- •Unit I the bank of england
- •From a National to a Central bank
- •1. Key terms
- •Answer the following questions in your own words:
- •Fill in the blanks in this passage, using words from the list given below:
- •Case Study.
- •Функції Банку Англії
- •V. Opposites and synonyms.
- •VI. Join the halves.
- •VII. Summarize the following passage in about 100 words and an appropriate
- •VIII. Write a memorandum.
- •The court of directors
- •The executive
- •IX. Meanings.
- •X. Make comments on the following charts, paying attention to the information given below
- •XI. Complete the following sentences using your own words:
- •XII. Study the text given below and explain in English the meaning of the following words and word combinations: a Stable Financial System
- •Issue Department
- •The Value of Money
- •Interest Rates
- •I. Key terms
- •II. Answer the following questions in your own words:
- •III. Fill in the blanks in this passage, using words from the list given below:
- •IV. Summarize the following text in English in about 50 words:
- •V. Join the halves.
- •VI. Meanings.
- •VII. Complete the sentences using your own words:
- •Unit II
- •The uk money and banking markets
- •The uk banking market
- •The British banking market structure
- •Key terms
- •Answer the following questions in your own words:
- •Memorize the following terms and use them in your own sentences:
- •Find in the text the following words and word combinations and translate the sentences in which they are used.
- •V. Synonyms and antonyms. Complete the following table:
- •VI. Fill in the blanks with prepositions and translate the text:
- •VIII. Translate the following sentences into English:
- •IX. Complete the text using these words: Types of Bank
- •X. Summarize the following text in English in about 100 words: комерційні банки: IX види та операції
- •XI. Study and translate the following scheme into English:
- •XII. How much do you know about banks? Decide if these statements are true or false.
- •The financial systeм Nature
- •II. Answer the following questions:
- •III. Fill in the blanks. Rewrite the passage filling in the blanks from the list of words below.
- •IV. Match the Ukrainian and English equivalents:
- •V. Read the passage below. Explain the meanings of the words and phrases which have been highlighted:
- •VI. Render the following text into English: Трансформаційні функції комерційних банків
- •VII. Choose the correct alternative to complete each sentence:
- •VIII. Complete the following sentences using words and word-combinations given below:
- •IX. Translate the following words and word-combinations into English and insert them in the sentences given below.
- •X. The following famous quotations are about credit and borrowing and lending. Can you complete them:
- •In business, one way to obtain ……… is to create the impression one already has it.
- •XI. Translate the following text into English without using a dictionary:
- •XII. Discussion topics:
- •XIII. As we have already seen, a bill of exchange might not be honoured, or the order might be cancelled. So, a letter of credit is a more binding method of payment. Documentary Credits
- •Unit III
- •Commercial banks
- •Retail and wholesale activities of financial institutions
- •I. Key terms
- •II. Answer the following questions:
- •III. Find in the text the following word combinations and translate the sentences in which they are used:
- •IV. Find English equivalents to the word combinations given below:
- •V. Complete the table:
- •VI. Fill in the blanks from the list of words below the text:
- •VII. Answer the following comprehension questions based on the text:
- •VIII. Sum up what the following text said about:
- •IX. Complete the sentences using your own words:
- •X. Complete the text using these words:
- •XI. Read the text and the dialogue following it. Find answers to the questions given below. Reproduce the dialogue with your partner. The structure of a Bank
- •The Dialogue
- •XII. Using the information in the text, say what is true and what is false. Correct the false sentences.
- •XIII. Fill in the blanks with proper words or phrases:
- •XV. Read and translate the text. Describe the bank’s management hierarchy. Study the chart following the text. Service operations of a small bank
- •Organization Chart for a Small Community Bank
- •XVI. Match the words above with the definitions which follow:
- •XVII. Fill the spaces with words from the box. Translate the text into Ukrainian:
- •XVIII. Render the following text into English:
- •I. Key terms:
- •II. Answer the following questions:
- •IV. Study the following text and translate the table into Ukrainian: The balance sheets of the retail banks
- •V. Translate the text in writing: Savings banks and the National Giro
- •VI. Reproduce the main idea of the text: The Bankers’ Clearing House
- •VII. Find in the text the following words and word combinations and translate the sentences in which they are used:
- •VIII. Find in the text the terms which match the following explanations:
- •IX. Scan the text. Translate it into Ukrainian. Don’t use the dictionary:
- •X. Join the halves.
- •XI. Translate the text in writing: The Bankers' Clearing House
- •XII. Read and translate the following text: Easy money
- •XIII. Match these terms with their definitions:
- •XIV. Replace the underlined items with words or phrases from the text that have a similar meaning.
- •XV. Choose, the best explanation for each of these words or phrases from the text:
- •XVI. Find a word or phrase in the text that has a similar meaning.
- •XVII. Match the first half of each sentence with the most appropriate second half. Notice the words are used in each sentence to mark a contrasting idea. (These words are in italics.)
- •If possible, find the annual results of a bank in your country and report on its profitability.
- •XVIII. Prepare a brief summary of the text: Savings Banks and the National Giro
- •The changing environment and activities of the uk retail banks
- •XIX. Complete the text using these words:
- •XX. Make an overview of the following texts: current accounts
- •Interest-earning cheque accounting
- •Deposit accounts
- •Budget accounts
- •Loan accounts
- •Personal loan accounts
- •XXI. Add the words and expressions that complete the following sentences below:
- •XXII. Read and discuss the following text. Give answers to the questions below:
- •XXIII. Choose the right answer:
- •XXIV. Say what is true and what is false. Correct the sentences:
- •XXV. For each of the following phrases find the expression in the text or in the dialogue that explains it:
- •XXVI. After reading the text explain in detail explain in detail how to open a current account. Current accounts
- •XXVII. Read and translate the text. Describe to a partner how to open a deposit account. Deposit accounts
- •XXVIII. Match questions and answers:
- •XXIX. Act as an interpreter for a and b:
- •Paying-in slip
- •XXX. Translate into Ukrainian.
- •XXXI. Read the dialogue.Answer the questions which follow it. Reproduce the dialogue in pairs.
- •Choosing a bank account
- •XXXII. Read the text and write a précis in English in about 200 words:
- •Questions:
- •Unit IV Text a Wholesale banks
- •British merchant banks
- •Other British banks
- •Overseas banks
- •I. Key terms
- •II. Answer the following questions:
- •III. Find in the text the following words and word combinations and translate the sentences in which they are used:
- •IV. Fill in the blanks:
- •V. Rearrange the following sentences to make up a coherent and logical text about other British banks. The first sentence is given to help you: Other British banks (iso)
- •VI. Prepare a brief summary of the text:
- •VII. Translate the text in writing: The bill of exchange
- •The merchant banks
- •VIII. Read and retell the following text. Foreign banks
- •IX. After reading the following dialogue translate the passages concerning recent changes and the range of services provided by the bank:
- •X. Study the divisions of the bank and their areas of responsibilities:
- •XI. Look at the terms in the left-hand column. Match each one with its correct definition in the right-hand column:
- •XII. Scan the following text in about 100 words. Give the proper title to the text:
- •XIII. Read the following information:
- •If you represent Company c, look at the following instructions.
- •XIV. Choose words to complete each sentence. In some cases there is more than one possibility.
- •XV. Read the dialogue. Answer the questions which follow it: Part I. Application for credit
- •Part II. Granting the Loan on an Open Note
- •XVI. After reading the text answer the questions which follow it:
- •XVII. Choose the right answer:
- •XVIII. Say what is true and what is false. Correct the false sentences:
- •XIX. Translate the following text into English:
- •XX. Role-play
- •Text b The discount houses
- •I. Key terms:
- •II. Answer the following questions:
- •III. Find in the text the following words and word combinations and translate the sentences in which they are used:
- •IV. For each of the following words you should provide a word with the same or similar meaning and a word, which is opposite in meaning:
- •V. Join the halves.
- •VI. Read about the history of Alexanders. Ask comprehension questions on the text. Alexanders Discount p.L.C.
- •VII. After having read the text below you should be able to answer the questions following the text: Building societies
- •VIII. Analyse the following charter:
- •IX. Make an overview of the following text in English: Other deposit-taking intermediaries
- •Investing financial intermediaries
- •Insurance companies
- •Investment trusts
- •X. Find the terms which match the following definitions:
- •Unit V federal reserve banks
- •Organization of the Banks
- •Monetary Policy Role
- •Supervision and Regulation
- •Government Services
- •Depository Institution Services
- •Key terms
- •Answer the following questions in your own words:
- •III. Fill in the blanks in this passage, using words from the list given below:
- •IV. Case Study:
- •Monetary Policy and the Economy
- •The ultimate targets of monetary policy
- •V. Read the text and prepare your comments on the supply of Federal Reserves, using the given below picture. Supply of Reserves
- •Trading of Reserves
- •VI. Opposites and Synonyms.
- •VII. Join the halves.
- •VIII. Summarize the following passage in about 100 words and give an appropriate title
- •IX. Write a memorandum.
- •X. Read the passage below and explain the meanings of the words and phrases which have been highlighted.
- •XI. Analyze the following text. Make up a plan of it; give the translation of the underlined words and word combinations. Open Market Operations
- •XII. Interpretation of data.
- •XIII. Find in the text given below answers to the following questions:
- •XIV. Give a brief report on the given material Techniques of Open Market Operations
- •Repurchase Agreements
- •Federal Reserve System outright transactions Billions of dollars
- •Matched Sale-Purchase Transactions
- •Federal Reserve System temporary transactions
- •XV. Case study.
- •A typical day in the conduct of open market operations
- •The discount window
- •Interest rates
- •XVI. Analyze the texts. Complete a list of advantages and disadvantages for the borrower of each of the types of credit. Types of Credit
- •Adjustment Credit
- •Adjustment borrowing and the spread of the federal funds rate over the discount rate Seasonal Credit
- •Extended Credit
- •Emergency Credit
- •Unit VI
- •I. Key terms:
- •II. Answer the following questions:
- •III. Find in the text the following word combinations:
- •IV. Explain the following word combinations and use them in your own sentences:
- •V. Fill in the blanks. Rewrite the passage filling in the blanks from the list of words below.
- •Financial institutions: their role in business
- •Commercial Banks
- •Table 1. Top 15 Commercial Banks in the United States (Based on Total Assets)
- •VI. Summarize the following passage in about 100 words: Young Americans Bank
- •VII. Choose the right answer:
- •VIII. Do it in English making use of the active vocabulary: Порівняння банківської структури сша та інших країни
- •X. Express the main idea of each of the paragraphs in the following text in English:
- •XI. Act as an interpreter for a and b:
- •Other Banking Institutions Thrifts and Credit Unions
- •Limited-Service Banks
- •I. Key terms:
- •II. Answer the following questions:
- •III. Find in the text the corresponding English terms:
- •IV. Summarize the functions of savings banking institutions in about 150 words.
- •V. Find in the text the words which correspond to the following explanations:
- •VI. Explain the meaning of the following word combinations and use them in your own sentences:
- •VII. Complete the table:
- •VIII. Do it in English making use of the active vocabulary: Кредитні спілки
- •IX. Make an overview of non-banking institutions. Use comprehension questions given below: Nonbanking Financial Institutions
- •X. Complete the sentences:
- •XI. Match the words and the word combinations given on the left with their dictionary definitions given on the right:
- •XII. Explain the following word combinations and use them in your own sentences:
- •XIII. Role play:
- •XIV. The following are some of the more obvious and important differences in terminology between British and American English in the area of finance.
- •XV. Speak on the following topics:
- •Unit VII the banking system of ukraine
- •Structure of the banking system of ukraine
- •I. Key terms:
- •II. Answer the following questions:
- •III. Study the following information: Selected data on banks of Ukraine
- •IV. Find in the text the following words and word combinations and translate the sentences in which they are used:
- •V. Find English equivalents to the words and word combinations given below:
- •VI. Translate the following text into English: Організація внутрішнього аудиту в комерційних банках України та взаємозв'язок з зовнішніми аудиторами
- •VII. Translate the text in writing: Banking system
- •VIII. Read and discuss the following texts: Monetary policy: The nbu further reduces the discount and reserve requirement rates
- •Financial markets: Although the amount of bad credits has decreased, it is still quite high
- •Bank activity bases concerning automation of electronic payments
- •I. Key terms:
- •II. Answer the following questions:
- •III. Find in the text the following words and word combinations and translate the sentences in which they are used:
- •IV. Study and present the information given in the text: opening a bank account
- •V. Read and retell the following text: Rise and development of the banking system of Ukraine
- •VI. Write a resume of the text given below: Banks and the Association of Ukrainian Banks
- •Unit VIII the national bank of ukraine
- •Issuing centre
- •The National Bank of Ukraine determines the foreign exchange policy.
- •I. Key terms
- •II. Answer the following questions in your own words:
- •III. Fill in the blanks in this passage, using words from the list given below:
- •IV. Case Study.
- •V. Opposites and synonyms.
- •VI. Join the halves.
- •VII. Summarize the following text in about 100 words and give an appropriate title.
- •Herald of the National Bank of Ukraine, May 2000
- •VIII. Read the memorandum (memo) written by the Kyiv National University teacher, who is responsible for the students practicing at one of the nbu departments (International Banking Department).
- •1) Memo 1
- •2) Memo 2
- •IX. Read the passage below and explain the meanings of the words and phrases, which have been underlined. Cash Circulation and Settlements Sphere
- •X. Make a chart using the following data, given by the nbu (20xx).
- •XI. Write a memo to your supervising teacher, in which you should comment on the envisioned monetary parameters, shown in the table.
- •XII. Complete the sentences using your own words:.
- •XIII. Match the words and word combinations given on the left with their dictionary definitions given on the right.
- •XIV. Point all possible advantages and disadvantages (if may be) of the bills of exchange (b/e) given bellow. Bills of Exchange
- •2) Study the letter:
- •XVI. A) Study the text given below and make your comments on it: Role of the Central Bank in Interbank Settlement
- •XVII. Study the Bank’s following tables, add the data on the Bank of England, and the nbu and state what is different and what is not in their performance.
- •Unit IX bank supervision
- •Organization of Effective Bank Supervision
- •Introduction to the Legal Framework
- •I. Key terms
- •II. Answer the following questions in your own words:
- •III. Fill in the blanks:
- •IV. Translate into English
- •V. Study the following text and make up a plan, covering all crucial points
- •IV. Opposites and Synonyms.
- •VII. Join the halves.
- •VIII. Summarize the following passage in about 100 words and give an appropriate title.
- •Introduction to the Camel Rating System
- •IX. Write a memorandum.
- •X. Read the passage below and explain the meanings of the words which have been highlighted.
- •Study the following notes and prepare an oral presentation
- •Component ratings
- •Analysis of Capital
- •Risk Assets
- •Analysis of asset quality
- •XII. When you have considered these problems, express your thoughts in writing.
- •XIII. Asking about credit rating.
- •Using an Enquiry Agency
- •Replying to enquiries about credit rating
- •Refusing to reply
- •Replying favorably
- •Letter to a referee
- •Questions
- •Enquiry Agent's reply
IV. Study the following text and translate the table into Ukrainian: The balance sheets of the retail banks
An alternative perspective on the operations of retail banks can be obtained from an examination of the aggregate 'balance sheet' for the group. The summary totals for the retail banks as at 30 April 2002 are given in Table 1.l.
Assets
(i) Sterling assets
Sterling assets represent over 70% of total assets, and hence it is clear that they dominate the business of the retail banks. The components of those sterling assets are as follows.
Table 1. UK retail banks: summary balance sheet as at 30 April 2000 |
|||
Assets |
£bn |
£bn |
|
Sterling |
|
|
|
Cash & balances with Bank of England |
|
4.7 |
|
Market loans |
|
95.6 |
|
Secured money with discount houses |
6.4 |
|
|
Rest of UK banking sector |
62.8 |
|
|
Certificates of deposit held |
17.0 |
|
|
UK local authorities |
0.3 |
|
|
Overseas |
9.2 |
|
|
Bills |
|
18.9 |
|
Treasury bills |
7.9 |
|
|
Eligible bank bills |
10.6 |
|
|
Other |
0.4 |
|
|
Claims under sale and repurchase agreements |
|
9.3 |
|
Advances |
|
307.6 |
|
UK private sector |
303.6 |
|
|
Others |
4.0 |
|
|
Investments |
|
48.0 |
|
Foreign currency |
|
|
|
Market loans and advances |
|
99.3 |
|
UK |
38.4 |
|
|
Overseas |
60.9 |
|
|
Bills |
|
2.9 |
|
Investments |
|
50.9 |
|
Claims under sale and repurchase agreements |
|
8.1 |
|
Miscellaneous assets (in sterling and foreign currency) |
|
32.6 |
|
Total assets |
|
677.9 |
|
Liabilities |
£bn |
£bn |
|
Sterling |
|
|
|
Notes issued |
|
2.4 |
|
Sterling deposits (of which £203bn are sight deposits) |
426.8 |
||
UK banking sector |
51.8 |
|
|
UK private sector |
306.0 |
|
|
UK public sector |
5.1 |
|
|
Overseas residents |
26.5 |
|
|
Certificates of deposit issued, etc. |
37.4 |
|
|
Liabilities under sale and repurchase agreements |
|
7.9 |
|
Foreign currency |
|
|
|
Foreign currency deposits |
|
146.6 |
|
UK |
41.1 |
|
|
Overseas residents |
83.0 |
|
|
Certificates of deposit issued, etc. |
22.5 |
|
|
Liabilities under sale and repurchase agreements |
|
6.0 |
|
Miscellaneous liabilities (in sterling and foreign currency) |
88.2 |
||
Total liabilities |
|
677.9 |
Cash and balances with the Bank of England. Despite being the most vital asset for the day-to-day operations of the retail banks, the latter manage to keep the total very small. They do so because cash and balances at the Bank of England bring them no income. The balances with the Bank of England are partly operational balances used to meet commitments arising from payments-clearing operations, though they also include the cash ratio balances that all banks are required to hold with the Bank of England as part of the authorities' regulatory provisions. Only the operational balances are liquid assets.
Market loans. At £95.6bn, these represent about 14% of total assets and about 20% of sterling assets, and consequently represent a significant proportion of the retail banks' assets and activities. The 'market' aspect of these loans refers to the fact that they are wholesale loans that are usually made at market-related rates of interest and usually to other banking institutions. The majority of market loans are very liquid, i.e. they have only a short period to maturity, and hence represent an important means of holding interest-bearing assets that are also very liquid as an alternative to holding cash. They form the greater part, of the banks' liquid assets.
Bills. Bills total only £18.9bn, representing 2% of total assets and 3.9% of sterling assets. As such, they now constitute only a fairly minor element of the retail banks' business, though their importance has been higher in the past. The largest element of these bills is 'eligible bank bills', so called because they are commercial bills that have been accepted (underwritten) by banks which have eligibility status with the Bank of England. To achieve eligibility status, banks have to meet certain criteria set by the Bank of England, relating to the quality of their acceptance business. The significance of eligible bank bills lies in the tact that they are eligible for re-discounting at the Bank of England. A bill that has been accepted by a bank which does not have eligibility status is a normal, non-eligible bank bill and will be included in this category of bills, along with Treasury bills and local authority bills. With a liquid secondary market in bills, these also represent liquid assets that yield an investment return.
Claims under sale and repurchase agreements. These are a new type of asset, introduced in the discount market on a formal basis to market members in 1993. In 1996, an 'open' repo (as these facilities are known) was introduced to the gilt-edged market. Banking statistics now show repo claims as a separate asset, with repo liabilities also being shown separately. These claims arise where the banks have bought assets (bills or gilts) in sterling from other parties, who must later complete the transactions by buying the assets from the banks with cash. The figures show claims at £9.3 billion and liabilities at £7.9 billion, so that the retail banks have net claims of £1.4 billion, which is small compared to the figure for wholesale banks.
Advances. At £307.6bn, representing 45% of total assets and over 63% of sterling assets, sterling advances clearly represent the most important element of retail banks' assets. Advances constitute the lending made predominantly to the UK private sector, either in the form of overdrafts or loans for fixed periods of lime. If the lending is for a fixed period of time, the original maturity may range from a few months to 10 years or more; in the case of mortgage loans, the original maturity is normally for 25 years. The arrangements for the interest rate charged on advances will be either floating (changing with the bank's base rate or the sterling London inter-bank offered rate - LIBOR), or fixed over the duration of the loan, or a hybrid of the two with rates fixed for a certain period of time. In addition, the interest rate charged will vary with the size of the sum borrowed, the creditworthiness of the borrower, the maturity of the loan, the arrangements for repayment, and so on.
Advances represent the least liquid element of the retail banks' financial assets but also represent the most important source of profit to a retail bank since, subject to competitive forces, the interest margin is greatest on these assets. In order for advances to be profitable, however, the banks need to control the costs of originating and administering the advances and to minimise losses through defaults. Given the lack of liquidity associated with advances, the importance of a substantial proportion of liquid assets - that is, cash, operational balances with the Bank of England, market loans and bills within the total sterling asset portfolio can be appreciated.
Investments. At £50.9bn. these represent only 7.5% of total assets and just over 10% of sterling assets. The bulk of these investments is accounted for by securities issued by, or guaranteed by, the British government. An important aspect of British government securities is that they are highly marketable and hence the underlying investment can be realised quickly. Their value changes, however, in the opposite direction to changes in interest rates.
(ii) Foreign currency assets
Table 1.1 shows (hat foreign currency assets constituted £16lbn and therefore about 24% of the total assets of the retail banks. The significance of these figures is that the retail banks are not just dealing in sterling at a retail level, but that almost 25% of their business involves foreign currencies.
The components of the foreign currency assets are very similar to those for sterling assets. A notable figure is the £99.3bn for market loans and advances to the overseas sector, demonstrating the point that not only is a substantial element of the business of the retail banks expressed in foreign currency, but furthermore a significant element of that is non-domestic in nature. In practice, around 75% of the 'market loans and advances' elements constitutes market loans, and therefore only 25% constitutes advances. Sale and purchase agreements are available in foreign currencies, so there is an entry for claims of £8.1bn.
(iii) Miscellaneous assets
This figure on the asset side of the balance sheet consists of items such as the retail banks' own branch premises and equipment and the value of cheques that have been credited to customers' accounts but which have not been presented for payment to other banks. Since it includes assets in both sterling and other currencies, it has been excluded from the calculation of the percentages above.
Liabilities
(і) Sterling liabilities
Sterling liabilities represent £437bn, equivalent to 64.5% of total liabilities. This is slightly lower than the proportion of sterling assets in total assets, but account needs to be taken of the higher proportion of the 'miscellaneous' item on the liabilities side of the balance sheet than the asset side. Moreover, most of these 'miscellaneous liabilities' items will be the banks' sterling capital and reserves.
Notes issued. These constitute £2.4bn and represent the notes that are issued by the Scottish and Northern Ireland banks, which are backed, pound for pound, by notes issued by the Bank of England.
Sterling deposits. These constituted £426.8bn, nearly 63% of total liabilities. Examination of the balance sheet in Table 1.1 reveals that 12%) of these deposits emanated from the UK banking sector, nearly 72% from the UK private sector (both individuals and businesses), 1.2% from the public sector and almost 6.1% from overseas residents. In addition, 8.8% of sterling deposits were in the form of certificates of deposit and other short-term paper where (lie source, in terms of the previous classifications, is unknown. (Sterling certificates of deposit are negotiable bearer securities of fixed term (usually between 28 days and five years), carrying a fixed rate of interest and issued in denominations of £50,000 or more.)
What the balance sheet does not identify is the maturity structure of these sterling deposits because this is market-sensitive information. In practice, around 50% of sterling deposits are in the form of sight deposits repayable on demand, with around 70% of these being interest-bearing. The time deposits have maturities that range from a few days up to several years, and are sourced on both a retail and a wholesale basis. In practice, however, a significant number of the time deposits are repayable on demand (albeit with an interest penalty), and a significant number also have only a short period to maturity. The overall picture facing the retail banks, therefore, is that their sterling liabilities are highly liquid, emphasising their dependence on the 'law of large numbers' to enable them to provide loans and other advances.
Liabilities under sale and repurchase agreements. These arise when a bank has sold assets (bills or gilts) in return for cash under the newly introduced 'repo' facilities described earlier. As part of the contracts, the banks have liabilities to repurchase these bills or gilts at some date in the near future. In this instance, the retail banks' liabilities are slightly less than their claims.
(ii) Foreign currency deposits
Foreign currency deposits originate primarily in the form of wholesale deposits, with a high proportion, not surprisingly, coming from the overseas sector. Certificates of deposit are also issued in foreign currencies.
(iii) Miscellaneous liabilities
Constituting £75.6bn, this item represents 14.3% of total liabilities and includes credit balances received but not yet credited to customers' accounts, and standing orders and credit transfers debited to customers' accounts but not transferred to the payee. This miscellaneous liabilities item, however, also includes the important element of shareholders’ funds, the vast majority of which are denominated in sterling. Like any business, a bank needs capital backing for its business operations; in addition to the capital required for premises and equipment and for working capital, shareholders’ funds are required to cover the possibility of defaults on loans and capital losses on investments. The size of shareholders’ funds relative to total assets therefore represents the ability of a bank to absorb losses, and therefore its ability to repay depositors when it does incur losses. (Capital adequacy is covered in Unit 5.) Since it includes liabilities in both sterling and other currencies, the miscellaneous liabilities item has been excluded from the calculation of the percentages above.
What are eligible bank bills?
What is the significance of eligible bank bills for retail banks?
What is the significance of foreign currency assets for retail banks?
Describe the structure of a typical retail bank’s portfolio.
Distinguish between claims and liabilities under sale and repurchase agreements.