Text 1 banking systems

Exercise 1.1 Study the vocabulary:

1) to acquire funds	1) брати кошти, мобілізувати кошти
2) checkable deposits	)банківський депозит, по якому можливі розрахунки чеками
3) NOW (Negotiable Order of Withdrawal)	3) рахунок НАУ (рахунок з наказом про вилучення коштів)
4) ultimate borrower	4) безпосередній позичальник
5) pooling of risks	5) об’єднання ризиків
6) liquidity	6) ліквідність
7) to evaluate	7) оцінювати
8) creditworthiness	8) кредитоспроможність
9) rate of return	9) норма прибутку
10) to accrue	10) накопичувати
11) Federal Deposit Insurance Corporation (FDIC)	11) Федеральна корпорація страхування депозитів
12) custodian	12) фінансова установа, що управляє чужими капіталами
13) entry	13) бухгалтерське проведення
14) prudence	14) обачливість
15) ultimately	15) урешті-решт
16) to overstate	16) перебільшувати

На кожному екрані має бути кнопка vocabulary

Exercise 1.2 Re tad and translate the text:

The operations of individual banks (how they acquire, use, and manage funds to make a profit) are roughly similar throughout the world. In all countries banks are financial intermediaries in the business of earning profits.

Banks today accept checkable deposits such as a demand deposit or a NOW (Negotiable Order of Withdrawal) account as well as time deposits, and use their depositors' funds mainly to make loans and buy securities.

Banks thus operate as financial intermediaries standing between the primary lenders (depositors) and the ultimate borrowers. In this way they provide many services. One is the pooling of risks. A bank that makes many loans is spreading its risks. It is highly likely to experience losses on a few loans but most unlikely to experience losses on all or most. (In contrast someone who makes only a single loan faces an all-or-nothing situation.) Another service of banks is providing liquidity. Someone who opens a checking account in a bank can get his or her money back whenever required. The bank meanwhile can make loans with his or her deposits and others' deposits while keeping only a small fraction of such deposits as a liquid reserve. Because it has many depositors who usually want to withdraw deposits at different times a bank normally can meet the demands of those depositors who want to withdraw their deposits.

Another service that banks provide is expert judgment in making loans. Most savers cannot evaluate the creditworthiness of those who wish to borrow. Hence, instead of lending directly to the ultimate borrowers they ‘lend’ their savings to banks by depositing them, and the banks then use those savings to make loans to the ultimate borrowers.

- Banks have an incentive to take risks because risky loans have a higher rate of return. All of these higher earnings accrue to the banks. But most of the funds at risk belong to depositors. Accordingly much of the risk that banks take is borne by depositors and by the Federal Deposit Insurance Corporation (FDIC), which insures their deposits in the USA. This is one reason why banks are heavily regulated by the government. Another, perhaps even more important reason is that banks are custodians of the checkable deposits that make up most of society's circulating medium of exchange. If banks fail and there is no deposit insurance, then depositors have to reduce their expenditures. As a result sales fall and firms have to throw employees out of work.

Exercise 1.3 Decide if the statements are true or false. Correct the false ones.

1. The operations of individual banks considerably differ throughout the world.

2. Banks use their depositors’ funds to make loans and buy securities.

3. If you have a checking account in a bank you cannot get your money back whenever required.

4. Risky loans have a lower rate of return.

5. Banks are heavily regulated by the government.

6. Banks play a vital role in a country’s financial system.

Exercise 1.4 Match the term with its definition:

Profit motive	a) able to be trusted to pay back money that is owed
Depositor	b) an organization whose business is providing insurance
Loan	c) the part of an income that is kept for a particular purpose or for unexpected expenses in the future
Loss	d) money that an organization such as a bank lends and sb borrows
Liquidity	e) the desire to make money, which is the reason that most businesses exist
Reserve fund	f) money that has been lost by a business or an organization
Creditworthy	g) a person or an organization that puts money in a bank account
Insurance company	h) the state of owning cash or things of value that can easily be exchanged for cash in order to pay debts

Exercise 1.5 Fill in the gaps with the words and phrases:

deposit; borrowers; liquidity; loan; funds; interest rates; loss;

1. We are now operating at a _____.

2. The Central bank has cut ______ to try to stimulate economic growth.

3. The bank has a lot of money from lending to high-risk _____.

4. Payments are placed on ______ to earn interest.

5. Asset sales are intended to improve the company’s ______.

6. Many people take out a ______ to buy a new car.

7. They ran out of ______ before they could finish the building work.

Exercise 1.6 Complete the sentences choosing one of the options:

1. At this bank you can get 14% ____ on your savings.

3. interest b) rate c) rent

2. I want $ 500-worth of French francs. What is the _____ rate, please?

3. currency b) exchange c) money

3. Every Friday Fred ______ money out of the bank.

3. cashed b) drew c) stole

4. The ______ of the pound has fallen recently.

3. expense b) worth c) value

5. Miss Thrifty phoned the bank to _____ how much money there was in her account.

12. control b) inspect c) check

6. The _____ of the bank where I work is in the suburbs.

12. branch b) seat c) quarter

7. In order to buy his house Mr Not-Too-Rich had to obtain a large ____ from his bank.

a) loan b) capital c) debt