Listening Central Banking

Gabriel Mangano is an economics research student, specializing in monetary policy. You will hear him outlining the functions of a central bank, and discussing whether it should be independent from the government, and run by bankers, or under the control of the government.

Ex. 1. Make sure that you understand the following words and word combinations.

• to implement monetary policy;

• interest rate ceilings and floors;

• a fluctuation of interest rate;

• an upswing/a downswing of the exchange rate;

• a bank run = a run on the bank.

Ex. 2. Which of these banks are independent from the government?

• the Bank of England;

• the Federal Reserve System;

• the Bundesbank;

• the Japanese central bank;

• the Chinese central bank;

• the National Bank of Belarus.

Ex. 3. A. Listen to Part One of the interview about the functions of a central bank, and fill in the gaps.

The first one is actually to implement monetary policy. There are roughly three ways to do it. First (1 a) ……, which means limiting, upwards or downwards, the fluctuations of the interest rate.

The second way to implement monetary policy is simply (1 b) …… coins, banknotes.

The third one, which is a bit more modern, is those (1 c) …… , which are simply buying and selling government bonds to and from commercial banks.

So that was the first main task of a central bank. The second one is (2) …… I would say. [...]

The third main task, yes, (3) …… , I would say – make sure that the commercial banks have enough liquidities, for instance, to avoid any bank run. [...]

The fourth main task of the central bank would be to (4) …… , in case, actually, one of these commercial banks goes bankrupt and the investors, the people putting money in the bank, have to get back their money.

B. Read the six sentences below, which also summarize central banking functions, but slightly differently, and match them up with the six expressions you have written in A.

1. controlling the amount of banknotes in circulation;

2. establishing maximum and minimum lending rates, thereby controlling the credit system;

3. ensuring that banks have a sufficient liquidity ratio to allow customers to withdraw their deposits when they want;

4. intervening on foreign exchange markets, buying or selling large amounts of the national currency, to prevent major fluctuations;

5. lending money to a commercial bank in danger of going bankrupt;

6. selling government bonds to commercial banks or buying them back, in order to alter the amount of credit the banks can offer (and thereby alter the money supply).

C. Listen to Part Two of the interview and answer the following question:

What is Gabriel Manganos opinion concerning central bank independence, and why?

D. Look through the following statements. Listen to the extract again, and decide whether the statements are TRUE or FALSE. Correct them if they are false.

1. Gabriel Mangano says that governments tend to increase the money supply in the months before an election, which helps reduce unemployment.

2. Mangano states that the central bank should be the branch of the government that implements monetary policy.

3. Mangano considers that the central bank should be the branch of the government that implements budgetary policy.

4. Mangano suggests that governments always have a budget deficit.

5. Mangano points out that the US Federal Reserve is not concerned with price stability.

6. Mangano is of the opinion that there should be a limit to the central bank’s independence.

E. Do you agree that central banks should be controlled by (unelected) bankers rather than by elected governments – which will often do everything possible to get re-elected?

SPEAKING

A. Useful language: Asking and dealing with questions.

Asking questions politely Could you tell me/explain to us … I wonder if…/I wonder if you could tell me … Do you happen to know … I’d like to know what/when/where/why/how/if Dealing with questions I’m often asked that question. What I (usually/often) say is … Do you mind if we deal with that later? Dealing with difficult questions I’m not sure if I entirely understand your question. Do you mean …? I’m afraid I don’t have that information at hand, but … I’m sorry, but that’s not really my field/department/sector.

Ex. 1. Act as a customer who visits a bank and asks a series of questions about the bank services. Use different forms of polite requesting information.

Model. The account has been credited with the dividend.

Can you tell me whether my account has been credited with the dividend?

1. the kinds of current account available;

2. the normal bank charges on overdrawn account;

3. the frequency of sending statements (How often…);

4. interest rate on deposit account;

5. current level of interest they charge on loans;

6. getting an appointment to discuss the cash flow problem with a loan officer;

7. checking whether the cheque paid in last Monday has been cleared.

Ex. 2. Read the dialogue and identify the ways of asking and dealing with the questions politely. Do the tasks that follow.

Student:	I’d like to know who really owns the bank?
Banker:	The stockholders own it. In the beginning, they put up the necessary capital and were granted a charter from the government.
Student:	Am I right to say that all the members of the board of directors are stockholders?
Banker:	Oh, yes. They are chosen by the other stockholders to operate the bank.
Student:	And I wonder if board hires the president and the vice-president to manage it.
Banker:	That’s right. Along with the cashier, the tellers and the clerical workers.
Student:	I guess most of your work has to do with checking and savings accounts and making loans.
Banker:	Yes. But we invest money too. Planning the bank’s investment is also very important.
Student:	I wonder if you divide all the profits among the stockholders.
Banker:	I’m often asked that question. The stockholders receive regular dividends. But some of our earnings are held in reserve accounts.
Student:	I suppose that would be necessary.
Banker:	Here is a copy of our last published statement. You see, the reserves are shown here as surplus and undivided profits.

The dialogue deals with the structure and functions of an American bank. You should keep in mind that there are some differences in American and British terminology. Give the American terms corresponding to the British ones given below.

British terms (BrE)	American terms (AmE)
to run a bank
cheque
current account
deposit account
managing director
shareholder
cashier
banknote

Role-play the dialogue.

B. Discuss the following issues:

1. What changes have there been in personal banking recently? What further changes do you foresee in future?

2. What is ATM?

3. What is the difference between a credit card and a debit card?

4. What are the advantages of using a debit card instead of cash?

5. What is remote (home) banking? What are its weak and strong points?

6. What are the basic financial institutions in your country?

7. How can you get a loan from a bank in your country?

8. What interest on deposit accounts do Belarusian banks offer?

C. Revise the texts from the unit and be ready to speak on the following issues:

• types of banks and their functions;

• types of the accounts the commercial banks provide;

• the principal functions of the Fed;

• banking system in Belarus.