Exercises

Ex. 1. Answer these questions:

A. 1. What is the major sector of any modern monetary system?

2. What are central banks responsible for?

3. What functions do central banks perform?

4. What is done to ensure the safety of a banking system?

5. Why are "prudential ratios" imposed on commercial banks?

6. What is the structure of the Federal Reserve System?

7. How are members of the board appointed?

8. What functions does the "Fed" perform?

9. What services does the "Fed" perform for banks and the government?

10. How does the "Fed" contribute to the stabilization of the banking system?

11. What role does the "Fed" play in the making of economic policy?

B. 1. How is the Russian banking system organized?

2. Has the role of the CBR changed over the years of the economic reforms?

3. What are the functions of the CBR?

4. What measures are being worked out to ensure stability of the Russian banking system?

5. How will the Russian banking business be developing?

6. What tax treatment is applied to banks in Russia?

Ex. 2. Give derivatives of:

important adj intervene v choose v tend v

national adj independent adj maintain v represent v

function n governor n finance n stability n

supervise v executive adj deposit n progress n

Ex. 3. Find English equivalents for the following Russian phrases from the text:

А. система центрального банка; быть важным (иметь значение); быть ответственным за проведение кредитно-денежной политики; контролировать денежную массу; устанавливать процентную ставку; проблемы нехватки ликвидных средств; осуществлять эмиссию денег; надежность банковской системы; депонировать средства в центральном банке под нулевые проценты; быть известным в финансовых кругах; совет управляющих; это результат длительного срока полномочий управляющих; члены совета назначаются; председатель совета выбирается; чеки, выписанные на банк; депонировать чеки в банке; осуществлять клиринг чеков через Федеральную Резервную Систему; вести счета; основная причина организации ФРС; покупать государственные облигации; операции на открытом рынке; многие банки обанкротились;

В. двухуровневая система; представительства иностранных банков; финансовые преобразования; система рефинансирования; заниматься операциями на открытом рынке; покрывать дефицит бюджета; неинфляционные меры; усиливать роль; отзывать лицензии; в свете недавних банкротств; соответствовать международным стандартам; резерв на покрытие возможных убытков; закон об ипотеке; обязательное страхование банковских вкладов; быть освобожденным от уплаты налогов; отчисления в Пенсионный фонд.

Ex. 4. Say in a few words what the main text is about. Use the opening phrases from Ex. 4 (Unit 1).

Ex. 5. Sum up the contents of the main dialogue. Use the phrases from Ex. 5 (Unit 1).

Ex. 6. Read the dialogue, translate the Russian remarks into English and act it out.

Foreigner. Western bankers unanimously admit that your banking system has changed rapidly since Russia embarked on economic reforms.

Russian: Да, это так. Я рад слышать такую оценку. Наша банковская система изменилась, и сейчас она является двухуровневой системой. Первый уровень представлен центральным банком, а второй – коммерческими банками.

F.: Undoubtedly, your Central Bank has contributed to the process and supported the reforms.

R.: Я лично считаю, что усилия ЦБ по осуществлению кредитно-денежной политики в новых условиях, в частности по контролю за денежной массой и борьбе с инфляцией, трудно переоценить.

F.: Your Central Bank has become very active in developing the banking sphere and the services it provides.

R.: Да, например, он ввел в банковскую практику операции РЕПО, ломбардные кредиты, а также проводит операции с ценными бумагами на вторичном рынке.

F.: Central banks in market economies are "lenders of last resort" for banks. Does your Central Bank help banks with liquidity problems?

R.: Отвечая на ваш вопрос, хочу прежде всего подчеркнуть, что ЦБР, контролируя работу коммерческих банков, стремится обеспечить надежность и стабильность банковской системы. Он выдает и отзывает банковские лицензии, вводит резервные требования, обязывающие коммерческие банки депонировать часть своих активов в ЦБ под нулевые проценты. Что касается помощи банкам, имеющим проблемы с ликвидностью, то в случае необходимости ЦБ оказывает такую помощь.

F.: Recent years saw a rapid growth in the activities of foreign banks in the US. What about Russia?

R.: Наши банки пока еще в определенной степени защищены от конкуренции иностранных банков, хотя иностранные банки имеют свои филиалы и представительства в России.

Ex. 7. Work on vocabulary and grammar.

a) Study the key words for the unit in the dictionary at the back of the book:

requirements, deposit, check, reserves, capital, assets, liabilities;

b) Think of the verbs that are most commonly used with:

money supply, exchange rate, banknotes, safety, requirements, powers, bank reforms, inflation, operations, restrictions;

c) Think of the nouns that are often used with:

to implement, to supervise, to issue, to influence, to ensure, to stabilize, to set up, to lend, to regulate, to strengthen, to exempt;

d) Make your own sentences with any five word combinations from (b) and (c).

e) Match the verbs from (a) with the nouns from (b) below:

a) to deposit b) ratios

to impose targets

to fix function

to appoint chairman

to perform money

to control circulation

to clear checks

to maintain accounts

f) Write out from the main text international words like: central, modern, etc. Transcribe them and read aloud.

Ex. 8. a) Supply the articles where necessary.

b) Write down 3-5 questions about the text.

c) Describe the principal instruments of credit policy.

Credit Policy

Credit policy is ... component of economic policy. It is a combination of measures taken by ... Central Bank to affect the supply of credit. The aims of ... credit policy may include stimulation or restriction of investment or consumer spending, ... avoidance of price inflation.

Credit policy and monetary policy tend to be closely related and in some countries credit policy is regarded as ... part of monetary policy.

Credit policy largely works indirectly. The Central Bank controls ... amount of credit advanced by commercial banks through the interest rate policy, by influencing ... liquidity, expanding or contracting the volume of Central Bank money. The principal instruments available for this purpose are ... discount policy, minimum reserve requirements and open market operations. Direct credit control involving ... establishment of credit ceilings is less frequently used now than in ... past, many governments regarding it as ... undesirable interference with the market mechanism.

Words you may need:

price inflation ценовая инфляция

the amount of credit advanced ... размеры кредита, предоставленного ...

discount policy учетная политика

credit ceiling потолок кредитования

Ex. 9. a) Supply the prepositions where necessary.

b) Describe the impact of "easy" and "tight" monetary policy on an economy.

Monetary policy is the branch of financial policy that is concerned ... controlling the supply of money and credit. Monetary policy is important because of its impact... inflation and on interest rates.

If a government pursues an "easy" monetary policy it means that it allows the amount of money ... circulation to rise and it lets banks increase the volume of loans.

If government pursues a "tight" monetary policy, it restricts the amount ... money in circulation and reduces the funds available ... banks... making loans.

When money is tight:

1. Interest rates rise, because commercial banks have to borrow ... a higher rate ... the interbank market.

2. Credit falls, because people and businesses borrow less ... higher rates.

3. Aggregate demand falls, because people and businesses buy less, as they have less money.

4. Output falls, too, because ... less consumption, firms produce less.

5. Unemployment rises, because companies are producing and selling less, and so need ... less labour.

6. Inflation falls, because there is less money in circulation.

7. The exchange rate will probably rise, if there is the same demand but less money, or if there is higher demand, as foreigners take advantage of the higher interest rates to invest ... the currency. Increasing the money supply, ... making more reserves available, has the opposite effects.

The amount of money ... circulation and its velocity of circulation determine the average level of prices and wages. Many central banks now set money supply targets. ... increasing or decreasing the money supply, the central bank indirectly influences ... interest rates, demand, output, growth, unemployment and prices. The central bank can reduce the reserves available ... commercial banks by changing the reserve requirements. This reduces the amount ... money that banks can create and makes the money tight or scarce.

Alternatively, the central bank can engage ... what are called open-market operations, which involve selling short-term government bonds (such as three-month Treasury bills) ... the commercial banks, or buying them back.

Words you may need:

money is tight денег недостаточно

interbank market межбанковский рынок

velocity of circulation скорость обращения

to set targets устанавливать ориентиры, показатели

alternatively adv (зд.) и наоборот

engage v заниматься (чём-л.)

short-term government bonds государственные краткосрочные облигации

Treasury bill казначейский вексель

Ex. 10. a) Open the brackets, putting the verbs in the correct form.

b) Compare the FED, the CBR and the Bank of England, using information from the unit.

The Bank of England

The Bank of England is Britain's central bank. Founded in 1694, it (to be) the world's second oldest central bank, being six years younger than Sweden's Riksbank. It was privately owned until it (to nationalize) in 1946.

The Governor, Deputy Governor, and 16 Directors who form the Court of Directors (to appoint) by the sovereign on the recommendation of the Prime Minister.

The Bank of England is both monetary authority and bank supervisor, it is charged with the control of the banking system in the interests of the nation. The chief functions of the Bank of England are to act as the Government's bank in the widest possible sense. The main Government account is the central Exchequer Account in the Bank, to which all Government revenues eventually (to credit), and from which all Government payments originate. Other major ministerial accounts also (to keep) in the Bank and the major expenses of Government departments (to disburse) from these accounts.

The Bank does not lend money to the Government. If the Government needs funds it (to borrow) the sums required by issuing Treasury bills or by selling stocks. Treasury bills are short-term securities, offered for sale by tender, repayable three months after issue. The Bank's function is to balance every day the sums received against the sums needed, never allowing idle balances to accumulate. If moneys (to receive) in excess of requirements, the Bank buys back Treasury bills, adding them to its portfolio.

The Bank of England are bankers to the commercial banks, and also to the discount and accepting houses. The ordinary commercial banks (to keep) about half of their cash assets on current accounts with the Bank of England, which therefore acts as the "Bankers' Bank", using these deposits for the day-to-day settlement of indebtedness between the banks. A lot of overseas central banks and international bodies have accounts with the Bank of England to facilitate a wide variety of international transactions and to promote trade and prosperity.

The Bank is the central note-issuing authority. New notes (to issue) and worn notes (to withdraw) in very large numbers every day.

The Bank performs registration activities as registrar of government stocks and stocks of nationalized industries. It also (to pay) dividends when they fall due.

The Bank acts as the Government's agent for the administration of exchange control and protects the gold and foreign exchange reserves.

Being monetary authority in the country, the Bank implements the Government policy in the money market and the loan market by raising or lowering Bank Rate.

Because of its influential position in the financial affairs of the country the Bank gives useful financial advice to the Treasury to assist it in forecasts of the economic situation and the balance-of-payments position. The Bank also advises companies on capital structure and finance.

The style of work of the Bank much (to admire) by the world and (to give) the credit for the safe and successful growth of London as the world's number one international banking centre.

Words you may need:

sovereign n монарх

charge (with) v (зд.) поручать

Exchequer n казначейство

credit v записывать в кредит

disburse v платить, оплачивать (из государственных средств)

sale by tender продажа на торгах

idle adj (зд.) свободный, неиспользованный

discount house учетный дом

accepting house акцептный дом

settlement of indebtedness урегулирование задолженности

registrar n регистратор, регистрационное бюро

to fall due наступать (о сроке выплаты)

exchange control валютный контроль

Bank Rate ставка Центрального банка

Eх. 11. Fill each gap with a suitable word from the box. Sum up the text in 5-7 sentences. Present your summary in class.

institutions apply engage conduct impact operating branches activities banks legislation responsibilities powers