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Banks and Banking

Banks are the most important link in the world of money. Nowadays they perform the most part of the work of transferring money from a customer to a seller, by operating the system of payment in the economy.

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Banking in its modern sense evolved in the 14th century in the prosperous cities of Renaissance Italy but in many ways was a continuation of ideas and concepts of credit and lending that had their roots in the ancient world.

Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers in the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as Automated Clearing House (ACH), Wire transfers or telegraphic transfer, EFTPOS, and automated teller machines (ATMs).

Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.

Banks provide different payment services, and a bank account is considered indispensable by most businesses and individuals. Banks can create new money when they make a loan. New loans throughout the banking system generate new deposits elsewhere in the system. The money supply is usually increased by the act of lending, and reduced when loans are repaid faster than new ones are generated.

Almost everyone in the world uses or has used banking services. Families keep their savings there, and banks pay them interest rates on their deposits and give them loans to buy expensive goods. Companies conduct payment through them. Commercial organizations, which work at the market and in production, take loans for their needs and conduct all payments with buyers and sellers through them. Landowners and owners of real estate take loans from the bank to buy an estate or to make use of it and pay back loaned money.

Everything in the economy is controlled by money. Banks perform the function of controlling circulation between firms, depositors and loaners, and offering services to make that circulation easier for them.

A health and stable economy of any country depends on healthy banking services. Any offers the following services: 1) deposit operations; 2) credit operations; 3) payment operations.

Deposit operations are the operations of placing clients, money into the bank on deposit. While keeping money for its clients, the bank pays them interest.

Credit operations are the operations of giving loans to bank’s clients and receiving, in exchange interest rates on those loans.

Conducting payment operations- the bank acts as an intermediary between sellers and payers, companies, tax agencies, citizens and the budget.

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New words and word combinations:

1) legal – юридический; 2) a sole proprietorship – единоличная собственность; 3) a partnership – партнерство; 4) a corporation – корпорация; 5) to be responsible for – быть ответственным за…; 6) a debt – долг; 7) to provide capital – обеспечивать капитал; 7) losses – убытки; 8) to obtain license – получить лицензию; 9) law – закон; 10) an advantage – достоинство; 11) a disadvantage – недостаток; 12) tax – налог; 13) to raise capital – увеличивать капитал; 14) co-owners- совладельцы; 15) a privilege – привилегия, преимущество; 16) to share – делить; 17) profit – прибыль.