Banking Business Brief

The banking system is a crucial component of the global economy. While money-changing and money-lending may be as old as money, banking dates back to 15th century medieval Italy, and played a major role in the rise of the Italian city-states as world economic powers. Ever since, the health of an economy and the health of its banks have been interrelated.

A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank is the connection between customers that have capital deficits and customers with capital surpluses.

Today banks offer a wide variety of products both to individual and institutional clients. The most widely offered retail banking products are: current accounts, savings accounts, certificates of deposits, time deposits, credit and debit cards, mortgages, personal loans, etc. Moreover there also exist the complex of products and services offered by Private Banking departments who serve mainly high-net-worth individuals. Businesses benefit from such banking products as business loans, capital raising mechanisms, project finance, revolving credits, etc.

There are three major types of banks: investment banks, commercial banks and universal banks. Their interrelations and activities depend on the existing national regulations and financial market models. Generally, the activities of the banking market are regulated by the Central Bank.

Vocabulary

Extended vocabulary Financial market models (German vs Anglo-Saxon) Credit scoring Custodian Depository bank Clearing Risk management Operational risk Credit risk System risk AML (Anti-Money Laundering) KYC (Know Your Client) Compliance

Basic vocabulary

Banking system

Bank

Commercial bank/ merchant bank

Investment bank

Universal bank

Personal customer

Corporate customer

Assets

Liabilities

Liquidity

Profitability

Fee

Bank account

Current account/checking account

Savings account

Bank transfer

To borrow

To lend/to loan

Lender/creditor

Borrower/debtor

Central bank

Regulatory body/ regulator/supervisor

Deposit CD (Certificate of Deposit)

Time deposit

Interest rate

Debit card

Credit card

Cash dispenser/ATM

To withdraw

Loan

Principal

Installment

Overdraft

Mortgage

Personal loan

Collateral

To pledge

Secured loans

Unsecured loans

Solvency

Private banking

HNWI

Related exam topics and questions

Topics

1. Banking system in Russia

2. Western banks vs Russian banks. Strengths and weaknesses.

3. Borrowing and lending. Loans and mortgages.

Questions

1. What is a financial market?

2. What are the major participants in the financial market?

3. What is a bank?

4. What are the most common types of banks?

5. What is the difference between a commercial and an investment bank?

6. What is the difference between German and Anglo-Saxon financial market models?

7. What are the functions of the Central bank?

8. What are the bank products and services offered nowadays to personal customers?

9. What is the difference between current and deposit accounts?

10. What is a loan?

11. What types of loans do you know?

12. What is a mortgage?

13. What plastic cards are used nowadays?

14. What are the benefits and risks related to Internet banking?

15. What are the specific features of the Russian banking system? How is it organized?

16. What are the strengths and weaknesses of Russian banks if compared to Western banks?

17. What were the causes and consequences of the 2008 crisis?

18. What are the current trends of the world banking system development?