Vocabulary

Using your dictionary, match words in A with their synonyms in B.

A	B
to provide	а) fee
to control	б) to occur, to take place
to issue	в) surpass
banknotes	г) to address
coins	д) resident
legal tender	е) paper money
to refuse	є) to operate
payment	ж) to fix
to look after	з) power
reserve	и) to get income
to happen	і) to announce
demand	ї) settlement facilities
supply	й) percent
to exceed	к) to manage
interest rate	л) to vary
to apply for	м) to supervise
to deposit	н) mediator
citizen	о) to calculate
to make profit	п) to invest
to charge	р) request for
to act	с) offer
intermediary	т) token money
authority	у) stock
to determine	ф) to reject
to fluctuate	х) to render
to advertize	ц) to emit

Pre-reading task

Work in small groups.

Now you are going to read about different types of banks: central banks, commercial banks and investment banks (called merchant banks in Great Britain). Which of them, do you think, deal with the public in general, and which specialize in providing services to companies, raising funds for industry on financial markets, etc?

Reading

1. Read text 27 quickly. Were your ideas about the services provided by these banks correct?

Text 27

Banks and banking

When it comes to dealing with money, the banks provide a variety of services essential to trade and to the economy of a country. There are three main types of banks:

Central banks

These are the institutions which control the banking of the entire country; they work together with the government to control the country’s economy. The central bank of the United Kingdom is the Bank of England, in the USA it is the Federal Reserve System, in single-currency Europe the European Central Bank, etc.

The central bank has a number of different functions:

1. to issue banknotes and coins, the country’s currency. These notes and coins are legal tender in the country where they are produced; this means that traders in that country may not refuse them when they are offered as payment.

2. to look after the country’s gold reserves.

3. to make sure that the country’s currency keeps its value.

4. Tto act as bankers for the government and the other banks.

5. to keep inflation under control. Inflation happens when demand for the goods exceeds supply. When this happens, prices increase sharply and often. To stop it, the central bank needs to take money out of circulation, for example by increasing interest rates (this makes borrowing more expensive and means that fewer people will apply for credit), and by increasing the amount of money which all banks have to deposit with the central bank.

Commercial banks and investment banks

There are two other types of banks: commercial banks and investment banks – or merchant banks as they are called in Great Britain. Commercial banks deal mainly with individual customers, for instance, private citizens, small businesses, and such like. They receive and hold deposits, lend money, exchange foreign currencies, advise their customers how to invest their money, and manage the customers’ accounts (for instance, pay or invest money according to the customers’ wishes). Commercial banks make their profit from the difference between the interest that they pay to people who deposit money and the interest they charge to people who borrow money. This difference is called a margin.

Investment banks deal mainly with rich corporate clients (companies or large firms) or rich individual clients. They aim not so much at lending money but at raising funds for industry (their corporate clients) in different financial markets. Therefore, investment banks act mainly as intermediaries for their customers. They do not themselves make loans, but make their profits from fees paid for their services. Merchant banks in Britain do the same, but they have greater authority because they also offer loans themselves. They finance international trade, deal with mergers, and issue government bonds.

In recent times the difference between commercial and investment banks has been slowly disappearing as the so-called “financial supermarkets” replace them. These are a combination of a commercial bank, an investment bank, and an insurance company, offering the full range of financial services.

Whether depositing or borrowing money, a customer is most interested in the bank’s interest rate. The minimum interest rate within a certain country is usually determined by the central bank, and the interest rates offered by other banks sometimes fluctuate slightly from time to time, and are publicly advertised by any bank. They are always either higher than or equal to the minimum interest rate fixed for that country.

2. Comprehension check.

1. Working in pairs, answer the questions.

• What role does the Central Bank play in the economy of a country?

• What functions does the Central Bank perform?

• When does inflation happen?

• In what way can the Central Bank stop inflation?

• What services does a commercial bank provide to its clients?

• Whom do the investment banks deal with?

2. Which of the three summarizes below reflects the content of the text more accurately? What is wrong with the other two summaries? Identify the mistakes in them.

• There are three types of banks: central banks, commercial and investment banks (merchant banks in Great Britain). Commercial banks deal mainly with individual customers: they receive and hold their deposits, lend money, manage their customers’ accounts, etc. Their profits are made from fees charged to their customers for the bank’s services. Investment banks deal with corporate clients and raise funds for their clients’ projects. Their profits are also made from fees paid to them. Now all commercial and investment banks have merged into “financial supermarkets”. Every bank determines its own interest rate that is advertised to the public.

• There are three types of banks: central banks, commercial and investment banks (the latter called merchant banks in Great Britain). Commercial banks deal mainly with individual customers: they receive and hold their deposits, lend money, manage their customers’ accounts, etc. Their profits are mostly determined by the difference in the interest they pay to people who deposited their money with the bank and the interest they charge to those who borrow money. Investment banks principally deal with rich corporate and individual clients and raise funds for their projects. Their profits are from fees paid to them for their services. Now the difference between commercial and investment banks is slowly disappearing because “financial supermarkets” have appeared, combining the services of commercial banks, investment banks, and insurance companies. Every bank fixes its own rate of interest on the basis of the minimum interest rate determined by the bank of the country.

• There are three types of banks: central banks, commercial and investment banks (the latter called merchant banks in Great Britain). Commercial banks deal with both individual and corporate customers: they receive and hold their deposits, lend money, manage customers’ accounts, and raise funds for them. Their profits are determined mostly by interest charged to people who borrow money from them. Investment banks only deal with corporate clients and raise funds for their clients’ projects. Their profits are from fees they charge for their services. The difference between commercial and investment banks is slowly disappearing because “financial supermarkets” have appeared. They combine the full range of services offered by the two types of banks as well as by insurance companies. The minimum rate of interest offered by banks is determined by the central bank of the country, but other banks may fix their own interest rates at levels that may be higher or lower than those determined by the central bank.

3. Find words or word combinations in the text that mean the following:

1. when one company unites with another company and they make a single company;

2. a combination of a commercial bank, an investment bank, and an insurance company offering different financial services;

3. a client of a bank that is a whole company or a large firm;

4. money put in a bank;

5. percentage of money paid by a bank to people who deposited their money with it; percentage of the loan paid to the bank by people who borrows money from the bank;

6. to get money for some project (usually through an intermediary);

7. money charged by a bank for its services;

8. the money that is used in various countries;

9. a document issues by a government indicating that the money was borrowed and the government promises to give it back with interest to the holder of the document.

Discussion

Work in pairs.

Discuss which functions of the commercial banks do you think are most important for private and business customers? Why?

Pre-listening tasks

1. The words and word combinations in A are in the text you will hear. Use your dictionary if necessary and match each of them with a definition in B.

A

B

to deposit bank customer public to raise funds to save to withdraw deposit loan to apply for

people in general an amount of money that a person, business or country borrows, especially from a bank to put your money in the bank where your account is opened to approach, turn to an amount of money that you pay into a bank account a financial institution that people or business can keep their money in or borrow money from to collect money to take money out of your account a person or company that buys goods or services to keep or store something so that you can use it in the future

2. Work in small groups.

Discuss the necessity of opening a bank account. Which one would you prefer to open (a savings account or a checking account)? Why? Would you try to open both types of accounts? Why?

Listening

T³ The dialogues you are going to hear demonstrate various services of a bank. Listen to them and answer the questions.

1. What kind of bank is discussed in dialogue a?

2. What account will the customer be advised to open in dialogue b?

3. What is the purpose of the customer’s visit to the bank in the dialogue c?

4. Does the customer (in dialogue c) already have an account with that bank?

Role-play

Work in pairs.

1. Listen to a dialogue a again and reproduce it, changing it so that it would be clear that a commercial bank is being discussed.

2. Listen to dialogue b again and reproduce it, changing it so that the customer is advised to open a checking account.

3. Listen to dialogue c again and reproduce it, changing the purpose of the loan (for instance, to request money to buy a house). Choose a purpose for which you, personally, would like to get a loan.

Reading

1. Read text 28 using your dictionary to help with new words.

TEXT 28