Banking and banking services

Vocabulary notes

		account — счет current account — текущий счет deposit account — сберегательный счет
		on behalf of smb. — от имени и по поручению кого-л.
		to draw a cheque — выписать чек syn. to make out a cheque to issue a cheque
		to pay interest on smth. — выплачивать проценты (по счету) to earn interest — приносить процентный доход
		transference of money — перевод денег to transfer — переводить physical entity — физическое лицо
		payable — подлежащий выплате to payable to bearer — подлежать выплате предъявителю
		lending — ссудная деятельность to be available for lending — иметься в наличии для выдачи займа to lend — давать взаймы a lender — кредитор (syn. creditor)
		overdraft — превышение кредита to overdraft an account — превысить кредит по счету
		borrower — заемщик to borrow (from) — занимать (у кого-л.)
		to offer security — предоставлять в качестве залога against the security of smth. — под обеспечение чего-л. syn. on (as) collateral
		fixed capital — основной капитал
		insurance policy — страховой полис to issue — страховать insurer — страхователь
		miscellaneous services — прочие, другие услуги
		executor to a will — душеприказчик
		trustee of property — доверенное лицо, временно управляющее собственностью truster — доверитель trust services — трастовые услуги
		advising — консультационные услуги to advise smb on smth — консультировать (по вопросу)
		to be engaged in trade — заниматься торговлей

Answer the following comprehension question based on the text.

1. What do you think is meant by "trade in money"?

2. Explain in your own words the difference between a current account and a fixed deposit account.

3. What is a cheque?

4. If a firm borrows for a year 10,000 at a rate of 5 per cent, how much does it pay back at the end of the year, and where has the extra money come from?

5. Explain in your own words what an overdraft is?

6. Why should business firms sometimes want to borrow from banks?

7. What are the executors of wills?

8. What are trustees?

9. Why has the Central Bank a special place in the banking system of a country?

The banks are firms which trade in money. The commercial banks have four main functions.

The first is to store their customers' money and keep it safe, and they do this in two ways. The bank may look after money which a customer has deposited with it by means of а current account. This means that the bank holds the money on behalf of the customer, who can whenever he wishes, by making a written order known as a cheque, direct the bank to make payments up to the amount deposited either to himself or to anybody, else. The bank makes a small charge for this service. Alternatively money can be stored in a fixed deposit account, where the money deposited is not used for drawing cheques, but is merely entrusted to the bank for safe-keeping, on the principle that the customer loans it to the bank who pays him interest on it. Of course, a customer can have both types of account in one or as many banks as he wishes.

The second function of the commercial banks is to make easy and safe the transference of money from place to place, so that people and firms (for firms, of course, are very important customers of the banks) can pay their debts in all parts of the country without the inconveniences or risks of carrying actual cash about. This transference is done also by means of cheques, which can easily be sent through the post, and, if crossed, are payable only into the bank account of the person or firm named on the cheque.

The third, and probably the most important function of the commercial banks, is lending money, They can do this because the money deposited with them is available for lending, and because of the interest which they can earn on the lending they undertake. In fact, such interest is the chief source of income for banks. The lending by banks is of two kinds, overdrafts and loans. An overdraft is a type of loan in which the bank allows the customer to issue cheques, up to an agreed figure, for a larger sum than he has in his current account. A loan is a specified amount given to a borrower for a specified period. A large number of business firms can obtain credit in this way in order to expand their business, to extend their premises, buy new machines, or something like that. Of course, before a bank lends money it needs to be assured that the borrower can offer some sort of security. In the case of overdrafts, regular income and the unevenness of the customer's spending are usually enough, if the customer is well known to the bank; there will be, perhaps, only short periods when the account is overdrawn and that by only a comparatively small amount. In the case of loans, the bank is likely to require as security such things as a firm's fixed capital — land or buildings, for instance; and if a private individual is the borrower, the bank will need as security the borrower's property or insurance policies.

The fourth function of the commercial banks is to provide certain miscellaneous services to customers, such as exchanging foreign currency for those who wish to travel abroad, acting as executors to wills or as trustees of property, or advising those who wish to invest money, and so on. Banks can also store valuable ' property or documents in their strong-rooms. And since many customers of bank are firms engaged in import and export trade, foreign exchange, or adjusting the relationships between currencies, will be an important part of a commercial bank's work.

The Central Bank has a special place in the banking system of a country. Unlike the commercial banks it is nationalized, and unlike them, too, it does not deal with private individuals or firms.

■ Ex. 1. Mark the true (T) and false (F) statements.

1. The most important function of any commercial bank is lending money.

2. The money deposited on a current account is used for drawing cheques.

3. The lending by banks of on: type — loan.

4. The borrower doesn’t have to provide any security when taking a loan.

5. The Central Bank deals only with private individuals and firms.