AN ENGLISH COURSE FOR STUDENTS OF FINANCE. Учебно-методический комплекс

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of financial claims being traded and the needs of different groups. One of the most important divisions in the financial system is between the money market and the capital market.

The money market is designed for the making of short-term loans. It is the institution through which individuals and institutions with temporary surpluses of funds meet borrowers who have temporary funds shortages.

Thus, the money market enables economic units (principally business firms and governments) to manage liquidity. By convention, a security or loan maturing within one year or less is considered to be a money market instrument. *One of the principal functions of the money market is to finance the working-capital needs of corporations and to provide governments with short-term funds in lieu of tax collections. The money market also supplies funds for speculative buying of securities and commodities.

*In contrast, the capital market is designed to finance longterm investments by businesses, governments, and households. Trading of funds in the capital market makes possible the construction of factories, highways, schools, and homes. Financial instruments in the capital market have original maturities of more than one year and range in size from small loan to very large, multimillion dollar credits.

Who are the principal suppliers and demanders of funds in the money market and capital market? In the money market commercial banks and the most important institutional supplier of funds (lender) to both business firms and governments. Nonfinancial business corporations with temporary cash surpluses also provide substantial short-term funds to banks, securities dealers, and other corporations in the money market. On the demand for funds side the largest borrower in the American money market is the U.S. Treasury, which borrows several billion dollars weekly. *The largest and best known corporations and securities dealers are also active borrowers in the money market through their offerings of short-term notes. *Finally, there is the Federal Reserve System, which is charged by Congress with responsobility for regulating the flow of money and credit in the U.S. financial system and

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AN ENGLISH COURSE FOR STUDENTS OF FINANCE

keeping the money market functioning smoothly. Due to the large size and strong financial standing of these well-known money market borrowers and lenders, money market instruments are considered to be high-quality "near money" IOUs

The principal suppliers and demanders of funds in the capital markets are more varied than in the money market. Families and individuals, for example, tap the capital market when they borrow to finance a new home State and local governments rely upon the capital market for funds to build schools and highways and provide essential services to the public. The U.S. Treasury draws upon the capital market in issuing long-term notes and bonds to pay for federal government programs. The most important borrowers in the capital market are businesses of all sizes, which issue long-term IOUs to cover the purchase of equipment and the construction of new plant and other facilities. Ranged against these many borrowers in the capital market are financial institutions, such as banks, insurance companies, and pension funds, that supply the bulk of long-term funds.

C. Divisions of the Money and Capital Markets

The money market and the capital market may be further subdivided into smaller markets, each important to selected groups of demanders and suppliers of funds. Within the money market, for example, is the huge Treasury bill market. Treasury bills - a short-term government IOU - are a safe and popular investment medium for financial institutions and corporations of all sizes.

Nearly as large in total dollar volume is the market for negotiable certificates of deposit (CDs) issued by the largest, bestknown commercial banks and other depository institutions. Depository institutions use the funds raised from CDs and other sources to extend loans to corporations and other borrowers. Two other important money market instruments evidencing loans to corporations are bankers' acceptances and commercial paper - both shortterm IOUs issued by large, well-established borrowers of funds.

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*Still another portion of the money market is devoted to trading in federal funds, which are essentially reserve balances of banks held at the Federal Reserve and with other banks that are immediately transferable anywhere by wire. Another segment of the money market reaches around the globe to encompass suppliers and demanders of short-term funds in Europe, Asia, and the Middle East. This is the vast and largely unregulated Eurocurrency market, where bank deposits denominated in the world's major trading currencies - the dollar, the franc, the pound, the yen, and the mark are loaned to corporations and governments all over the globe.

*The capital market, too, is divided into several major sectors, each having special characteristics and its own collection of suppliers and demanders of funds. For example, the largest segment of the capital market is devoted to mortgage loans to support the building of homes, apartments, and business structures such as factories and shopping centers. State and local governments sell their tax-exempt (municipal) bonds in another sector of the capital market. Households borrow in yet another segment of the capital market, using consumer loans to make purchases ranging from automobiles to home appliances. There is also an international capital market represented by Eurobonds and Euronotes.

Probably the best-known segment of the capital market is the market for corporate stock represented by the major exchanges, such as the New York Stock Exchange (NYSE) and the Tokyo Exchange and a vast over-the-counter (OTC) market for individual stocks. No matter where it is sold, however, each share of stock (equity) represents a certificate of ownership in a corporation, entitling the holder to receive any dividends that may be paid out of current company earnings. Corporations also sell a huge quantity of corporate notes and bonds in the capital market each year to raise long-term funds. These securities, unlike shares of stock, are pure IOUs, evidencing a debt owed plus an obligation to pay interest to the holder.

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AN ENGLISH COURSE FOR STUDENTS OF FINANCE

Vocabulary Notes

1.temporary funds shortages – дефицит временных фондов;

2.treasury bill – казначейский вексель;

3.short-term funds – краткосрочные вклады;

4.mortgage loan – ипотечный заем, закладная;

5.tax-exempt bonds – облигации не облагающиеся налогом;

6.consumer loans – потребительские кредиты;

7.corporate notes and bonds – корпоративные ценные бумаги;

8.share of stoсk – пакет акций;

9.“near money’ IOUs – квази денежные ценные бумаги.

10.IOU = (I owe you).

EXERCISES

1.Выпишите подчеркнутые термины из текстов, пере- ведите их и запомните.

2.В выделенных предложениях найдите глагол “to be” (is, was, are и т.д.) и определите его функцию. Переведите эти предложения (см. Грамматический справочник).

3.К следующим глаголам найдите в словаре русские эк- виваленты и запомните их.

4. Переведите письменно текст А и В, пользуясь слова- рем в конце пособия.

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5. Прочтите текст С и запишите на русском языке под-

робно что такое “Money market and capital market”.

TEST

1. Дополните следующие предложения, выбрав соот- ветствующее по смыслу слово из колонки справа.

5.The financial system offers risk protection to businesses and individuals through sales of … .

6.The principal … and demanders of funds in the capital markets are more varied then in the money market.

7.For example, the largest segment of the capital market is devoted to … to support the building of homes.

1.Выберите русские эквиваленты к английским словам

слева.

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AN ENGLISH COURSE FOR STUDENTS OF FINANCE

2. Выберите английские эквиваленты к русским словам слева.

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Additional Practice 2.1

BANKING ON SHARE OF EURO MARKET

Pre – reading questions:

Which of the following words would you expert to find in a text with the above title?

One of the sound effects will be the sloshing of capital flowing freely from country to country, as banking controls are lifted throughout the European Community.

The measures, which are expected to come in, are still subject to tricky disputes over the question of tax. But the theory goes that banks will be forced into stiffer competition for accounts, and that margins of profit will go down.

This will make life tougher for the smaller players, some of whom are expected to go into friendly mergers, joint ventures or alliances to get a share of the integrated market and to avoid being taken over. One such bank is the Royal Bank of Scotland.

Royal Bank served notice that it was not prepared to be confined to a niche position by going into partnership with the comparably sized Banco Santander of Spain.

Royal Bank has assets of £ 20 billion and Santander assets of£ 15 billion. Mr. Lewis McGill, executive director of the international division, emphasises that this was not out of fear: 'This is an aggressive move by two banks to tackle a big market place. Europe is going to be our home market.

The alliance means that the chairman of each bank will join the other's board. Royal Bank holds 2.5 p.c. of Santander, and Santander, after the recent acquisition of the Kuwaiti Investment Office stake, holds 9.9 p.c. of Royal Bank.

The great advantage for Royal Bank is that Santander - considered by analysts to be a very go-ahead bank - already owned

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CCBank in Germany and Credit du Nord in Belgium. Now Royal Bank has a 50 p.c. interest in both.

Mr. McGill explains: 'The attraction is that these banks have a branch network in Germany and Belgium already. That saves us the time and expense of having to set them up.'

In Europe, the objective is to provide a service for UK customers and to develop a profitable customer base. The method, says Mr. McGill, will be to other countries, either involving Santander or not.

One theory, which is known to attract Barclays Bank, is that 1992 will create an opportunity for banks to serve not just all those middle-range corporate customers who are looking to establish themselves on a Europe-wide basis, but also a newly emerging species of middle-range individual.

This is the so-called 'Euro-yuppy', said by some to number hundreds of thousands, the sort of person who was born in Italy and now works in Germany for a French company - and would consequently need a sophisticated banking service across all borders.

But while Barclays is thinking hard about ways of claiming this theoretically colossal business (aided by an improbable degree of cachet among the French, who refer to the bank as 'la Barclays'), Royal Bank is sceptical that they exist in the numbers claimed.

Instead, Mr. McGill says his firm is aiming at all types of customer in all the community countries. In particular it will be focusing on Italy, France and Portugal, where its combination with Santander is so far least represented.

Comprehension

1.(a) What, according to the Text, is supposed to happen when banking controls are lifted throughout Europe ?

(b)What will be the effect of this on smaller banks?

2.How did Banco Santander get its share of the Royal Bank of Scotland?

3.(a) What big advantage for the royal Bank of Scotland was there in going into partnership with Banko Santandcr?

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(b)Does the Royal Bank of Scotland think that it may have to join with other banks besides Banko Santander?

4.(a) How would you describe a'Euro-Yuppy'?

(b)Why is the Royal Bank of Scotland not trying to attract the 'Jiuro-yup-pies'?

5.Which countries will the Royal Bank of Scotland be concentrating on in the near future? Why?

Vocabulary

6. Here is a summary of the article with some words missing. Complete the summary using only ONE word for each gap. Your words must come from the text.

The coming of the single market in banking in the EEC will cause (1) ______________ competition and profit (2) _______ will fall. To Survive, smaller banks will have to enter agreed (3) ______

and (4) ______ ventures. The Royal Rank of Scotland, to avoid being limited to a (5) __________position is forming a (6) _________

with Banko Santander. The Royal Bank of Scotland and Banko Santander, whose chairmen are joining each other's

(7)________________. have combined (8) ___________ of £ 35 billion. Royal Bank owns 2.5 per cent of Banko Santander while Ihe Spanish bank bought the 9.9 per cent (9) ________ formerly held by the Kuwaiti Investment Bank. One advantage of the partnership is that it will provide Royal Bank with a branch (10)____________ in Germany and Belgium.

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AN ENGLISH COURSE FOR STUDENTS OF FINANCE

BLOCK 3

INFORMATION FOR STUDY

Money and Banking

A. Money and Functions

Although the crucial feature of money is its acceptance as the means of payment or medium of exchange, money has three other functions. It serves as a unit nf account, as a store of value, and as a standard of deferred payment. We discuss each of the four functions of money in turn.

The Medium of Exchange

Money, the medium, is used in one half of almost all exchange. Workers exchange labour services, for money. People buy or sell goods in exchange for money. We accept money not to consume it directly but because it can subsequently be used to buy things we do wish to consume. Money is the medium through which people exchange goods and services.

To see that society benefits from a medium of exchange, imagine a barter economy.

A barter economy has no medium of exchange. Goods are traded directly or swapped for other goods.

In a barter economy, the seller and the and the buyer each much want something the other has no offer. Each person is simultaneously a seller and a buyer. In order to see a film, you must hand over in exchange a good or service that the cinema manager wants. There has to be a double coincidence of wants. You have to find a cinema where the manager wants what you have to offer in exchange.

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