Материал: Money and Banking - Учебное пособие (Барташова О.А., Полякова С.Е.)
By definition, banks are institutions which accept money from people for safe keeping, lending it out to others, but particularly creating money by lending their credit, i.e. by making loans and advances to customers. Banks make money work at all levels in industry and commerce.
Thus, commercial ( or in the UK clearing) banks are providers of payment services and they act as financial intermediaries. They offer a variety of services such as deposit and current accounts tailored to fit particular savers‟ preferences and they lend the funds they receive on a variety of terms which satisfy the needs of a range of borrowers.
By pooling risks, by studying the experience of many individuals and by acquiring the expertise to assess the prospect of profit and loss inherent in lending, banks are able to provide their savers with a combination of interest, ease of repayment and protection against loss that are better than these savers could obtain by lending directly to the ultimate borrowers. Banks mediate between these borrowers and savers to achieve a profit. In this intermediation process costs are incurred which must be met out of the bank‟s margin between the borrowing and lending interest rates. Banks are able to achieve these margins through economies of scale. But the margin is always under pressure from the basic costs of the business and from competition. They make their profit by paying a lower rate of interest for the money they lend.
Later other activities were added to the original function of the banks. A modern joint-stock bank is expected to supply the following services: to accept deposits; to provide cheque facilities; to collect and pay cheques, bills and dividends; to grant loans for customers and arrange for overdraft facilities; to discount bills, to open letters for credit; to issue travellers‟ cheques; to transact foreign exchange business; to provide safedeposit strong room facilities for clients valuables; to transact stock and share business on behalf of their clients and hold securities in safe custody.
Banks write "insurance" type contracts with depositors and borrowers. Thus, personal, corporate and bank depositors are assured that their deposits can be redeemed at full value.
Retail banking involves business with individuals and small businesses. Wholesale banking involves business primarily with other large banks, as well as some business with governments and very large multinational companies.
The more recent development in banking is the merging of investment and commercial banking. Investment banking involves information intermediation and underwriting roles.
In addition, offshore banking, which is part of a country‟s banking business that is denominated in foreign currencies and transacted between foreigners, is developing too.
Since banks must always be able to meet demands for withdrawals. Either immediately or at short notice, they keep a certain percentage of their deposits in actual cash with the Central Bank. This so called Cash Ratio is carefully guarded by banks through their credit policy. Bankers are cautious men and, besides organizing the first line of defence – maintaining the Cash Ratio, they guard carefully another percentage, which is the liquidity ratio, or near money i.e cash, money at call and Treasury Bills, in their assets.
Ex. 1. Answer the questions:
1. What services do banks offer?
2. What is the nature of banking? How do banks do a living?
3. What are the more recent developments in banking?
4. What banking policy can guarantee stability?
5. What can prove the substantial progress progress made by bank?
6. What can the success of the bank be attributed to?
7. What does the bank specialize in?
8. Are customers‟ service requirements changing?
9. How does the bank respond to these changes?
10. Why and how was the bank restructured?
Ex 2. Find English equivalents for the following Russian phrases from the text:
A. По определению; принимать деньги на хранение; ссужать деньги;
текущий счѐт; на различных условиях; удовлетворять потребности; приобретать опыт; оценивать перспективы; выступать в роли посредника; покрывать издержки; разница между процентными ставками; процентная ставка на заѐмный капитал; ставка ссудного процента; экономия, обусловленная ростом масштаба деятельности (производства); испытать воздействие чего-либо; принимать вклады, инкассировать и оплачивать чеки; учитывать векселя; открывать аккредитивы; выписывать дорожные чеки; предоставлять овердрафт; осуществлять операции с иностранной валютой; предоставлять сейфовые услуги; по поручению клиента; хранить в сейфе; возмещать по полной стоимости; иметь резервы; операции банков с широкой клиентурой; операции крупных банков между собой; слияние банков; удовлетворять требованиям; снятие средств со счетов; с краткосрочным уведомлением; норма кассовых
резервов; коэффициент ликвидности; деньги до востребования;
B. Значительный прогресс; доля… на рынке; развивать инфраструктуру; подтверждать; прибыль до налогообложения; доход от основной деятельности; мелкие клиенты; ссуды и авансы клиентам; улучшать качество портфеля выданных ссуд; профессиональный опыт; проводить политику; приносить плоды; разрабатывать и вводить в практику новые услуги; соответствовать потребностям заказчиков; достигнуть цели; удобство ведения банковских операций по телефону; приводить к чему-либо; ценить личные контакты; расширять сеть; освобождать от рутинной работы; перестраивать работу; выручка; повышать безопасность; сделать структуру более гибкой; укрепить подразделения; управление инвестиционным портфелем; свести увольнения в связи с сокращением штата до минимума; самая важная задача.
Ex. 3. Say in a few words what the main text is about. Use the opening phrases given above.
Ex. 4. Read the dialogue below, translate the Russian remarks into
English and act it out:
Foreigner: In my opinion, the main objective of your crisis – hit banks is to achieve financial recovery. How do they set about this task?
Russian: Многие наши банки действительно находятся сейчас в сложном положении. Число вкладчиков сократилось. Люди не доверяют банкам. Кроме того, банки должны более серьѐзно относиться к проводимой ими кредитной политике.
F.: First of all, your banks should restore confidence of their clients by honoring their obligation. Then they must make their services more
attractive to their clients.
R.: Что касается услуг, то наши банки, как правило, предлагают достаточно широкий круг услуг: они принимают средства во вклады, принимают и оплачивают чеки, осуществляют учѐт векселей, открывают аккредитивы, предоставляют ссуды, предоставляют кредит по овердрафту, продают и оплачивают дорожные чеки, проводят операции с иностранной валютой, предоставляют сейфовые услуги, осуществляют операции с ценными бумагами, принимают на хранение ценные бумаги своих клиентов.
F.: In my country the customers‟ service requirements are changing. Increasing numbers of customers prefer the convenience of telephone banking. What about your country?
R.: Мне кажется, наши вкладчики более консервативны в этом отношении, хотя банкоматы и кредитные карточки также широко используются. Кроме того, многие банки также расширяют сеть своих филиалов, что позволяет им уделять больше внимания непосредственному обслуживанию клиентов и оказывать им различные консультации.
F.: It also seems to me that your banks must be more flexible, must pay more attention to the improvement of management.
R.: Полностью с вами согласен. Принимая во внимание усиление конкуренции в банковском бизнесе, банки должны более активно заниматься управлением своих портфельных инвестиций, сделками с иностранной валютой.
F.: Yes, it's the biggest challenge for the world banking community.
Ex. 5. Read and discuss the text that follow.
Explain the difference between loans and overdrafts. Discuss the services provided by banks.
Bank loans and overdrafts
There are two principal ways in which a businessman can borrow money from his bank: by means of a loan and by means of a overdraft. An overdraft is “a sum of money drawn from a bank by a customer that is more than the amount he holds in his account with the bank”. Permission of the bank has to be obtained for this facility, and interest is charged on the outstanding amount.
Here is an extract from Statement of Terms and Conditions for NonU.S. Banks of Citibank, N.Y.:
“Customers will receive overdraft interest statements monthly. However, under exceptional temporary circumstances, statements may be issued daily. Changes for overdrafts will be calculated in accordance with normal banking practice at Citibank, New York.”
When the bank makes a loan, a separate loan account is opened at
the bank in the borrower‟s name. The amount of the loan is debited in the
loan account and credited in the customer‟s current account. Interest is
draw on the full amount immediately.
Because bank funds must be kept fluid, loans are nearly always short term, and a bank will not lend money to a customer unless it knows that the money can be repaid quickly. Normally the bank likes to have its loans repaid or its overdrafts charged, within a year.
Words you may need
To charge interest взимать проценты Outstanding amount сумма превышения Statement выписка
Charges расходы, издержки
To keep fluid работать (о деньгах)
Ex. 6. Read the text “Application for a loan” and summarize the
Application for a loan
Banks make their profit by lending the money which customers
deposit with them to others who need it for personal or business reasons/ Most people need more money than they have currently available at some time in their lives.
To be a borrower you must be a customer of a bank because the money will be lent to you through a bank account. There are two ways in which you may borrow. The first, and easy, is to spend more money than you have in your current account – to overdraw. The second, and the normal way of borrowing larger amounts or for a long period of time is the loan.
If a manager permits an overdraft on current account he is likely to set a limit to the size of the overdraft and may stipulate a date by which the account is back in credit. En Businesses whose payments and receipts are often irregular will frequently need to use overdraft facilities and they are often granted to private customers as well particularly when the manager knows that regular payments are made directly into the account.
If a loan is granted it will be a fixed sum immediately available for a fixed period of time. The principal and the interest on it may all become due for payment at the end of that period but for personal loans it is common to arrange that the loan and the interest are repaid in equal regular instalments over the period of the loan. A separate account is opened to record the repayments as they are made.
there are a number of things that the manager will want to know before he is prepared to grant your request. The obvious facts will be the amount that you seek and the arrangements for re-payment that you are able to suggest. You need to tell him something about the purpose of the loan, a business loan is likely to help you make profits out of which the loan can be repaid with interest and he will wish to judge for himself whether or not this is likely. Personal loans usually have to be repaid out of an income which will not get any bigger and the manager will be particularly anxious to ensure that you are not being too optimistic. In deciding this he will be considerably assisted by his knowledge of you and his estimate of your character.
Sometimes people do not ask for enough money because they are anxious about the burden of the repayments. The manager will be wise enough to try and ensure that you will have sufficient amount of money to do what you want to do. Finally he will consider whether or not you really will be able to repay and what kind of security you can offer against the possibility that you do not repay. In the case of a business the manager may well want to see well prepared, relevant documents such as profit and loss accounts and balance sheets for the most recent years. He would also ask about the expected return from the use of the money and want some figures upon which you have based your calculations. For a business good security might be one or more of the assets of the business whilst personal loans are often secured by such things as insurance policies on which the bank is making regular payment for you or the deeds of your house.
(English for Banking).
Ex. 7. Explain the meaning of the following words and expressions:
1) bank account; 2) to overdraw; 3) the account is back on credit; 4) to
become due for payment; 5) by regular instalments; 6) burden of repayment;
7) security for the loan.
Ex.8. Agree or disagree with the following statements and explain why.
1) Businesses are more likely to be permitted an overdraft than
2) The repayment of a loan is done on the account that you have already have in your bank.
3) If you apply for a personal loan the bank manager should know you very well in order to grant you one.
4) In case of a business loan it is quite enough to prove to the bank manager that your company is in good financial position.
1. Describe the procedure of one company taking over another. Do you know any cases of takeovers?
2. What can a company facing the danger of a takeover do to prevent it?
3. Explain the difference between a merger and a takeover.
4. If your company were looking for another firm to take over, what factors would you take into account, what prey would you prefer? Discuss the problem from the position of a Marketing Manager, Production Manager; Financial Director; Personnel Manager; Sales Manager.
Ex. 9. Discuss the kinds of banks described in the text and their functions.
In a country with a developed banking system there different kinds of banks with widely varying activities:
1. The Universal banks. Those banks (commonly found in Switzerland, West Germany and the Netherlands) are allowed to do almost anything financial, from lending other people‟s money to underwriting, advising on investments, stockbroking , ets. Some frown on universal banking in the belief that it creates too many conflicts of interest within one
bank. Can a bank give advice on a share for which it is the underwriter and
also broker and banker to the issuer? That question has not stopped foreigners from wanting a Swiss bank account and taking their Swiss banker‟s investment advice.
2. The ordinary deposit banks. These include the commercial or joint-stock banks, large and small, some private banks. All these have direct contact with the public which deposits money with them and draws cheques on them.
3. The savings banks. The chief function of these banks is explained by their name. In old times savings banks were banks which accepted only the deposits of small savers. They did no business with industry and provided no money-transmission service, had no chequedrawing facilities. These distinctions between savings banks and other banks are now being eroded.
4. The merchant banks, or “acceptance houses”. Merchants banks are British banks which concentrate on advising companies about raising new capital and about buying or selling other companies. They do a bit of lending too. Some of them also specialize in fund management .
or so by a small number of London-based institutions. The origins of merchant banking in London lie in the 18th century.
The name :”merchant bankers” refers to their origin as mercantile houses specializing in the export of British products and the import of products from foreign countries. This involved remitting money from one country to another, and the bill of exchange on London became the means of
financing the import and export trades, which allowed the vendor and
purchaser of traded goods to achieve liquidity; the role of the merchant was to put its name to or to “accept” a bill, which was then discounted in the market. The skill of the general merchant was to assess the credit of the purchaser whose bill it has accepted. Trade and its finance continued to form the backbone of their business and the growing significance of their ability to provide credit transformed a number of general merchants into merchant banks, specializing in accepting bills. In doing so they assisted London to become the world‟s financial system: the bill of exchange on a London accepting house, denominating in sterling, became a means of settlement in trade throughout the world.
Merchant banks maintained excellent connections with leading
British companies and frequently joined their boards. As a result, from the
1950-s a small number of merchant banks, in addition to their acceptance business, came to dominate the business of corporate issues in the form of offers for sale of formerly private companies to the public, rights issues of equities and debenture issues. In these issues merchant banks acted both as advisers and as primary underwriters in guaranteeing a sale price to the vendor. Merchant banks took full advantage og the development of the Eurocurrency markets in London in 1970-s, and were amongst the most active syndicators of currency loans to the international banking community. Merchant banks have built up a substantial business as investment managers on behalf of UK institutions, such as pension funds, as well as overseas governments and major institutions worldwide. They played a leading role in developing the international investment management industry in London.
5. The consortium banks. A consortium bank is a bank owned by a group of other banks from a number of different countries, no one of which owns a majority share. Cosortium banks were children of the Euromarket. Born in the 1970-s they gave smaller banks a way into the Euromarket hand in hand with big bank partners. The advantage to the bigger banks lay in their easier access to the big domestic customers of the smaller banks.
of new financial techniques, acting as a type of merchant bank, some other were gobbled up by one or other of their shareholders.
Words you may need
Underwriting универсальный банк
Frown не одобрять, относиться отрицательно
To draw a check on a bank выписать чек на банк
Erode размывать(ся), разрушать(ся)
Fund management управление финансовыми средствами
London based расположенный в Лондоне
To remit money переводить деньги (по телеграфу)
Vendor торговец, продавец
Backbone хребет, основа
Rights issues of equities выпуск новых акций, предлагаемых акционерам компаний
Debenture облигация (акционерной компании) Consortium bank консорциональный банк Majority share контрольный пакет акций Thrive процветать
Ex. 10. Read the dialogue, sum up its content and act it out:
Commercial banks in Russia
Foreigner: As far as I Know, Russian has a two-tier banking
Russian: Yes, our banking system consists of the Central Bank of
Russia ( CBR) and commercial banks, which is typical of many countries in the market economy.
F.: How do commercial banks operate? Is the regulatory control
R.: Banking in Russia is regulated by the Law on Banks and Banking in the Russian Federation. As to the CBR, it is constantly strengthening its regulatory and supervisory role. For instance, now banks can start operating only after they get registered and obtain a licence from the CBR.
F.: Your banking legislation provides for the existence of banks and credit institutions. How do they differ?
R.: Our credit institutions are only allowed to perform cash settlement operations, collect money and documents, buy and sell foreign currency.
F.: How are your banks run?
R.: It depends on the organizational and legal form of the bank. Banks with the authorized capital made up of contributions, have the status of limited liability societies. The founders‟ contributions may be in the form of money, property and other tangible assets. A joint-stock bank forms its authorized fund by issuing shares. The governing body in a bank is a meeting of the founders or shareholders. Between the meetings, this function is performed by the bank‟s council. They determine the bank‟s policy. Day-today management is carried out by the board, which is an executive body. The board is headed by the President. The board members determine the bank‟s structure and functions of its departments.
F.: In the West, bankers‟ services cover an enormous range of activities today. What about your banks?
R.: In principle, we offer practically the same services. All operations can be divided into active and passive. Passive operations are bank‟s resources consisting of a bank‟s own and outside funds. I mean the authorized capital, the reserve and special funds as well as the retained profit.
F.: But the bulk of a bank‟s resources are formed by outside resources, in other words, loans obtained by the bank and deposits.
R.: You are right. Speaking about active operations, I‟d like to stress that they are placement operations aimed to get a profit and guarantee a bank‟s liquidity. They are cash, credit and investment operations.
F.: What operations prevail in the assets structure?
R.: Lending operations. Their share is the largest.
F.: Then the loan management department must be most careful with applicants.
R.: They are. They study creditworthiness of applicants and their credit history most carefully before they give recommendations to lending operations departments.
F.: Banks sometimes follow a risky credit policy. Are your banks tempted by quick and easy profits?
R.: They are. Moreover, sometimes they infringe normative
documents of the Central Bank, particularly about the capital and reserve requirements. Some banks also infringe rules for accounting and reporting and requirements for reserves for possible losses.
F.: What is the position of the Central Bank in this critical situation?
R.: Banks are controlled regularly for capital adequacy, asset quality and liquidity, I mean cash and “near cash” investments.
F.: Refinancing is a tested technique to regulate bank‟s liquidity. Your Central Bank arranges refinancing, doesn‟t it?
R.: Yes, it does. Refinancing is done by granting Lombard credits, through sale and repurchase agreements (REPOs), and by crediting correspondent accounts of banks acting as primary dealers in the GKO
F.: I see that you financial sector is really developing at a great pace.
Words you may need
Cash settlement operation кредитная организация
Tangible assets материальные активы
Active/passive operations активные/пассивные операции
Outside funds привлечѐнные средства Retained profit нераспределѐнная прибыль Placement operation размещение средств
Primary dealer первичный дилер, дилер по правительственным облигациями
Credit history «кредитная история», досье заѐмщика
Infringe нарушать (правила, законы и т.п.)
Ex. 11. Give extensive answers to these discussion questions:
1. What is the nature of banking?
2. What services do banks offer to individuals/corporations?
3. What kinds of banks exist? Describe their activities.
4. How can an individual get a bank loan?
5. What does the stability of a bank depend on?
6. What are the functions of central banks?
7. In what way do the discount houses earn money?
8. How is banking developing these days?
9. How do banks obtain funds?
10. Describe the banking system in Russian?
Ex. 12. Write a short essay on:
1. Services provided by banks.
2. Your attitude to the bank‟s work.
3. Different kinds of accounts opened by banks.
4. History of banking and its present-day developments.
5. The influence of modern technology on banking.
Ex. 13. Prepare a short talk on following:
1. Explain how banks earn profit, how they act as financial
intermediaries, how they create their money?
2. Have you ever turned to a bank either as a depositor or a borrower? Have you ever done business with banks offering intermediation services?
3. Do you have a credit card or a debit card? What was the most recent purchase you made with your cards? Describe the sequence of connected events with the use of the cards?
4. If you have a bank account and heard that your bank was not honoring its obligations towards depositors, what would you do about your account?
Ex. 14. Scan several business newspapers and make conclusions about the attitude of businessmen to the presence of foreign banks in Russia.
Ex. 15. Read very carefully the two statements defining capital, one by
Karl Max, the other by David Ricardo. Then discuss the following:
1. What do you think is the main difference in the two definitions of
2. What is the role of capital in these definitions?
3. Why does Karl Marx compare capital to a vampire where as David
Ricardo thinks it a necessary for labor and life?
I. Capital is dead labor that, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks.
Karl Max, Das Kapital
II. Capital is that part of the wealth of a country which is employed in production and consists of food, clothing, tools, raw materials, etc. necessary to give effect to labor.
Ex. 16. Look through the text and name the facts which are new to you.
A crucial aspect of the development of a country‟s domestic banking system and financial markets is the payment system, which is used by enterprises and individuals to discharge obligations incurred in a market economy. Payment systems are the foundations on which a stable and efficient economy can be built. The principle objective of the payment system is to support the country‟s economy. Moreover, the payment system
financial difficulty fail to meet their payment obligatrions.
The payment system is the apparatus through which obligations resulting from economic activity are discharged by transfers of monetary value. Obligations can be discharged through the payment system using cash or deposits held in banks. In the case of payments made using bank deposits, it is necessary to use some form of payment instrument, such as paper or electronic credit or debit payment, to move funds. For a debit payment, such as a check, the receiver of money (the payee) initiates an instruction to the bank holding deposit of the sender of money (the payer), ordering the paying bank to pay. This is done by presenting a check, which must be honoured by the payer, who is the customer of the paying bank, once the check I authenticated.
For a credit payment, such as a payment order, the party making the payment initiates the instruction to his bank to pay money to the intended receiver by initiating a payment order.
When using deposit money in banks to make payment, the process for discharging an obligation can be divided in to two parts. The first part is clearing, the process by which payment information is conveyed between the payer and payee and between the banks holding the accounts of the two parties to the transactions. Once a payment is initiated, clearing should take place quickly and reliably in order to minimize financial risk as funds are being transferred. Commercial banks play an important role as intermediaries in the clearing process because they provide account services to the public.
The second part of the process for discharging an obligation using deposit money in banks is settlement, in which the actual transfer of monetary value associated with the payment is made. Banks play a role in settlement because it is through the accounts held on their books that the transfer of monetary value occurs. Commercial banks settle for the non-bank public and sometimes for other banks with which they have correspondent
The Central Bank, where all commercial banks hold accounts, is often used by commercial banks as the settlement entity for interbank transfers.
Clearing and settling payments can be complex. Therefore, an efficient payment system requires a high degree of cooperation and coordination among banks, which usually occurs through a clearing house. A clearing house is a legal entity, owned and controlled jointly by its member banks. Its primary function is to coordinate the exchange and settlement of payments among its members.
coordinating the physical exchange of payments among banks, for example, by organizing efficient and speedy transportation of payment documents. Clearing houses may also provide processing services to their members, in which case they may operate fairly large data processing and data communications systems to process payment instructions. Payment systems face a number of risks, like liquidity risk, credit risk, cross-currency settlement risk and systemic risk.
Thus, confidence in a payment system is crucial in a market company. In the long term each country is likely to need a safe and efficient payments system for householders; legislation governing payments; and a sound financial sector, including financially and operationally sound banks.
Words you may need:
Crucial решающий, критический
To discharge obligations выполнять обязательства
To initiate an instruction дать указание To honour the check оплатить чек Payment order платѐжное поручение Convey передавать
Ex. 17. a) Read and discuss the text.
b) Single out the main facts from the text and present them in a short essay.
c) Give your answer to the question in the title.
A) Is monetary Policy Needed?
Many people believe that central banks should conduct an active,
interventionist monetary policy even though most countries are abandoning other forms of state intervention in their economies, such as price controls, income policies, and industrial planning. These and other of intervention, such as agricultural policies and state ownership of business enterprises, waste economic resources and distort markets.
Monetary policy, which represents government intervention in the market place for credit, exhibits the same negative effects. The time has come to challenge the need for monetary policy as practiced by central bankers (often with finance ministry guidance). The financial markets, operating under appropriate tax and structural policies, will produce far greater price stability and smoother economic growth than central bankers can.
Some people still believe that controlled growth of the money supply will minimize inflation. In fact, the quantity of money in the industrialized nations today is essentially demand –driven. Currency, a key component of the money supply, is demand-driven when people can easily exchange unneeded currency for interest-bearing financial assets, such as bank deposits and bonds. Currency driven inflations occur only when governments finance their deficits by paying their obligations in currency that cannot be converted easily into other assets.
Bank deposits, the main component of the money supply in the industrialized countries, are demand-driven as well. This demand reflects the willingness of individuals and businesses to provide credit to the economy in which they operate, versus investing in real assets or moving funds to other countries.
Reserve requirements on bank deposits, still a favoured monetary policy tool of some central bankers, do not restrict bank lending.
As a practical matter, monetary policy in the industrialized world today essentially takes the form of announced official rates for lending to banks and central bank “steering” of short – term interest rates should be.
The credit markets do not differ from other markets. Interest, like
any other price, should clear the market at a rate that balance supply with demand.
Words you may need
Interventionist policy интервенционалистская политика
Abandon отказываться от чего-либо
Demand-driven определяемый спросом, зависящий от спроса
Interest-bearing приносящий процентный доход
Currency-driven inflation инфляция, являющаяся следствием объѐма валютных средств
Convent конвертировать Versus против, в сравнении с “steering” управление, руководство
Civil servant государственный служащий
To clear the market регулировать рынок
d) Say why the CBR (The Central Bank of Russia) is interested in the development and improvement of the payment system of Russia.
B) Payment Systems
Public policy responsibility for the payment system usually rests
with central banks. Central banks are naturally interested in the payment system because it is a key component of the operarion of financial markets and has important implications for the trading efficiency of the real economy. Of particular concern to central banks is clearing and settlement in financial markets where trading results in large payment obligations, such as the securities, commodity, interbank funds, and foreign exchange markets.
The Central bank of Russia also participates in the payment system as a provider of interbank payment services. The role of the central bank in operating the interbank system depends on the development of a nation‟s payment system.
The Central Bank of Russia, with the assistance with the international experts, has taken steps to draft legislation and oversee the decentralized expansion of Russia‟s domestic payments system. Progress has included improvements in the Interbank Payments System, involving the use
of computer – generated instructions with specialized software. An electronic payments system for cash settlement wa installed in Moscow, where 65 per
cent of total document turnover in Russia occurs. The so-called automatic
payments system began with eight banks in September 1993. Eventually, all banks will be part of this system. Efficiency at other cash settlement centers was improved, and growth was recorded in the number of both interbank settlement centers and networks ob banks with cross-connecting correspondent accounts that act as settlements agents for associated groups of smaller banks.
Words you may need
Rest возлагаться (об обязательствах)
Software компьютерное программное обеспечение
Document turnover документооборот
Cash settlement center расчѐтно-кассовый центр
Cross-connecting correspondent accounts перекрѐстные корреспондентские счета
Ex.18. Give extensive answers to these discussion questions:
1. What role does the central bank play in any country?
2. What is monetary policy? Why is monetary policy necessary?
3. What banking system exists in Russia?
4. How does the CBR ensure the banking system stability?
5. What monetary policy does the CBR pursue?
6. What market-oriented instruments does the CBR use?
7. Is the entry of foreign banks welcome in Russia? What about other countries?
8. What are the shortcomings of the financial system in Russia?
9. What happens when a country pursues a “ tight” or an “easy” monetary
10. How can money supply be regulated?
11. Is the international financial community concerned about banking crises?
12. Why do many countries experience banking problems?
Ex. 19.Prepare a short talk on the following:
a) The structure of the CBR ( Bank of England, The Federal Reserve
System), how it provides services to banks, stabilizes the banking system and shares in economic policy-making.
b) The monetary policy pursued in Russia at the present time.
c) Define money and list the assets used as money in different countries.
Ex. 20. Scan the foreign financial newspapers available to you and look for articles about banking in Russia and the role of the Central Bank. Present the information in class and comment on it.
a) Read the text quickly for the main points.
Money is as hard to measure and define as it is to control. Money is graded according to its LIQUIDITY – notes and coins being completely liquid, whereas some kinds of bank deposits become spendable only after notice to withdraw them has expired.
- M1 is notes and coins in circulation, plus sterling sight deposits
(that is, those withdrawable without notice) held by the private sector.
- Sterling M3 is M1 plus sterling time deposits (those requiring notice of withdrawal) of the British private sector, plus all sterling deposits of the British public sector. To get M3, add the foreign currency deposits of all British residents.
- PSL2, short for private sector liquidity, is notes and coins in circulation; all sterling deposits (that is, including time deposits and certificate of deposit); other money market instruments (for example, treasury bills, bank bills and local authority debt held by the non-bank private sector); building socities‟ share and deposit accounts, and some national savings securities.
The United States uses three measures:
M1 is defined as currency in circulation, travellers‟ cheques, demand deposits of the ptivate sector at commercial banks, automatically withdrawable deposit accounts at banks and thrift institutions, credit union share draft accounts, and demand deposits at mutual savings banks.
M2 is M1 plus savings and smalldenomination time deposits, overnight deposits at commercial banks, overnight Eurodollars held by American residents (other than at Caribbean branches of Fed member Banks) and balances of accounts with money market funds.
M3 is M2 plus large denomination time deposits, companies term repurchase agreements at commercial banks and savings and loan associations, and money markets funds held by institutions.
Based on: The Pocket Economist
Words you may need
Notice to withdraw (the deposit) уведомление о снятии вклада
Sterling sight deposit вклад до востребования в фунтах стерлингов
PSL – private sector liquidity ликвидность частного сектора Великобритании (широкий показатель денежной массы в обращении) Certificate of deposit депозитный сертификат
Share draft account чековый паевой счѐт
Mutual savings bank взаимно-сберегательный банк
Overnight Eurodollars суточные евродоллары
Money market fund взаимный фонд денежного рынка
Repurchase agreement (REPO) соглашение о продаже и обратной покупке (РЕПО)
Savings and loan association ссудо-сберегательная ассоциация.
b) Reread the text more carefully to complete the sentences below:
1. Money is graded… .
2. Notes and coins… .
3. M1 is… .
4. Private sector liquidity is notes and coins in circulation plus… .
5. Sterling M3 is M1 plus… .
6. In the United States M1 includes… .
7. M2 is M1 plus… .
8. M3 is M2 plus… .
Ex. 21. Read the article below carefully to find specific information about paper-based payment systems, electronic funds transfer systems, and recent tendencies in the development of payment systems.
Paper-based systems are slow and costly to operate, involving physical movement of paper which must be sorted and cleared. They are phone to error, delays or disruptions because of returned cheques, missing documents or errors in data capture.
In recent years some countries have speeded up the documentation flows due to the rapid innovation of telecommunications and bank computer technology which has revolutionized payment systems. It is particularly true of debit or credit car-based transactions, in which bank customers may give instructions to effect funds transfers electronically through automated teller machines (ATMs), terminals or at retail outlets which operate electronic funds transfer at point of sale (EFTPOS). EFT systems have the advantage of speed, accuracy, convenience and greater efficiency relative to paper-based systems, but are much more costly to install and technologically complex to maintain. Most developed countries now maintain a mixture of paper-based and EFT systems:
a) Cheque clearing system;
b) Automated clearing houses for bank EFT payments;
c) Credit/debit card systems including ATMs and EFTPOS;
d) Giro payment system;
e) Interbank funds transfer system(such as Fedwire); and f) Securities market clearing/settlement system.
Modern banking technology enables payment systems to handle larger volumes of information faster, with greater accuracy, thus reducing the float and the time lag between a transaction and its settlement. As banking systems and financial markets become more inter-linked, payment systems have
become increasingly interconnected through harmonized document and
telecommunication standards. The greater the degree of harmonization of standards, the more efficient the information flows.
Banks that engage in foreign trade and foreign exchange transactions find it useful to become part of the international electronic message switching network operated by SWIFT (the Society of Worldwide Interbank Financial Tellecommunications).
Since payment systems also develop hand in hand with the volume of market transactions, modern payment systems are increasingly integrated with financial market settlement systems, where market transactions are automatically matched with payment instructions and settled on time.
Words you may need
Paper-based system система, основанная на обработке документов в бумажном виде
To be prone to error приводить к ошибкам, не исключать ошибок
Disruption срыв, нарушение
Data capture считывание данных
Documentation flow документопоток
To effect funds transfer осуществлять перевод средств
Retail outlet торговая точка
Electronic funds transfer at point of sale (EFTROS) система электронных платежей в пункте продажи
Giro payment system система жироплатежей (почтовая)
Fedwire- «Федуаер» система электронной связи, принадлежащая
Федеральной резервной системе США
Float срок между предъявлением чека в банк и его оплатой
Time lag временно лаг, запаздывание
Ex.22. Match the English words and word combinations with their
Russian equivalents and make up the dialoque:
1. To turn down the opportunity а) нынешнее помешательство,
2. To consider the business plan b) значительный дар предвидения
3. Considerable foresight с) рассмотреть бизнес-план
4. Extremely badly presented d) акции хорошо продавались
5. Current craze e) отвергнуть возможность
6. An opportunity arouse f) крайне плохо представленный
7. To create confidence in the business g) делать огромную прибыль
8. The shares sold well h) подвернулась возможность
9. To make a huge profit i) вызывать доверие к предприятию
Ex. 23. Translate the sentences into English:
1. Самая безопасная инвестиция – это банковский вклад, но процент
по нему высок.
2. Многие бизнесмены не смогли вернуть кредиты и были вынуждены продать своѐ дело.
3. В следующем месяце нам придѐтся поднять цены и понизить ставки заработной платы. Иначе мы не сможем получить прибыль.
4. Если вы хотите безопасно вложить небольшие деньги, вы можете обратиться в финансовые институты, такие как банк, инвестиционный или пенсионный фонд, или страховая компания.
5. Брокер – это посредник между продавцом и покупателем на фондовой, валютной и товарной бирже.
6. Частную компанию могут создать два или более человек. Они
подписывают устав внутренней организации акционерного общества, определяющий, сколько акций приобретает каждый, а также его подписывает ещѐ кто-нибудь, чаще всего один из его членов семьи.
7. Управляющий банком хочет, чтобы дом вкладчика был использован в качестве залога. Но на покупку дома вкладчик вносит ссуду в жилищно-строительной кооперации и ежегодно выплачивает им часть денег и проценты.
8. Вкладчик пригрозил управляющему банком, что если речь пойдѐт о невозможности предоставления ссуды, то он подумает о переводе
своего собственного счѐта и счѐта компании в другой банк.
9. Если бы нашим партнѐрам принадлежал 51\% акций, они бы могли стать обладателями контрольного пакета, и со временем у них появилась бы возможность поглотить нашу компанию, превратив еѐ в дочернюю.
10. Если клиент не сумеет выплатить банку ссуду в установленные сроки, его дом будет продан, и все деньги по первой закладной будут выплачены сполна. Затем оставшаяся сумма перейдѐт к владельцу второй закладной, т.е. банку.
Ex. 24. Read the text given below. Fill in the gaps with the articles where necessary. Give a title to the text, make up a plan of it and gave a summary of the text.
Strange as it may sound, banking in England – which is mainly represented by… Big Five ( Barclays Bank, Lloyds by Bank, Midland Bank, Westminster Bank) on the part of industry and commerce and by… Bank of England in the part of… Governmenthad its origin with the London goldsmith. They had … facilities for storing valuables and were accepting deposits of cash from those who had no… safe place to keep them. … second stage came when the receipts for those deposits began to be used as means of payment by merchants: this led early bankers to issue banknotes for fixed amounts of money. …growing use of…latter meant that… fewer people
withdraw their deposits in…cash from the banks. This system having proved… profitable business, bankers began offering interest to encourage merchants to increase their deposits ever further. Next, they would lend their own notes instead of coins….introduction of cheques made it possible for the bakers to allow customers to have overdrafts, i.e. to draw cheques for agreed sums even above… amount standing to their credit at the bank.
… Bank of England was founded as early as two centuries and …
half ago, primarily for… purpose of lending money to… Government.
Until 1833 it had a monopoly of joint stock banking in London, had
developed… use of cheques and had already established a clearing house.
Outside London, private banking was first…sideline to a manufacturer‟s business – e.g. Samuel Lloyd, who was in the iron and steel business in Birmingham, was…founder of Lloyd‟s Bank. The large increase in…number of private banks outside London is accounted for by…Industrial Revolution. Most of them being only small banks with no branches, many of them were forced to close down or went bankrupt whenever there came a cri sis. The further development went therefore by way of largescale banking, individual banks extending their activities by establishing branches and by amalgamation. Branch banking proved to be most advantageous: it was no longer necessary to maintain large reserves of cash, while…risk of failures was reduced, especially if the banks enjoyed limited liability.
… failure of City Glasgow Bank in 1878 caused shareholders in other banks with unlimited liability to press for production. Within a few years there were no large banks any longer that did not enjoy limited liability.
Large-scale industry of …imperialist era required large-scale banking, this provided a strong motive for amalgamation. … number of large banks developed and began absorbing other small banks, where-after powerful banks of equal importance merged. This movement towards monopoly has not yet fully culminated, though it has now reached the stage of… “Big Five”.
Ex. 25. Read the following text. Entitle the text and give a summary of it. Fill in the gaps with the following words:
Raised, effectiveness, power, interest, usefulness, device, lenders, boom, monetary, in practice, control, borrowers, poor, string, succeeds, raised, strengthen
The … of monetary policy depends on whether the problem is to combat inflation or unemployment. …policy is more effective on the former front than on the latter. “You can‟t push on a…”, as the saying goes. During a recession the Federal Reserve can … bank reserves, reduce… rates, and establish an attractive atmosphere for borrowing. But it cannot directly affect the will to borrow. So long as business prospects seem…, borrows will hold off and the desired increase in loans and spending will not materialized.
It is toward the top of a … which is threatening to pass over into inflation that monetary policy really comes into its own. As a technique for inflation…, monetary policy is alleged to have several advantages:
1. Decisions on monetary… can be reached and applied rapidly,
since… is concentrated in the Board of Governors.
2. The effectiveness of monetary action is reasonably certain. Interest rates can always be… to a level at which the brakes take hold.
3. Monetary policy is an impersonal…, which produces its affect through the market mechanism. It is neutral as among individuals and groups in the economy. If the Federal Reserve … in restricting credit , some would be borrows will be left unsatisfied. But the Federal Reserve doesn‟t presume to say which… or which projects will be dropped from the list. This is left to negotiations between private borrows and… .
But the… of monetary policy should not overstated. Monetary policy… is
more complicated and less affective than appears from textbook examples.
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