benefits to be gained from the ‘improving’ terms of trade will be short-lived.

Conversely, a ‘deterioration’ in the terms of trade means that a country is able to buy less imports per unit of exports. A deterioration can be organised deliberately by a policy of currency depreciation which lowers the price of exports and raises the price of imports. Exports are therefore encouraged and imports discouraged sufficiently.

 

Ø Comprehension:

1. Why does international trade merit special attention?

2. What do the terms of trade depend on?

3. What does “deterioration” in the terms of trade mean?

4. How can we characterize improvement in terms of trade?

 

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. In some respects international trade differs from ….

2. There are more obvious barriers to trade between countries than ….

3. The country’s terms of trade is the quantity of exports ….

4. Improvement in trade means ….

5. Deterioration in terms of trade means ….

Ø Text organization:

The Nationalments below express the main ideas of the text. Number them so that they are in the same order as the ideas in the text. The first one is given for you:

	Nationalment	Order
a.	International trade differs in several crucial respects from the exchanges of goods and services that take place within a country.
b.	Conversely, a ‘deterioration’ in the terms of trade means that a country is able to buy less imports per unit of exports.
c.	An ‘improvement’ in the terms of trade means that the country is able to obtain more imports for a given quantity of exports than before.
d.	We define a country’s terms of trade as the quantity of that country’s exports that have to be sold per unit of imports.

 

Ø Viewpoint:

How can you characterize the situation with the international trade in Ukraine:

excellent; good; average; poor;

INTERNATIONAL TRADE.