Unit 7 Money and financial institutions

Ex.1. Read and memorize the following words, words combinations and word-groups:

Customer - клієнт

flow - потік, рух

valuables - цінні речі

guardian - хранитель

prevent - запобігати

allocating - розподіл

to issue – випускати, виписувати (чек)

current account – поточний рахунок

interest – банківський відсоток

deposit account – депозитний (накопичувальний) рахунок

business entitу – юридична особа

interest rate – відсоткова ставка

to lend - давати позику

loan – позика

insurance – страхування

bonds – облігації

securities – цінні папери

merger – злиття, об`єднання

acquisition – придбання, поглинання

mortgage – іпотека

retail banking – банківські послуги, орієнтовані на широку клієнтуру

business banking - банківські послуги, орієнтовані на юридичних осіб

corporate banking - банківські послуги, орієнтовані на корпоративних клієнтів

BANKS

1. A bank is a financial institution licensed by a government. Its primary activities include providing financial services to customers while enriching its investors. Banks are important players in financial markets and offer financial services such as investment funds.

2. Banks are closely concerned with the flow of money into and out of economy. They often cooperate with government in efforts to stabilize economies and to prevent inflation. They are specialists in the business of providing capital and in allocating funds. Banks originated as places to which people took their valuables for safe-keeping, but today the great banks of the world have many functions in addition to acting as guardians of valuable private possessions.

3. We can say that the primary function of a bank today is to act as an intermediary between depositors who wish to make interest on their savings and borrowers who wish to obtain capital. Bank normally receive money from their customer in two distinct forms: on current account and on deposit account. With a current account, a customer can issue personal cheques. No interest is paid by the bank on this type of account. With a deposit account however, the customer leaves his money in the bank for a minimum specified period of time. Interest is paid on this money. The bank in its turn lends the deposited money to customers who need capital. This activity earns interests for the bank, and this interest is almost always at a higher rate than any interest which the bank pays to its depositors. In this way the bank makes its main profits.

4. Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to small and medium businesses; corporate banking, directed at large business entities; private banking, providing wealth management services to rich individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.

5. Central banks are normally government-owned and charged with regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.

6. A commercial bank is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provides checking accounts, savings accounts and that accepts deposits. Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses. It is the most successful department of banking. Commercial banking may also be seen as distinct from retail banking. Many banks offer both commercial and retail banking services.

7. Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, credit cards, and so forth.

8. An investment bank is a financial institution that raises capital, trades securities and manages corporate mergers and acquisitions. Investment banks profit from companies and governments by raising money through issuing and selling securities in capital markets and insuring bonds, as well as providing advice on transactions such as mergers and acquisitions. A majority of investment banks offer strategic advisory services for mergers, acquisitions or other financial services for clients and act mainly as intermediaries for a fee.

9. Universal banks, more commonly known as financial services companies, perform functions of all types of banks. These big banks are very diversified groups that, among other services, also offer insurance.

Ex.2 Find in the text and put down English equivalents to the following word combinations:

Організація, що отримала ліцензію уряду; фінансові ринки; інвестиційні фонди; розподіл коштів; рух коштів; запобігати інфляції; малий та середній бізнес; банки, орієнтовані на широку клієнтуру; іпотека; стратегічні консультативні послуги; контроль над комерційними банками; діяти в якості посередника; злиття та придбання корпорацій; пропонувати страхування.

Ex.3. Find where in the text it is said about the points given below. Put down the number of the paragraph.

1. the definition of the term “bank”;

2. functions of banks;

3. two types of accounts;

4. types of bank activities;

5. functions of central banks.

Ex.4. Find the terms in the text which designate the following:

1. a financial institution licensed by a government, its primary activities include providing financial services to customers while enriching its investors;

2. a type of account with which a customer can issue personal cheques and no interest is paid by the bank on it;

3. a type of account with which the customer leaves his money in the bank for a minimum specified period of time and interest is paid on this money;

4. a financial institution that raises capital, trades securities and manages corporate mergers and acquisitions;

5. a type of a bank that performs functions of all types of banks.;

6. a bank providing wealth management services to rich individuals and families.

Ex.5. Say if the following statements are true or false:

1. Banks are important players in financial markets and offer financial services such as investment funds.

2. We can say that the secondary function of a bank today is to act as an intermediary.

3. With a deposit account, a customer can issue personal cheques.

4. Central banks generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.

5. Private banking provides services to small and medium businesses.

6. Retail banking offer savings and checking accounts, mortgages, personal loans, credit cards, and so forth.

7. A majority of investment banks offer strategic advisory services.

Ex. 6. Find the answers to the questions in the text. Put down the number of the paragraph:

1. What are banks concerned with?

2. What was the original function of banks?

3. In what way does a bank get its main profit?

4. What is the function of a commercial bank?

5. How do investment banks profit?

Ex. 7. Answer the questions of the Ex. 6 orally

Ex. 8. Explain the difference between current and deposit account.

Ex. 9. Describe the mechanism of getting profit by banks.

Ex. 10. Prove that central banks are very important for economic stability of a state.

Ex. 11. Make up a plan covering the main ideas. Discuss the text according to the plan.

Ex. 12. Discussion points:

1. Discuss the advantages and disadvantages of getting credit and making a deposit.

2. Think over and discuss the future of banking according to the modern situation in the world and global economy.