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III. Find in the text the following words and word combinations and translate the sentences in which they are used:

Monetary policy operations; flow of funds; payment-clearing operations; maturity value; assets maturity; short-term wholesale deposits; short-dated assets; earned on the assets purchased; overwhelming majority; “at call”; on an overnight basis; short of cash; liquidity position; deposit bases; cash shortages or surpluses; solvency; rediscounting; a lender of last resort; borrowed funds; the aggregate balance sheet; sterling certificates of deposits; short-term borrowings; commercial bills; a liquid secondary market; eligibility status; bills eligible; “Big Bang” reforms; gilt-edged market; repurchase agreement; gross; establish dealings relationships.

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:

Word

Synonym

Opposite

shortage (noun)

purchase (verb)

value (verb)

profit (noun)

earn (verb)

deposit (verb)

straightforward (adjective)

short-date (adjective)

lend (verb)

assets (noun)

extend (verb)

demand (noun)

reduce (verb)

loan (noun)

competition (noun)

long-term interest rates (adjective)

V. Join the halves.

  1. The sterling money market or discount market involves …

  2. The market plays a central role …

  3. Discount houses borrow money, mainly from banks but also from other sources, and…

  4. The funds they borrow are almost wholly short term, either overnight or at call (i.e. can be recalled without notice) and …

  5. The discount houses provide the banks with a convenient form of liquidity …

  6. Banks finding themselves with tempor­arily surplus funds …

  7. Banks with a shortage of funds …

  8. Deposits with discount houses earn a competitive rate of interest and, …

  9. The discount market's role in providing liquidity does not end here, for …

  10. The role of market-maker is an important one: for financial assets to be negotiable (i.e. readily tradeable), …

  11. Assets that are not negotiable are not liquid: and efficient financial markets need liquid assets in order …

  12. The discount houses' willingness to buy and sell bills and CDs ensures their negotiability and …

  1. as they are fully secured, any risk is slight.

  2. so makes them that much more useful as liquid assets, both for banks and for other market participants.

  3. the discount houses also act as market-makers in Treasury bills, local authority bills, commercial bills and CDs.

  4. can add to their deposits with the discount market.

  5. there have to be dealers who stand ready to buy and sell on a regular basis.

  6. that market participants can quickly respond to changes in cash flow by buying or selling assets.

  7. are secured against the financial assets they hold.

  8. a number of dis­count houses, other traders in bills, a large number of banks and the Bank of England.

  9. which can be added to, or sub­tracted from, on a day-to-day basis.

  10. can call back monies already lent to the marker.

  11. within the monetary system.

  12. invest in short-term financial assets, notably bills and certifi­cates of deposit.