VII. Translate the text in writing: The bill of exchange

The bill of exchange is an important means of financing trade credit. It is a kind of post-dated cheque; that is, a cheque made out as pay­ment for goods received but payable at some future date, usually 3 months after the date on which it is signed. It is used in the finance of domestic and international trade. It works something like this: when a trader sells goods he draws up a bill of exchange and sends it to the buyer. The bill is in the form of a promise to pay and specifies the sum of money owed and the due time for payment. It. bears a stamp, which makes it legally acceptable. The purchaser of the goods duly signs the bill and returns it to the seller who now has a legal acknowledgement of the buyer's indebtedness. Bills of exchange normally mature in 3 months so that the purchaser of the goods has been granted 3 months' credit.

The merchant banks

Many merchant banks' date back to the nineteenth century when they were simply merchant houses trading in various parts of the world. Some of these houses grew in reputation and turned to the finance of trade as a specialised business. While the finance of international trade remains an important function of merchant banks other functions have tended to become rather more important. The main activities of the merchant banks are summarised below.

Acceptance business. The principal merchant banks are members of the acceptance Houses Committee and their work consists of accept­ing (i.e. guaranteeing) certain promises to pay issued by merchants engaged in home and overseas trade. In other words they are pro­viding a form of trade credit.

Financial advice to companies. Their best-known activity is the hand­ling of mergers and take-overs. Merchant banks advise and act for the parties concerned, but they will also advise on any aspect of a com­pany's financial affairs.

Share issues. Merchant banks act as Issuing Houses. As well as advis­ing on the method of raising funds they will usually carry out all the work involved in floating a new issue.

Investment managers. In addition to their advisory role, merchant banks will take over the active management of investments on behalf of other institutions and they also operate a number of investment and unit trusts.

Wholesale banking. These banks operate extensively in the Eurocur­rency market, and in wholesale banking (dealings in very large deposits for periods of one year or more).

VIII. Read and retell the following text. Foreign banks

The number of foreign banks in London has expanded rapidly in recent years and there are now more than 300 of them. United States and Japanese banks are the most numerous. One reason why banks establish foreign networks is to meet the requirements of their customers’ international operations and this is particularly important

in these days of large multinational companies. There has also been a large increase in the practice of raising loans abroad by governments, nationalised industries, and large joint stock companies. Large sums of money now move from one international financial centre to another seeking either, higher interest rates or greater security against the loss in real value which occurs when a currency depreciates against other currencies. Foreign banks play an important part in the London Money Market.

It was during these decades that a new international banking system was developing. This system, often referred to as the eurodollar market or, more accurately, the euro-currency markets, proved a magnet to banks world­wide. All large banks, as well as many medium-sized ones, sought to become involved. And while the euro-currency markets were truly international, with active dealing in many centres in Western Europe and elsewhere. London was, and still remains, the single most important centre. So it was to London that most foreign banks went, when they decided to compete for a share of the new international banking business, although, naturally, the larger banks also established offices in other important centres of the market as well.

For present purposes it is sufficient to note that virtually all of the foreign banks have as their main business wholesale banking in foreign currencies, and that much of this business is conducted with companies, persons and banks outside the UK. Having come to London primarily to do international banking, many of the foreign banks have, nonetheless, been ready to compete for domestic business as well. In a small number of cases, foreign banks have opened offices in provincial centres, such as Birmingham or Manchester.