Каирсапова Сборник дополнителных 2014
.pdfand investing in them for the long-term has produced spectacular returns.
During the past 37 years, the company has delivered an average annual return of 22.6%. Since 1965 the company's book value has gone up by 194,936%.
However in 2001, the last year for which detailed numbers are available, heavy losses in the insurance industry worldwide resulted in a $3.77bn loss at Berkshire Hathaway - the first loss in the firm's history under Warren Buffett.
Interview with Mr. Buffett
Ask Mr. Buffett about his ups and downs during his career Refer back to the article and write a summary of the article
№2
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Look at the following article and suggest the best headline from this list
Good news for foreign investors Fall in profits
Setback for growth Trade deficit increases
The structure of the foreign exchange market
The foreign exchange markets are among the largest markets in the world, with annual trading volume in excess of $160 trillion. The purpose of the foreign exchange markets is to bring buyers and sellers of currencies together. It is an over-the-counter market, with no central trading location and no set hours of trading. Prices and other terms of trade are determined by negotiation over the telephone or by satellite, or telex. The foreign exchange market is informal in its operations: there
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are no special requirements for market participants, and trading conforms to art unwritten code of rules.
You know that almost every country has its own currency for domestic transactions. Trading among the residents of different countries requires art efficient exchange of national currencies. This is usually accomplished on a large scale through foreign exchange markets, located in financial centers such as London, New York, or Paris - in order of importance—where exchange rates for convertible currencies are determined. The instruments used to effect international monetary payments or transfers are called foreign exchange. Foreign exchange is the monetary means of making payments from one currency area to another. The funds available as foreign exchange include foreign coin and currency, deposits in foreign banks, and other short-term, liquid financial claims payable in foreign currencies. An international exchange rate is the price of one (foreign) currency measured in terms of another (domestic) currency. More accurately, it is the price of foreign exchange. Since exchange rates are the vehicle that translates prices measured in one currency into prices measured in another currency, chaлges in exchange rates affect the price and, therefore, the volume of imports and exports exchaлged. In turn the domestic rate of inflation and the value of assets and liabilities of international borrowers and lenders is influenced. The exchange rate rises (falls) when the quantity demanded exceeds (is less than) the quantity supplied. Broadly speaking, the quantity of U.S. dollars supplied to foreign exchange markets is composed of the dollars spent on imports, plus the amount of funds spent or invested by U.S. residents outside the United States. The demand for U.S. dollars arises from the reverse of these transactions.
Many newspapers keep a daily record of the exchange rates in the highly organized foreign exchange market, where currencies of different nations are bought and sold. For instance, the Wall Street Journal shows the price of a currency in two ways: first the price of the other currency is given in U.S. dollars, and second the price of the U.S. dollar is quoted in units of the other currency. Pairs of prices represent reciprocals of each other. These rates refer to trading among banks, the primary marketplace for foreign currencies. The participants of the foreign exchange markets
The foreign exchange market is extremely competitive so there are many participants, none of whom is large relative to the market.
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The central institution in modern foreign exchange markets is the commercial bank. Most transactions of any size in foreign currencies represent merely an exchange of the deposits of one bank for the deposits of another bank. If an individual or business firm needs foreign currency, it contacts a hank, which in turn secures a deposit denominated in foreign money or actually takes delivery of foreign currency if the customer requires it. If the bank is a large money center institution, it may hold inventories of foreign currency just to accommodate its customers. Small banks typically do not, hold foreign currency or foreign currencydenominated deposits. Rather, they contact large correspondent hanks, which in turn contact foreign exchange dealers.
The major international commercial banks act as both dealers and brokers. In their dealer role, banks maintain a net long or short position in a currency, and seek to profit from an anticipated change in the exchange rate. (A long position means their holdings of assets denominated in one currency exceed their liabilities denominated in this same currency.) In their broker function, banks compete to obtain buy and sell orders from commercial customers, such as the multinational oil companies, both to profit from the spread between the rates at which they buy foreign exchange from some customers and the rates at which they sell foreign exchаnge to other customers, and to sell other types of banking services to these customers.
Frequently, currency-trading banks do not deal directly with each other but rely on foreign exchange brokers. These firms are in constant communication with the exchange trading rooms of the world's major hanks. Their principal function is to bring currency buyers and sellers together.
Brokerage firms, commodity traders, insurance companies, and scores of other nonbaлk companies have come to play a growing role in the foreign exchange markets today. This is Nonbank Financial Institutions. Nonbank traders now offer a wide range of services to international investors and export-import firms, including assistance with foreign mergers, currency swaps and options, hedging foreign security offerings against exchange rate fluctuations, and providing currencies needed for purchases abroad.
In main all participants of an exchange market are usually divided on two groups. The first group of participants is called speculators; by definition, they seek to profit from anticipated changes in exchange rates. The second group of participants is known as arbitragers.
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Arbitrage refers to the purchase of one currency in a certain market the sale of that currency in another market in response to differences in price between the two markets.
№3
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A financial definition of insurance
Throughout human history, unexpected economic losses have occurred. Such losses would continue to occur whether or not a system of insurance had ever been devised. But through the operation of an insurance system, losses can be predicted before they occur. The predictability of losses in advance is basic to an insurance system's operations. Because an insurance system allows losses s to be predicted in advance, it allows the cost of losses to be financed and redistributed in advance.
The first definition of insurance that we will examine is the financial one. In this instance, insurance is a financial arrangement that redistributes the costs of unexpected losses. The insurance arrangement involves the transfer of many different exposures to loss to one insurance pool, which combines the numerous exposures.
An insurance system accomplishes the redistribution of the costs of losses by collecting a premium payment from every participant in the system. In exchange for the payment of the premium, the insured receives a promise from the insurance system to be compensated in the event of a loss. In most insurance systems only a small percentage of those insured suffer losses. Thus, an insurance system redistributes the costs of losses from the unfortunate few members who experience them to all the members of the insurance pool (including those who suffer losses) who have paid premiums.
An insurance system is able to operate because all the insures are willing to substitute a relatively small certain outlay, the insurance premium, for a relatively large uncertain loss. It is generally assumed that most people find the possibility of suffering a large loss unpleasant to contemplate. Therefore, people are willing to pay an insurance
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premium to be relieved of the uncertainty about a loss, as well as to be compensated if the loss actually occurs. Thus, even if no loss occurs during a year, as will be the case for most insureds, value has still been received in the form of a reduced or eliminated unpleasant mental state, the anxiety about a loss.
№4
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1.Документация и оценка системы внутреннего контроля рассматривалась через затратный подход и требовала глубокого обучения персонала
2.Все больше и больше акцент делался на скрытый аналитический обзор, предполагая использование решения для поддержки аудиторского мнения, которое становилось все меньше
именьше доказательным и документированным.
3.Чтобы увеличить появление надлежащих стандартов аудита, и в ответ на былые скандалы и свидетельства о недостатках, многие институты ввели так называемые «экспертные оценки».
4.Это дало возможность другим проверить работу, стандарты и методики, используемые фирмами.
5.Как и во всех прочих организационных вопросах, крупные фирмы, кажется, действуют как картели в рамках своих общих интересов, начиная с установления стандартов и заканчивая вопросами регулирования их профессии.
Unit 7
№1
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Answer the following questions:
1.What data was falsely reported by banks during the financial crisis?
2.What was the fraud made by Barclays?
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3.How did Fed get the evidence for Barclays' fraud?
4.Why did Barclays have to deceive?
5.What primordial steps were taken to solve this problem?
6.Why did concerns about the topicality of oil prices were growing?
7.What is the main problem which allows to affect the market?
Banking Bailout News Articles
Libor: They all knew – and no one acted
2012-07-14, The Independent (One of the UK's leading newspapers)
Regulators on both sides of the Atlantic failed to act on clear warnings that the Libor interest rate was being falsely reported by banks during the financial crisis, it emerged last night. A cache of documents released yesterday by the New York Federal Reserve showed that US officials had evidence from April 2008 that Barclays was knowingly posting false reports about the rate at which it could borrow in order to assuage market concerns about its solvency. An unnamed Barclays employee told a New York Fed analyst, Fabiola Ravazzolo, on 11 April 2008: "So we know that we're not posting, um, an honest Libor." He said Barclays started under-reporting Libor because graphs showing the relatively high rates at which the bank had to borrow attracted "unwanted attention" and the "share price went down". The verbatim note of the call released by the Fed represents the starkest evidence yet that Libor-fiddling was discussed in high regulatory circles years before Barclays' recent £290m fine. The New York Fed said that, immediately after the call, Ms Ravazzolo informed her superiors of the information, who then passed on her concerns to Tim Geithner, who was head of the New York Fed at the time. Mr. Geithner investigated and drew up a sixpoint proposal for ensuring the integrity of Libor which he presented to the British Bankers Association, which is responsible for producing the Libor rate daily. Mr. Geithner, who is now US Treasury Secretary, also forwarded the six-point plan to the Governor of the Bank of England, Sir Mervyn King.
Was the petrol price rigged too?
2012-07-12, The Telegraph (One of the UK's leading newspaper)
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Motorists may have been paying too much for their petrol because banks and other traders are likely to have tried to manipulate oil prices in the same way they rigged interest rates, an official report has warned. Concerns are growing about the reliability of oil prices, after a report for the G20 found the market is wide open to “manipulation or distortion”. Traders from banks, oil companies or hedge funds have an “incentive” to distort the market and are likely to try to report false prices, it said. Petrol retailers use oil price “benchmarks” to decide how much to pay for future supplies. The rate is calculated by data companies based on submissions from firms which trade oil on a daily basis – such as banks, hedge funds and energy companies. However, like Libor ... the market is unregulated and relies on the honesty of the firms to submit accurate data about all their trades. This is one of the major concerns raised in the G20 report, published last month by the International Organization of Securities Commissions (IOSCO). In the study for global finance ministers, including George Osborne, the regulator warns that traders have opportunities to influence oil prices for their own profit. It points out that the whole market is “voluntary”, meaning banks and energy companies can choose which trades to make public. IOSCO says this “creates opportunity for a trader to submit a partial picture in order to influence the price to the trader’s advantage”.
Are the following sentences true or false?
1.The problem of dishonest actions connected with Libor rate was taken seriously both by Europe and USA.
2.Barclays have been penalized for their deception.
3.There is no problem for bank traders and funds to manipulate the market.
4.The submitting of accurate information on all the trades was the main concern of G20.
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Refer back to the article and write a summary of the article
№2
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Appraising the European Central Bank
Hard talk, soft policy
The ECB has run as loose a monetary policy as other central banks have. It is just rather more coy about it
THE global economy has stopped sinking and central bankers are pausing for breath. As The Economist went to press on July 2nd, the European Central Bank (ECB) was expected to keep its main “refi” interest rate unchanged, at 1%. The ECB’s rate-setting council has been chary of cutting rates closer to zero as policymakers elsewhere have done. Its reluctance to do more has attracted criticism, only some of it fair.
The focus on policy rates may put the ECB in a bad light but these are no longer a reliable guide to the overall monetary-policy stance. If you look at market rates the policy stance in the euro area is as loose as anywhere else, because of stimulus decisions taken at the height of the financial crisis. In October the ECB decided it would offer banks as much cash as they wanted, at a fixed interest rate and against a wider range of security than usual, for up to six months. It also scheduled extra three-month and six-month refinancing operations, so that banks could come more often to the central-bank well.
In May the ECB council agreed to extend the offer of fixed-rate cash to one year. At the first 12-month refinancing operation on June 24th, euro-zone banks borrowed a staggering €442 billion ($620 billion). With so much cash splashing around, the charge that banks make for overnight loans has stayed well below the refi rate, with some occasional spikes. Since the €442 billion cash injection, overnight interest rates in the euro zone have fallen to a record low of 0.3%, below those in Britain and scarcely higher than in America. Indeed banks can now borrow more cheaply in euros than in pounds for either three, six or 12 months.
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Before the crisis, the ECB would aim to keep overnight interest rates close to the refi rate. Since it moved to unlimited fixed-rate funding, the central bank has been content to allow the overnight rate to drift much lower than the policy rate. In effect, the bank now has a target range for short-term rates: the upper bound is the 1% refi rate and the lower bound is the rate the central bank pays on banks’ deposits with it, currently 0.25%. The deposit rate has been a better guide to the policy stance than the refi rate has. ECB-watchers and markets understand this, even though it has not been spelt out in so many words by Jean-Claude Trichet, the ECB’s president.
Why be so coy? One concern is that by playing up the fight against recession, the ECB could appear to have lost sight of inflation. Keeping the totemic refi rate above zero may be seen as necessary to prevent inflation expectations from drifting up. There may also be a reluctance to admit that such a gushing provision of liquidity has altered the policy stance. Since the start of the crisis in August 2007, the ECB has insisted the two are separate. “They are bold on liquidity because they don’t see it as mainstream monetary policy,” says Charles Wyplosz of the Graduate Institute in Geneva. Yet the terms of its refinancing for banks have clearly led to looser monetary conditions.
Another reason for obfuscation is to mask differences among ratesetters. Monetary-policy hawks can reassure themselves that the policy rate is not too low. Doves are happy that effective interest rates are nearer to zero. And Mr Trichet can claim there is a “consensus”. The terms of the truce make it easier to reverse policy when the time comes. By restricting its liquidity support, the ECB will be able to guide overnight interest rates towards 1% without having to alter its policy rate.
Because the ECB has had one eye on the exit since the start of the crisis it has earned plaudits from those who think the Federal Reserve has been incautious. That judgment is too kind to the ECB, which could afford to have scruples about the medium term because other central banks were taking more care of the present. It is also unfair on the Fed, which had to stand in place of America’s collapsed shadow-banking system. When the economy was in most danger, the ECB could have cut rates more quickly. “If the ECB had been more proactive, the recession would have been less bad,” says Marco Annunziata of UniCredit. The striving for consensus militated against bolder action.
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Another criticism is that the ECB has not done more to ease credit conditions by buying government and corporate bonds outright, as the Bank of England and the Fed have done. Its scheme to purchase up to €60 billion of the safest bank bonds, launched this month, is modest by comparison. Mr Trichet believes that focus makes sense, as euro-zone businesses and homebuyers rely more on banks than capital markets for credit. In America, capital markets matter more, so the Fed had to get its hands dirtier by buying commercial paper and mortgage-backed securities.
The ECB is also loth to soil its hands with public debt, though banks flush with central-bank cash are keen buyers of such low-risk assets. If this is monetisation at a remove, so be it. The central bank keeps its independence from government and does not have to worry about selling bonds back into the market once the interest-rate cycle turns. “If you want to stay clean, the exit strategy is easier,” says Thomas Mayer of Deutsche Bank.
But offering ample liquidity support to banks gets you only so far. By buying assets, the Fed allows American banks to shed them, freeing scarce capital for fresh lending. As losses mount in the euro zone, capital may trump liquidity in determining credit growth. Lending to the private sector slowed to 1.8% in the year to May, an all-time low. Until credit starts to revive, the ECB cannot think about tightening policy. It may yet have to be bolder.
Complete the sentences:
1.…. rates may put the ECB in a bad light but these are no longer a reliable guide to the overall …….
2.It also scheduled extra …… and…….refinancing operations.
3.With so much cash………, the charge that banks make for overnight loans has stayed well below the refi rate, with some…………….
4.Before the crisis, the ECB would aim to keep……………. close to the refi rate.
5.Keeping the totemic refi rate……… may be seen as necessary to prevent inflation expectations from drifting up.
6.………… hawks can reassure themselves that the policy rate is not too low.
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