10. Banking as a business

The quest for profits led to the development of modern bank. If we gap into the history we’ll be able to find the ancestors of banks – the medieval goldsmiths. The goldsmiths worked and shared the precious metal. But they also undertook another function. Customers looked to the goldsmith for safe storage of their treasures. In return for the deposit of a valuable, the goldsmith would provide the customers with a warehouse receipt – the promise to return the valuables to the customer on demand. They stored the valuable for a fee. At this stage the goldsmith’s business was not very profitable. Its sole source of profits would be the small amount charged for safeguarding gold.

After some years of experience, the goldsmiths have noticed something interesting. Although he was committed to repay the gold of the depositors on demand, he didn’t actually repay them all at once. Each week some of the depositors made withdrawals but others added to their balances. There was a flow of gold out of the warehouse but there was also an inflow. As a result of it a sizable quantity of gold remained on deposit at all times.

Since the depositors did not try to withdraw their gold simultaneously the goldsmith didn’t need to have all the gold on hand. Some could be put to work earning interest.

Sooner or later the goldsmith begins to make loans. In making loans he entered the fractional reserve banking business. That is, he hold gold reserves that were only a fraction of his demand deposit liabilities. He earned interest on the loans he had made. Thus the basis for the development of banks was laid.

I . Прочитайте та перекладіть текст.

II. До кожного питання пропонується 4 варіанти відповідей. Запишіть номер питання та літеру того варіанту , який ви вважаєте правильним.

1.

A. money outflow;

B. gold;

C. profits;

D. valuables.

2. Who was an ancestor of a bank?

A. an accountant;

B. a customer;

C. a depositor;

D. a goldsmith.

3. What was an item that the goldsmith had to store?

A. money;

B. precious metal;

C. a deposit;

D. loans.

4. What did the goldsmith provide his customers with?

A. a cheque;

B. a warehouse receipt;

C. interest;

D. earnings.

5. What did the goldsmith begin to do later?

A. to make loans;

B. to control the money supply;

C. to become an instrument for political manipulation of the banks;

D. to get a cheque.

6. What earned interest for the goldsmith?

A. gold;

B. loans;

C. treasure;

D. precious metal.

7. Who decided to make loans to get interest?

A. a medieval goldsmith;

B. an ancestor;

C. a book-keeper;

D. a controller.

III. Із варіантів, поданих нижче, виберіть той, який передає головну думку кожного абзацу тексту.

І – й абзац.

A. making loans by the goldsmith;

B. the goldsmith’s activities at the first stage of a banking business;

C. keeping money by the goldsmith;

D. the customers’ interest.

2 – й абзац.

A. the balance of a banking business;

B. the depositors withdrawals;

C. simultaneous withdrawing of the depositors’ gold;

D. the depositors earn interest.

3 – й абзац.

A. the fractional-reserve banking business;

B. the development of banks;

C. the goldsmiths’ loans.

IV. Про що іде мова в тексті?

1. borrowing money from the banks;

2. transferring of government deposits;

3. the development of a banking business;

4. money definitions;

5. issuing paper currency.

V. Виберіть слова, які доповнюють наступні речення:

1. The goldsmith kept enough…… to pay off all depositors who wanted to make withdrawals.

1. Gold;

2. Money;

3. Goods;

4. Services.

2. They (the goldsmith) had …… to reduce reserves, because each additional dollar lent out meant that additional interest could be earned.

1. a loan;

2. interest;

3. a fraction;

4. an intensive.

3. The goldsmith-bankers were …. on a reasonably stable flow of deposits and withdrawals.

1. counts;

2. count;

3. will count;

4. counting.

4. The banks, operating with gold reserves equal to only…. Of their deposits did not have enough gold to pay off all their depositors.

1. a fraction;

2. businesses;

3. earnings;

4. demands.

5. Each depositor had a personal interest to be first in line …. Back his or her gold.

1. to control;

2. to get;

3. to add;

4. to begin.