Unit 20. Modern banking (современная банковская система)

The goldsmith bankers were an early example of a financial intermediary.

A financial intermediary is an institution that specializes in bringing lenders and borrowers together.

A commercial bank borrows money from the public, crediting them with a deposit. The deposit is a liability of the bank. It is money owed to depositors. In turn the bank lends money to firms, households or governments wishing to borrow.

Banks are not the only financial intermediaries. Insurance companies, pension funds, and building societies also take in money in order to relend it. The crucial feature of banks is that some of their liabilities are used as a means of payment, and are therefore part of the money stock.

Commercial banks are financial intermediaries with a government licence to make loans and issue deposits, including deposits against which cheques can be written.

Let's start by looking at the present-day UK banking system. Although the details vary from country to country, the general principle is much the same everywhere.

In the UK, the commercial banking system comprises about 600 registered banks, the National Girobank operating through post offices, and a dozen trustee savings banks. Much the most important single group is the London clearing banks. The clearing banks are so named because they have a central clearing house for handling payments by cheque.

A clearing system is a set of arrangements in which debts between banks are settled by adding up all the transactions in a given period and paying only the net amounts needed to balance inter-bank accounts.

Suppose you bank with Barclays but visit a supermarket that banks with Lloyds. To pay for your shopping you write a cheque against your deposit at Barclays. The supermarket pays this cheque into its account at Lloyds. In turn, Lloyds presents the cheque to Barclays, which will credit Lloyds' account at Barclays and debit your account at Barclays by an equivalent amount. Because you purchased goods from a supermarket using a different bank, a transfer of funds between the two banks is required. Crediting or debiting one bank's account at another bank is the simplest way to achieve this.

However on the same day someone else is probably writing a cheque on a Lloyds' deposit account to pay for some stereo equipment from a shop banking with Barclays. The stereo shop pays the cheque into its Barclays' account, increasing its deposit. Barclays then pays the cheque into its account at Lloyds where this person's account is simultaneously debited. Now the transfer flows from Lloyds to Barclays.

Vocabulary notes

securities ценные бумаги

interest-bearing long-term financial assets долгосрочные финансовые активы, приносящие процентный доход

government bonds государственные облигации

industrial shares промышленные акции

the stock exchange фондовая биржа

miscellaneous bank assets прочее имущество банка

sight deposit депозит до востребования; бессрочный вклад

time deposit срочный вклад

to withdraw отзывать (вклад)

to run down a deposit уменьшать вклад

cheque (checking) accounts текущий (чековый) счет

to sell off распродавать

call in high-interest loans требовать возврата займов (требовать уплаты процентов)

certificates of deposit депозитные сертификаты

miscellaneous liabilities прочие (другие) пассивы

Assignments

I. Suggest the Russian equivalents

institution that brings lenders and borrowers together; crediting them with a deposit; with a government licence; as a means of payment; handling payments by cheque; a set of arrangements; adding up all the transactions; to balance inter-bank accounts; the net amount; to calculate the net flows between banks; costs of making transactions; cash assets are notes and coin; to purchase interest-earning assets; bills and market loans; asset-holders; lending to households and firms; the major share of clearing bank lending; interest-bearing long-term financial assets; price fluctuates; a period of notification; high-interest investments

II. Replace the parts in italics by synonyms

debited at the same time; interest-bearing assets; current assets; to support the firm for a difficult period of time; firms may not be able to repay when the bank demands; demand deposit; to draw money from a bank account

III. Fill in the gaps with the words and expressions from the text

1. A financial intermediary is an institution that specializes in .

2. A commercial bank money from the public, them with a deposit, which is of the bank.

3. As liabilities are used as , and are part of .

4. Commercial banks are with a government licence to and

5. The clearing banks are so named because they have for .

6. A clearing system is a set of in which between banks are .

7. Lloyds presents the cheque to Barclays, which will Lloyds' account at Barclays and your account at Barclays by amount.

8. Because you purchased goods from a supermarket using ,

between the two banks is required.

9. Barclays then _ _ into its account at Lloyds where this person's account is .

10. The clearing system calculates between the member clearing banks, thus representing another way society of making transactions.

11. Modern banks' include notes and coin in the banks' vaults and their

deposited with .

12. The other entries on the asset side of show money that has been or used to purchase .

13. The second item, , shows .

14. Money itself is thus asset of all.

15. The third item, , shows lending to .

16. Although advances represent of clearing bank lending, they are not of bank lending.

17. The fourth item, , shows bank purchases of , which can be or .

18. Although these assets are traded daily on , their price from day

to day, hence financial investment in securities is also .

19. Deposits are chiefly of two kinds: and .

20. Whereas can be withdrawn whenever the depositor wishes, without giving the bank , a minimum must be given before can be

21. Whereas most banks do not pay interest on or , they can afford to pay interest on .

22. Since they have notification of any withdrawals, they have plenty of time to sell of ' or call in in order to have the money to pay out deposits.

23. CDs are an form of where the bank borrows from the public for and knows exactly when .

IV. Increase your vocabulary

Prepositions

to borrow from; to purchase from

to bank with; to deposit with

to credit with; to lend to

to take in; to call in loans

to write a cheque against a deposit

to pay the cheque into account

an account at a bank

Make sentences of your own using these phrases.

V. Find in the text English equivalents for the following

финансовый посредник; банковские пассивы; страховая компания; пенсионный фонд; строительное общество; предоставлять ссуды: открыть депозит; доверительный сберегательный банк; клиринговый банк; цен-трапьная расчетная палата; кредитовать счет; дебетовать счет; перевод суммы денег (фондов); получатель чека; банк - член расчетной палаты;, балансовый отчет; активы; денежные активы; кассовый резерв; кратко­срочные ссуды; переводить в деньги; авансовая ссуда; ценные бумаги; правительственные облигации; акции какой-либо промышленной ком­пании; фондовая биржа; неликвидный; прочее имущество; бессрочный вклад (депозит до востребования); отзывать вклад по предъявлении; срочный вклад; не предупреждая заранее; текущий (чековый) счет; вы­плачивать проценты; депозитный сертификат

VI. Explain in English

the National Girobank; cash assets; cash reserves; interest-earning assets; asset-holders; liquid assets; illiquid assets; sight deposits; time deposits

VII. Answer the questions

1. What's a financial intermediary? Name different financial intermediaries.

2. What's a deposit?

3. What's a bank liability? In what way are the bank liabilities part of the money stock?

4. What's a commercial bank?

5. What's a clearing bank?

6. What's a clearing system? How does it work? Draw a scheme showing how the system works.

7. What's the role of the Bank of England?

8. What do assets include? Dwell on each item.

9. What's liquidity? Why is money itself the most liquid asset? Why aren't advances very liquid forms of bank lending?

10. What do liabilities include? Dwell on each item.

VIII. Translate into English using all the active possible

1. О деятельности коммерческого банка можно судить (понять) с по­мощью балансового отчета, в котором активы равняются пассивам.

2. У коммерческого банка две основные функции — прием денежных вкладов и выдача ссуд.

3. Банкир преследует две противоречащие друг другу цели. Одна цель  прибыль. Коммерческие банки, как и другие предприятия, стремятся к прибыли. Поэтому они предоставляют кредиты и покупают ценные бу­маги, правительственные облигации и акции компаний. Эти операции в балансе показаны как основные активы, приносящие доход коммерче­ским банкам. С другой стороны, коммерческий банк должен стремиться к безопасности. Для банков безопасность обеспечивается ликвидностью, в частности такими ликвидными активами, как наличность. Поэтому банкиры стремятся к балансу между осторожностью и прибылями.

4. Финансовые посредники  это институты, которые собирают сбе­режения населения и предоставляют их заемщикам. Финансовые посред­ники в общем виде могут быть разбиты на три группы  банковские, страховые и инвестиционные институты. Банковские институты состоят из коммерческих банков, сберегательных банков и др. Для них характер­но принятие вкладов населения и организаций. Страховые институты представлены страховыми компаниями и пенсионными фондами. Инве­стиционные институты представлены финансовыми компаниями. Они привлекают деньги, выпуская собственные акции и инвестируя фонды в акции и облигации.