Text 1. Introduction to banking and financial markets

A commercial bank borrows money from the public, crediting them with a deposit. The deposit is a liability of the bank. It is the money owed to depositors. In turn the bank lends money to firms, households, or governments wishing to borrow.

Commercial banks are financial intermediaries with a government license to make loans and make issue deposits, including deposits against which cheques can be written.

Major important banks in most countries are included in the clearing system in which debts between banks are settled by adding up all the transactions in a given period and paying only the net amounts needed to balance inter-bank accounts.

The balance sheet of a bank includes assets and liabilities. Cash assets are notes and coins kept in their vaults and deposited with the Central Bank. The balance sheet also shows money lent out or used to purchase short term interest-earning assets such as loans and bills. Bills are financial assets to be repurchased by the original borrower within a year or less. Loans refer to lending to households and firms and are to be repaid by a certain date. Loans appear to be the major share of bank lending. Securities show bank purchases of interest-bearing long-term financial assets. These can be government bonds or industrial shares. Since these assets are traded daily on the Stock Exchange, these securities seem to be easy to cash whenever the bank wishes, though their price fluctuates from day to day.

The liability side of the balance sheet includes mainly deposits. The two most important kinds of deposits are sure to be sight deposits and time deposits. Sight deposit can be withdrawn on sight whenever the depositor wishes. These are the accounts against which we write cheques, thus withdrawing money without giving the bank any warning. Therefore, most banks do not pay interest on sight deposits, or chequing accounts.

Before time deposits can be withdrawn, a minimum period of notification must be given within which banks can sell of some of their high-interest securities or call in some of their high-interest loans in order to have the money to pay out depositors. Therefore, banks usually pay interest on time deposits. Apart from deposits banks usually have some other liabilities, as for instance, deposits in foreign currency, cheques in the process of clearance and others.

ACTIVE VOCABULARY

Deposit deposit money with/in a bank	вклад в банке; депозит; класть в банк, депонировать, отдавать на хранение
issue a deposit	открывать счёт
withdraw (withdrew, withdrawn) a deposit	изымать вклад; отозвать вклад, взять вклад в банке
time deposit, syn. demand deposit	срочный вклад
sight deposit syn. current account	Счёт до востребования; текущий счёт
chequing account	чековый вклад, счёт до востребования (по которому снятие средств может производиться с помощью чека)
Write a cheque against a deposit/ an account	выписывать чек против счёта
Liability	обязательство; pl долги; денежные обязательства, задолженность
to meet liabilities	покрыть свою задолженность
Owe	быть должным, задолжать (что-либо кому-либо)
lend (lent, lent) (smth to smb), lens smth out to smb	давать взаймы, одалживать
Lender	Кредитор
Loan	заем, ссуда
make a loan	давать ссуду
repay a loan call (in) a loan	возвращать, отдавать ссуду требовать возвращение займа
Clearing Clearance	клиринг; безналичные расчеты между банками производство расчётов через расчётную палату; оплата долга; урегулирование претензий
debt to the amount of ten pounds	долг на сумму десять фунтов
settle a debt with smb	выплатить кому-л. Долг
handle a transaction syn. make/undertake (undertook, undertaken) a transaction	проводить сделку
Net	чистый; нетто; без вычетов; сальдо; окончательный
net amounts	Зд. окончательные суммы
Cash	наличные деньги; получать наличные, обналичивать
Interest	процент; проценты, процентный доход
interest-earning/ interest-bearing	приносящий проценты (доход)
Bill	вексель, тратта; долговые обязательства
Securities	ценные бумаги
Bond	облигация; долговое обязательство
stock exchange	фондовая биржа
Stock	акция; pl облигации; ценные бумаги
Whenever	когда бы ни, всякий раз когда
Fluctuate	Колебаться

VOCABULARY AND GRAMMAR EXERCISES

Exercise I. Переведите предложения, обращая на инфинитивную конструкцию «сложное подлежащее» в действительном залоге:

Dividends and interest on capital are not likely to be paid in the years when the company has not received profit.

Since the Stock Exchange is a relatively free market, share prices are sure to fluctuate as market conditions change.

The government policy proved to have resulted in a rapidly growing unemployment rate.

The bank unable to meet its liability in due time cannot expect to stay in business.

The clearing system proved to have become a convenient and economical means of settling debts between banks.

Their current account happened to have been opened by the same bank as ours.

Exercise II. Переведите предложения, обращая внимание на употребление инфинитива.

Financial capital to be invested in a business can belong to the business itself or it can be lent by a bank.

The most important credit instruments to be used I order to get a loan are corporate and government bonds.

The current liabilities of the company are too high to be met without an additional loan.

The firm was too heavily in debt to hope to get any credit.

The demand for money is understood as the quantity required to undertake business transactions.

The bank has refused to issue a chequing account. Therefore, we’ll have to carry cash on us whenever we want to make a purchase.

A bill is an interest-bearing financial security which is issued by a firm or government in order to borrow short-term money to be repaid usually within three months.

To reduce his cash holdings (наличные деньги) to a minimum will be only natural for a banker since they produce no income.

Financial capital to be used in a business may either belong to the business itself or it may be borrowed from a bank.

Exercise III. Подберите определения к следующим терминам:

Current account, cheque, cash, liability, stock exchange, clearance, securities

1) means of borrowing money and raising new capital issued by companies, financial institutions, governments;

2) deposit which can be withdrawn on demand and which is used by depositor to finance day-today personal and business transactions;

3) coins and bank-notes which are in circulation in a country;

4) a market where company stocks and shares as well as government bonds are bought and sold;

5) a form of debt, for instance, a loan;

A means of transferring or withdrawing money from a bank or building society current account.

Settling liabilities through the Clearing House.

Exercise IV. Используя текст, закончите следующие предложения:

1. Banks borrow money from the public in order to …
2. The clearing system lets banks
3. The asset side of the bank balance sheet includes …
4. The liability side of the balance sheet includes…
5. The two most important kinds of deposits are known …
6. Cheques can be written against …
7. Interest is usually paid on …
8. To withdraw a time deposit one must give the bank a period of notification for the bank …

Exercise V. Переведите предложения на русский язык.

Sight deposits at banks appear to have two main characteristics: cheques can be written or transfers can be made against deposited funds, and the interest paid is lower what other assets offer.

If you keep cash on hand or hold your money in a chequing account, it is not a bad idea to think of how much interest you could have earned with a time deposit.

A bond is an interest-bearing security issued by businesses and by the government for the purpose of borrowing long-term funds. Bonds are most likely to be issued for periods of several years.

The clearing house brings together all cheques and determines at the end of each day net debts between banks. These debts are then settled by transferring funds held by commercial banks at the Central Bank.