Unit

Banking
Vocabulary
Match up the terms with the definitions:
7 Cash card 3 cash dispenser or ATM 2 credit card 8 home banking
!oan " mortgage # o$erdra%t & standing order or direct debit
' Current account or checking account
#( )eposit account or time or notice account
1 an agreement by which a customer can withdraw more form a bank account
2 a card which guarantees payment for goods and services purchased by the cardholder, who
pays back the bank or finance company at a later date
3 a computerized machine that allows bank customers to withdraw money, check their balance
and so on
4 a fied sum of money on which interest is paid, lent for a fied period, and usually for a
specific purpose
! an instruction to a bank to pay fied sums of money to certain people or organization at stated
times
" a loan, usually to buy property, which serves as a security for the loan
# a plastic card issued to bank customers for use in cash dispensers
$ doing banking transactions by telephone or from one%s own personal computer
& one that generally pays little or no interest, but allows the holder to withdraw his or her cash
without any restrictions
1' one that pays interest, but usually cannot be used for paying che(ues or checks, and on which
notice is often re(uired to withdraw money
)iscussion
1) *hich of the banking facilities do you use+
2) *hat services do commercial banks offer in your country+
3) *hat changes have there been in personal banking recently+
4) *hat future changes do you foresee in the future+
,he banking industry
*eading
*ead the te+t belo, and ,rite short headings %or each paragraph
Types o% bank
1)))-ommercial banking)))))))))))))))))))))))))))))))))))))))))
-ommercial or retail banks are businesses that trade in money) ,hey receive and hold deposits,
pay money according to customer%s instructions, lend money, offer investment advice, echange
foreign currencies, and so on) ,hey make a profit from the difference .known as a spread or a
margin/ between the interest rates they pay to lenders or depositors and those they charge to
borrowers) 0anks also create credit, because the money they lend , from their deposits, is
generally spent .either on goods or services, or to settle debts/, and in this way transferred to
another bank account 1 often by way of a bank transfer or a che(ue .check/ rather than the use of
notes and coins 2 from where it can be lent to another borrower, and so on) *hen lending money,
bankers have to find a balance between yield and risk, and between li(uidity and different
maturities)
2)))3nvestment banking))))))))))))))))))))))))))))))))))))))))))
3nvestment banks, often called merchant banks in 0ritain, raise funds for industry on the various
financial markets, finance international trade, issue and underwrite securities, deal with takeover
and mergers, and issue government bonds) ,hey also generally offer stock broking and portfolio
management services to rich corporate and individual client) 3nvestment banks make their profits
from the fees and commissions they charge for their services)
3)))))4niversal banking))))))))))))))))))))))))))))))))))))))))))
3n some 5uropean countries .notably 6ermany, 7witzerland and 8ustria/ there have always been
universal banks combining deposit and loan banking with share and bond dealing and investment
services, but for much of the 2'
th
century, 8merican legislation enforced a strict separation
between commercial and investment banks) ,he 6lass27teagall 8ct, passed during the
9epression in 1&34, prevented commercial banks from underwriting securities) ,his act was
repealed in 1&&&) ,he :apanese e(uivalent was abolished the previous year, and the banking
industry in 0ritain was also deregulated in 1&&'s, and financial conglomerates now combine the
services previously offered by banks, stockbrokers, and insurance companies)
4))))3nterest rates)))))))))))))))))))))))))))))))))))))))))))
8 country%s minimum interest rate is usually fied by the central bank) ,his is the discount rate,
at which the central bank makes secured loans to commercial banks) 0anks lend to blue chip
borrowers .very safe large companies/ at the base rate or the prime rate; all other borrowers pay
more, depending on their credit standing .or credit rating, or credit worthiness/: the lender%s
estimation of their present and future solvency) 0orrowers can usually get a lower interest rate if
the loan is secured or guaranteed by some kind of asset, known as collateral)
!))))5urocurrencies)))))))))))))))))))))))))))))))))))))))))))))
3n most financial centers, there are also branches of lots of foreign banks, largely dong
5urocurrency business, 8 5urocurrency is any currency held outside its country of origin) ,he
first significant 5urocurrency market was for 47 dollars in 5urope, but the name is now used for
foreign currencies held anywhere in the world .e)g) yen in the 47, euros in :apan/) 7ince the 47<
is the world%s most important trading currency 1 and because the 47 for the many years had a
huge trade deficit 1 there is a market of many billions of 5urodollars, including the oil2eporting
countries% =petrodollars%) 8lthough a central bank can determine the minimum lending rate for its
national currency it has no control over foreign currencies) >urthermore, banks are not obliged to
deposit any of their 5urocurrency assets at '? interest with the central bank, which means that
they can usually offer better rates to borrowers and depositors than in the home country)
*eading comprehension tasks
1) 7ummarize the tet
2) >ind the words or epressions in the tet which mean the following
8 to place money in a bank; or money placed in a bank deposit
0 the money used in countries other than one%s own %oreign currencies
- @ow much money a loan pays, epressed as a percentage yield
9 available cash, and how easily other assets can be turn into cash li-uidity
5 the date when a loan becomes repayable maturiry
> to guarantee to buys all the new shares that a company issues, if they can not be
sold to the public under,rite
6 when a company buy or ac(uires another one takeo$er
@ when a company combines with another one merger
3 buying and selling stocks or shares for clients stockbroking
: taking care of all a client%s investments port%olio management
A the ending or relaing of legal restrictions deregulation
B a group of companies, operating in different fields, that have Coined together
conglomerate
M a company considered to be without risk blue chip
D ability to pay liabilities when they become due sol$ency
E anything that acts as a security or guarantee for a loan collatteral
3) Match up the verbs and nouns below to make common collocations
-harge
9o
5change
3ssue
Make
Effer
Fay
Gaise
Geceive
4nderwrite
8dvice
0onds
0usiness
-urrencies
9eposits
>unds
3nterest
Boans
Frofits
7ecurity issues
9o business echange currencies issue bonds make loan make profits
offer advice offer loans make loans make profit raise funds receive
deposits pay interest underwrite securities issues
.+ercises
.+ercise #
This e+ercise de%ines the most important kinds o% bank/ 0ill in the blank the name o%
each type o% bank1
.1/)central bank)))))))))))))))))))))))))))))))))))))))))))) supervise the banking system; fi the minimum
interest rate; issue bank notes, control the money supply; influence echange rates; and act as
lender of last resort)
.2/)commercial bank)))))))))))))))))))))))))))))))))))))))))))) are businesses that trade in money) ,hey receive
and hold deposits in current account and saving accounts, pay money according to customer%s
instructions, lend money, and offer investment advice, foreign echange facilities and so on) 3n
some countries such as 5ngland these banks have branches in all maCor towns, in other countries
there are smaller regional banks) 4nder 8merican law, for eample, banks can operate in only
one state) 7ome countries have banks that were originally confined to a single industry, e)g) the
-redit 8gricole in >rance, but these now usually have a far wider customer base)
3n some 5uropean countries, notably 6ermany, 8ustria, and 7witzerland, there are .3/universal
banks))))))))))))))))))))))))))))))))))))))))))))) which combine deposit and loan banking with share and bond
dealing, investment advice, etc) yet even universal banks usually from a subsidiary, known as a
.4/ finance house))))))))))))))))))))))))))))))))))))))))))))), to lend money 1 at several per cent over the base
lending rate 1 for hire purchase or instalment credit, that is, loans to consumers that are repaid in
regular, e(ual monthly amounts)
3n 0ritain, the 478 and :apan, however, there is, or used to be, a strict separation between
commercial banks and banks that do stockbroking or bond dealing) ,hus in 0ritain, .!/)merchant
banks)))))))))))))))))))))))))))))))))))))))))))) specialize in raising funds for industry on the various financial
markets, financing international trade, issuing and underwriting securities, dealing with
takeovers and mergers, issuing government bonds, and so on) ,hey also offer stockbroking and
portfolio management services to rich corporate and individual clients) ."/)investment
banks)))))))))))))))))))))))))))))))))))))))))))) in the 478 are similar, but they can only act as intermediaries
offering advisory services, and do not offer loans themselves)
Het despite the 6lass27teagall 8ct in the 478, and 8rticle "!, imposed by the 8mericans in
:apan in 1&4!, which enforce this separation, the distinction between commercial and merchant
or investment banks has become less clear in recent years) 9eregulations in the 47 and 0ritain is
leading to the creation of Ifinancial supermarketsJ 1 conglomerates combining the services
previously offered by stockbrokers, banks, insurance companies, etc)
3n 0ritain there are also .#/)building societies)))))))))))))))))))))))))))))))))))))))))))) that provide mortgages,
i)e) they lend money to home2buyers on the security of house and flats, and attract savers by
paying higher interest than the banks) ,he saving and loan associations in the 4nited 7tates
served a similar function, until most of them went spectaculary bankrupt at the end of the 1&$'s)
,here are also .$/supranational banks))))))))))))))))))))))))))))))))))))))))))))) such as the *orld 0ank or the
5uropean 0ank for Geconstruction and 9evelopment, which are generally concerned with
economic development)
.+ercise 2
Complete the te+t using these ,ords1
4 accounts
$ current account
3 lend
13 overdraft
2' return
12 bank loan
14 debt
1& liabilities
" salary
# transfer
1' che(ue
1" depositors
1$ li(uidity
1! spread
! wages
2 customers%
1 deposits
1# optimize
11 standing order
& withdraw
-ommercial banks are businesses that trade in money) ,hey receive and hold
.1/)))))))))))))))))))))))))))))), pay money according to .2/)))))))))))))))))))))))))))))) instructions,
.3/)))))))))))))))))))))))))))))) money etc)
,here are still many people in 0ritain who do not have bank .4/))))))))))))))))))))))))))))))) ,raditionally,
factory workers were paid .!/)))))))))))))))))))))))))))))) in cash on >ridays) Don2manual workers,
however, usually receive a monthly ."/)))))))))))))))))))))))))))))) in the form of che(ue or a
.#/)))))))))))))))))))))))))))))) paid directly into their bank account)
8 .$/)))))))))))))))))))))))))))))) usually pays little or no interest, but allows the holder to
.&/)))))))))))))))))))))))))))))) his or her cash with no restrictions) 9eposit accounts pay interest) ,hey do
not usually provide .1'/)))))))))))))))))))))))))))))) facilities, and notice is often re(uired to withdraw
money) .11/)))))))))))))))))))))))))))))) and direct debits are ways of paying regular bills at regular
intervals)
0anks offer both loans and overdrafts) 8 .12/)))))))))))))))))))))))))))))) is a fied sum of money, lent for
a fied period, on which interest is paid, bank usually re(uire some form of security or guarantee
before lending) 8n .13/)))))))))))))))))))))))))))))) is an arrangement by which a customers can overdraw
an account, i)e) run up a debt to an agreed limit; interest on the .14/)))))))))))))))))))))))))))))) is
calculated daily)
0anks make a profit from the .1!/)))))))))))))))))))))))))))))) or differential between the interest rates
they pay on deposits and those they charge on loans) ,hey are also able to lend more money than
they receive in deposits because .1"/)))))))))))))))))))))))))))))) rarely withdraw all their money at the
same time) 3n order to .1#/)))))))))))))))))))))))))))))) the return on their assets .loans/, bankers have to
find a balance between yield and risk, and .1$/)))))))))))))))))))))))))))))) and different maturities, and to
match these with their .1&/)))))))))))))))))))))))))))))) .deposits/) ,he maturity of a loan is how long it
will last; the yield of the loan is its annual .2'/)))))))))))))))))))))))))))))) 1 how much money it pays 1
epressed as a percentage)
.+ercise 3
Match the ,ords ,ith the correct de%initions1
1 dispenser C
2 teller i .47 1k/
3 cashier k
4 withdrawal g
! balance a
" deposit d
# che(ue e
$ credit b
8 ,he remaining amount of money in an account
0 Money paid into a bank
- 8 record of the financial transactions of a person or business
9 8n amount of money in an account
5 Dote to a bank asking it to pay money from your account to a
named person or business
> Money in the form of bank notes and coins
6 8n amount of money deducted from an account
& debit h
1' cash f
11 statement c
@ ,he removal of money from an account
3 8 machine or person who count out money
: 8 container designed to give out money in regulated amounts
A 8 clerk who pays out and receive cash at a bank
Match the $erbs ,ith the correct e+plainations1
1 honour h
2 present g
3 draw b
4 clear a
! cross f
" reconcile c
# adCust d
$ circulate e
8 pass the che(ue through the clearing system
0 write a che(ue
- make two account agree
9 change an account
5 move around the country
> draw two lines down the middle of a che(ue
6 show and ask for payment
@ pay
.+ercise
2ut the correct prepositions to complete each sentence1
1) 8 che(ue is simply an order to your bank to pay money ))))))))))fromK out of))))))))))))) your
account )))))))))to)))))))))))))) someone else)
2) 8 customer an pay )))))))by)))))))))))))))) che(ue )))))))))for)))))))))))))) goods and services
3) *ith a bank card, the customer%s bank guarantees payment )))))))))up to)))))))))))))) a limit,
say <!''
4) *hen an account holder pays a che(ue ))))))))into))))))))))))))) her bank, the bank credits the
amount of the che(ue )))))))))))to)))))))))))) her account and sends the che(ue to be
presented ))))))))))))))to))))))))) the drawer%s bank)
!) 3n 0ritain the clearing system is operated )))))))))by)))))))))))))) the -learing @ouse in Bondon)
") ,he -learing @ouse adds up the total each bank owes to each other bank and reconciles
the difference ))))))))in))))))))))))))) the bank%s accounts ))))))))))with))))))))))))) the 0ank of
5ngland)
#) ,his process, from the time when the payee pays the che(ue ))))))))into))))))))))))))) her bank
until the che(ue is debited ))))))))))))to))))))))))) the drawer%s bank account, takes three days)