Types of Banking Institutions

Ex.1 Read the text

The reason for which the Bank of England was founded in 1694 was to look after the Government's debt, commonly called the National Debt, and this is still a most important function. A large proportion of the debt is made up of Gov­ernment bonds, that is pieces of paper stating that the holder has subscribed such-and-such a sum of money and is entitled to so much interest per year. Two world wars have helped to swell the issue of bonds to some $,40,000 million. Another sizable slice of debt is in the form of Treasury bills which are rather like bonds with a very short life span before the Government buys them back again and so repays the loan. Their purpose is to provide the government with day-to-day money to cover the inevitable gaps which occur between its disbursements, e.g. on such things as unemployment benefit and its receipts from taxation. A third type of debt is the group of National Savings Securities, of which ordinary Post Office (now National Savings Bank) accounts and Premium Bonds are perhaps the best-known examples.

The Bank of England is the ultimate source from which the general public can obtain cash. Other English banks used to issue their own notes, but now they all use the Bank of En­gland notes. Scottish banks have continued to issue their own, hut it is an expensive undertaking, and is closely controlled by the central bank in England.

The Bank also looks after the bank account of the Govern­ment just like an ordinary bank does for its customers. Into this account go all tax receipts and/any other transfers of money from the various banks, and out of it go all payments. Because all the important institutions in the City maintain accounts al the Bank, transfers of money between them and the Government, which go on every day, are made very eas­ily. The Bank merely debits one account and credits another. The Bank also holds accounts for important international in­stitutions like the World Bank, for just over a hundred central banks and also for some ordinary foreign banks, making a total of nearly two hundred accounts.

The Exchange Equalization Account is the name of the fund in which are held the gold and foreign currency reserves of the country. The managers of the fund have the task of inter­vening from time to time in the otherwise free market for foreign currency, so as to influence the price of the pound in line with Government policy, or simply to try to maintain a reasonably orderly market.

The pound is not the only currency whose price has to be carefully controlled. Most of the major world currencies have the same problems, and all greatly benefit from international cooperation. Dealing with other central banks and managing money on an international scale has an important side of the Bank's work. Every month the Governor (lies to Basle to spend a week-end in conference with his opposite numbers from the central banks of other western industrial countries.

The object of the Bank's management in the monetary field is to support the Government's activities in other fields, e.g. taxation policy, export promotion and so on. The methods of control used by the Bank are based on a system in which money available to be borrowed should be rationed by price, not by orders from the Bank or The Treasury.

The battery of instruments of control the Bank has may be summarized as follows:

1. Suggestion and request.From time to time the Bank will make suggestions to the other institutions in the City, indicating the policy the authorities intend to pursue. If they want specific action, the Government makes a "request" like the following:

"Notice to banks. All banks and finance houses are asked not to provide ei­ther loan to persons or check trading facilities for the pur­chase of..."

2. Open market operations.This is the name given to the activities of the Bank in the financial markets for control purposes. The point is that by its interventions the Bank can influence markets to move in the directions which it desires.

3. Special deposits and supplementary deposits.From time to time, the Government may wish to reduce the amount of money that people can borrow in order to reduce the amount they spend. An effective way of doing this is 10 reduce what the banks have available for lending, and this is done by re­quiring them to deposit more money at the Bank of England in special accounts from which it cannot be withdrawn until the Bank says so.

Ex.2 Answer questions on the text:

1. Why and when was the Bank of England founded?

2. What type of securities make up the National Debt?

3. What is the money raised in this way spent on?

4. Enumerate the most important functions of the Bank of England.

5.What is the object of a central bank's management in the monetary field?

6. What principle does the Bank of England follow in exer­cising its control over the monetary policy?

7.What instruments of control has the Bank got at its dis­posal ?

Ex 3 Say what is true and what is false. Correct the false sen­tences:

1. Commercial bank's services are limited.

2. Fiduciary services are handled by trust companies.

3. Commercial banks don't deal with brokerage services!

4. American state banks offer fewer services than a national bank.

5. The interest on deposits is usually higher in savings and loan associations.

6. Savings and loan associations offer regular commercial ser­vices.

7. Every English bank issues its own notes.

8.All the important institutions in the City maintain accounts at the Bank of England.

9.The amount of money available for British borrowers de­pends on the Treasury orders.

Ex.4 Complete the following:

1. We remit money orders.

a) A person who remits is a......

b) A person to whom the money order is remitted is a

2. We transfer bank drafts.........................
a) A person who transfers them is a......

b) A person to whom they are transferred is a.....

3You draw out a cheque.

a) A person who draws a cheque is a......

b)The bank on which the cheque is drawn is a.......

A person to whom the cheque is made payable is a

4. One can pledge assets as security.

a) A person who pledges assets as security is a
b) A person to whom assets are pledged is a

5. Loans are granted.

a) A person who grants a loan is a...

b) A person to whom a loan is granted is a.

Ex.5 Combine the words listed below into meaningful two or three word expressions as possible:

Ex.6 For each of the following phrases, find the expression in the text that explains it:

1.restricted range of services

2. services having to do with trusts and estates

3. services having to do with buying and selling securities

4. bank which gets its charter from the state
5. stocks and bonds

6, a place where stocks are bought and sold

7. The fund in which the gold foreign currency reserves of Great Britain are held

8. Bonds with a very short life span before the government buys them back again

9. Economic policy which regulates the level of money or li­quidity

Ex.7 Demonstrate the meaning of the following expressions № sentences of your own:

1. to handle transactions

2. to be a party to a transaction

3. to manage the estate

4. to make loans for the purchase of

5. to borrow money from

6. to get a loan from

7. to charge a higher/lower rate of interest

8. to discuss some fiduciary matters

9. to provide the government with

10. to cover the gap between

11. to maintain an orderly market

12. to be the subject to scrutiny by

TEST

Choose the correct word.

1. Spain now uses the euro. Pesetas are no longer ____________.

a.good money b.legal money c.legal tender

2. I bought a TV which doesn't work. I'll take it back to the shop to get ___________.

a.my money returned b.a refund c.a repayment

3. In a shop, to get a refund, you usually have to show the ___________.

a.receipt b.recipe c.payment ticket

4. I'm paying for my new car in 36 monthly __________.

a.instatements b.pieces c.parts

5. I earn a lot of money, but I have a lot of _________.

a.payouts b.expenses c.paying

6. Famous paintings are usually sold by __________.

a.bid b.highest price c.auction

7. In an auction, the item is sold to the person who makes the highest __________.

a.bid b.price c.offer

8. In Japan, the US dollar is __________ .

a.foreign money b.strange money c.a foreign currency

9. In Britain, it's not usual to discuss your personal __________

a.money b.finances c.money arrangements

10. You can _________ a house and __________ a car.

a.hire / rent b.hire / hire c.rent / rent or hire

11. Here's the fifty dollars I __________.

a.owe you b.pay you back c.must return

12. The best things in life are __________.

a.free b.not for c.not bought and sold

Bank correspondence

INQUIRY

Gentlemen,

We would like to open a current account at your bank. We will appreciate your informing us of your condi­tions in regard to interest rates, service charges, han­dling fees, etc. Yours sincerely,

ORDER

Gentlemen,

We kindly request to open a current account for us in the name of...

A check for ... is enclosed herein as an initial deposit.

We acknowledge that Mr... and Mr... have the right to sign jointly (individually) our newly opened account on our behalf.

Their signatures are:

Mr....:

Mr....:

Yours sincerely,

Enclosure:

1 check

OPENING AN ACCOUNT

1. Since we intend to do business with you, we would be grateful if you provided us by a current account.

2. Hereby is the request to open a current account at your bank in the name of...

3. The following persons are empowered to sign all documents as well as to cover our liabilities.

1................................................. (name) (signature)

2...................

4. All correspondence is to be directed to...

5. Bank statements are to be mailed daily/weekly/ monthly/at the end of year.

6. Payments received from third parties are to be for­warded by mail immediately/shall be handled like bank statements.

REQUEST FOR CREDIT

Gentlemen,

Please let us know about conditions for granting a credit on our current account in the amount of...

Our merchandise in stock which has an approximate value of... will be used as collateral.

We would greatly appreciate an early reply.

Yours sincerely,

INVESTMENT OF CAPITAL

1. Gentlemen,

Could you please send us some information on how at present to invest temporarily available funds in the amount of ...

We are looking forward to an early reply.

Yours sincerely,

2. Gentlemen,

3. We intend to transfer an amount of... from our cur­rent account to a time deposit account for a period of ... days. Please let us know the rate of interest you are ready to pay us. Yours sincerely,

COLLECTION OF DIVIDENDS

Gentlemen,

Enclosed please find due dividend coupons.

Kindly redeem same on our behalf and deposit the money in our account.

Thank you for your co-operation.

Yours sincerely,

Enclosure:

dividend coupons