Unit 5 Banking

A Introduction
Before reading the section on Banking, check the following vocabulary. investment fund (n.) bank account (n.) current account UK / checking account US (n.) savings account (n.) account balance (n.) account statement / bank statement (n.) cheque (n.) draw a cheque (v.) deposit (n. & v.) term deposit (n.) checkable deposit (n.) savings deposit (n.) issue (v.) banknote (n.) bond (n.) corporate bonds (n.) government bonds (n.) securities (n.) advance (n.) loan (n.) instalment (n.) bank draft (n.) overdraft (n.) payment instrument (n.) safe deposit box / safety deposit box (n.) branch (n.) bank teller (n.) insert (v.) contain (v.) access (v.) consist of sth (v.) conduct (v.) process (v.) enable (v.) verify (v.) signature (n.) remote (adj.) data (n.) domain (n.) mortgage (n.) mortgage loan (n.) business entity (n.) merger (n.) money supply (n.) exchange rate (n.) advisory services (n.) distinguish (v.) liabilities (n.) assets (n.)

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B bank is a financial institution licensed by a government. Cts primary activities include borrowing and lending money. Dany other financial activities were allowed over time. Eor example banks are important players in financial markets and offer financial services such as investment funds.

B Traditional banking activities

Fanks act as payment agents by conducting checking or current accounts for customersG paying che ues drawn by customers on the bankG and collecting cheques deposited to customersH current accounts. Fanks also enable customer payments via other payment methods such as telegra!hic transferG and AT". Fanks borrow money by accepting funds deposited on current accountsG by accepting term depositsG and by issuing debt securities such as banknotes and bonds. Fanks lend money by making advances to customers on current accountsG by making instalment loansG and by investing in marketable debt securities and other forms of money lending. Ihe commercial role of banks is not limited to banking and it includesJ issue of banknotes processing of payments by way of telegraphic transferG internet other means issuing bank drafts and bank che ues accepting money on ter# de!osit

banking or

lending money by way of overdraftG instalment loan or otherwise providing documentary and standby letters of creditG guaranteesG performance bondsG securities underwriting commitments and other forms of offKbalance exposures safekeeping of documents and other items in safe de!osit bo$es currency exchange Fanking business meansJ receiving from the general public money on currentG depositG savings or other similar account which is repayable on demand or within less than a specified period of time (e.g. LG MG NO monthsG etc.) paying or collecting cheques drawn by or paid in by customers Pince the advent of direct creditG direct debit and internet bankingG the cheque has lost its primacy in most banking systems as a payment instrument.

% Banking channels
Fanks offer many different channels to access their banking and other servicesJ A branchG banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of faceK toKface service to its customers. Bn auto#ated teller #achine &AT"' is a computeriQed telecommunications device that provides the customer with access to financial transactions in a public space without the need for a human clerk or bank teller. Rn most modern BIDsG the customer is identified by inserting a plastic AT" card with a magnetic stripe or a plastic s#artcard with a chipG which contains a unique card number and some security information. Pecurity is provided by the customer entering a !ersonal identification nu#ber &(I)'. Ssing an BIDG customers can access their bank accounts to #ake cash withdrawals and check their account balances. BIDs are known by various names including automated banking machineG money machineG cash machineG cash dispenserG cash pointG Fancomat (in various countries in Turope and Uussia). Cn recent yearsG with the development of technologies and techniquesG options for communication with banks are expanding for clients. Vew services are originating such as home bankingG phone bankingG internet banking and others. *lectronic banking is a service that allows customers to use some form of electronic communications to access accountKspecific information and conduct transactions from a remote locationG such as customerWs home or workplace. +or#s of e,banking Tlectronic banking using a telephone connectionJ (hone banking is the provision of banking services using a classic telephone line. B bank client can obtain the necessary information on dialing a telephone number specified in advance. "obile banking is a method of using oneWs mobile phone to conduct simple banking transactions by remotely linking into a banking network. S"S banking uses short text messages sent through the clientWs mobile phone. B client can automatically receive information about his account balance. Bn PDP is sent to the client immediately after a certain operation is performedG or on requestJ a client sends the bank a correctly formatted message which processes it and answers the clientWs request by PDP.

Tlectronic banking using personal computersJ Internet banking (sometimes called online banking) is the service provided through the Cnternet. Xustomers can perform financial transactions and access their accounts from anywhere in the world by logging on to a bankWs website.

-o#e banking is a service that enables a bank client to handle his accounts from a computer from a place selected in advanceG at home or in the office. Ihe main features of home banking systems are the high level of securityG comfortG simplicity of useG openness of the systemG wide communication possibilitiesG networkingG definition of users and their rights. B home banking system usually consists of two partsJ a bank computer program and a program in the clientWs computer. Ihe bank program works as a communication server. Ct receives calls from clientsG verifies their identityG receives data from themG authenticates digital signaturesG generates digital receipts and sends data to clients. "ail banking is another electronic banking service that makes it possible to communicate with the bank by electronic mail or eKmail. Ihe most frequently used service is sending account statements at periodically to the clientWs mailbox. TKmail is not used for more complex operations.

. Ty!es of banks
Ihere are several types of banks in the world and each has a specific role and function as well as a domain in which they operate. Cn broad strokesG banks may be divided into several groups on the basis of their activities and these include retail banksG invest#ent banksG !rivate banksG business banks and cor!orate banks. Dany of the larger banks have multiple divisions covering some or all of these categories. /etail banks deal directly with consumers and small business owners. Ihey focus on mass market products such as current and savings accountsG mortgages and other loansG and credit cards. (rivate banks normally provide wealth management services to high net worth families and individuals. Business banks provide services to businesses and other organiQations that are medium siQedG whereas the clients of cor!orate banks are usually major business entities. Invest#ent banks are financial institutions that raise capitalG trade in securities and manage corporate mergers and acquisitions. %entral banks are normally governmentKowned organiQations responsible for managing banking activity. Ihey supervise the banking systemG control the cash interest rateG issue banknotesG control the money supplyG influence exchange ratesG etc. Ty!es of retail banks %o##ercial bank is the term used for a normal bank to distinguish it from an investment bank. Bfter the Yreat ZepressionG the S.P. Xongress required that commercial banks engage only in banking activities (accepting deposits and making loans)G while investment banks were limited to ca!ital #arket activities. Ihis separation is no longer mandatory. Ct raises funds by collecting de!osits from businesses and consumers via checkable de!ositsG savings de!osits and ti#e &ter#' de!osits. Ct makes loans to businesses and consumers. Ct also buys cor!orate bonds and govern#ent bonds. Cts primary liabilities are deposits and primary assets are loans and bonds. %o##unity develo!#ent banks serve customers from [financially underserved\ geographical areas and encourage economic development in these areas. (ostal savings banks are associated with national postal system. (rivate banks are banks that manage the assets of high net worth individuals. 0ffshore banks are banks located in area with low taxation and regulation. Ihey provide financial and legal advantages to their clients. Savings banks are financial institutions whose primary purpose is accepting savings de!osits. Ihey may also perform some other functions. Building societies are financial institutions that offer banking and financial servicesG especially #ortgage lending.

Ty!es of invest#ent banks Invest#ent bank issues stocks and bonds to the clients and then invests the money that the client used to purchase the stocks and bonds. Ihe client receives payments from the profits made on his

money. Pince these banks know the ins and outs of their tradeG it is not unusual that companies seek their help on matters regarding mergersG acquisitions and other corporate activities. "erchant banks provide capital to firms in the form of shares rather than loans. Snlike venture capital firms (which invest money in startKup firms)G they tend not to invest in new companies. Ihey also provide advisory services to companies.

*$ercise 1
"atch each of the verbs in the first colu#n with a word2words in the second colu#n in order to for# !hrases. Then co!y the !hrases on the lines !rovided. N. deposit ]. issue L. put ^. verify _. go M. drawG depositG cash `. insert O. process a. conduct Nb. access NN. open N]. pay NL. rent N^. take out a) identityG storyG hypothesis b) transactionsG researchG surveyG experimentG negotiations c) money in a bank / bank account d) informationG dataG applicationG food e) signature at the bottom of the page f) your bills online g) a websiteG bank account onlineG classified material h) banknotesG bondsG securities i) into overdraft j) a loan k) a safe deposit box l) a cheque m) a bank / current / savings account n) a wordG paragraphG BID card

N. ccccccccccccccccccccccccccccccccccccccc ]. ccccccccccccccccccccccccccccccccccccccc L. ccccccccccccccccccccccccccccccccccccccc ^. ccccccccccccccccccccccccccccccccccccccc _. ccccccccccccccccccccccccccccccccccccccc M. ccccccccccccccccccccccccccccccccccccccc `. ccccccccccccccccccccccccccccccccccccccc O. ccccccccccccccccccccccccccccccccccccccc a. ccccccccccccccccccccccccccccccccccccccc Nb. cccccccccccccccccccccccccccccccccccccc NN. cccccccccccccccccccccccccccccccccccccc N]. cccccccccccccccccccccccccccccccccccccc NL. cccccccccccccccccccccccccccccccccccccc N^. cccccccccccccccccccccccccccccccccccccc

*$ercise 3
%hoose the correct answer to co#!lete the sentences. +or#s of #oney.

N. Doney in notes and coins is called dd a) cash b) capital c) reserves ]. Ihe dollarG the mark and the yen are all dd a) funds b) currencies c) monies L. Doney borrowed from a bank is a dd a) deposit b) income c) loan ^. Forrowed money that has to be paid back constitutes a dd a) debt b) fund c) subsidy _. Bll the money received by a person or a company is known as dd a) aid b) income c) wages M. Ihe money earned for a weekWs manual work is called dd a) income b) salary c) wages `. Ihe money paid for a monthWs (professional) work is a dd a) loan b) salary c) wages O. Doney placed in banks and other savings institutions constitutes dd a) capital b) deposits c) finance a. Doney paid by the government or a company to a retired person is a dd a) pension b) subsidy c) fee Nb. Ihe money that will ultimately be used to pay pensions is kept in a dd a) budget b) deposit c) fund NN. Ihe money paid to lawyersG architectsG private schoolsG etc. is called dd a) fees b) instalments c) wages N]. Uegular part payments of debts are called dd a) deposits b) loans c) instalments NL. Tstimated expenditure and income is written in a dd a) reserve b) budget c) statement N^. Doney given to producers to allow them to sell cheaply is called a a) loan b) subsidy c) rebate N_. Doney given to developing countries by richer ones is known as dd a) debt b) subsidy c) aid

*$ercise 4
%hoose the correct answer to co#!lete the sentences. Borrowing and lending. N. Cf you possess somethingG you can say that you dd it. a) owe b) own c) owner ]. Cf you have to reimburse or repay someoneG you dd money. a) owe b) own c) have L. Io let someone else have the use of your money for a certain period of timeG after which it must be paid backG is to dd a) borrow b) lend c) credit ^. Io take money that has to be repaid is to dd a) borrow b) lend c) steal _. Bn amount of money lent is a dd a) debit b) debt c) loan M. B person who has borrowed money is a dd a) creditor b) debtor c) owner `. Bnother word for a lender is a(n) dd a) creditor b) debtor c) owner O. Ihe income received by someone who lends money is called dd a) dividend b) interest c) interests a. Ihe borrower has to pay back the loan itselfG also known as the dd a) principal b) principle c) premium

*$ercise 5
%hoose the correct answer to co#!lete the sentences. Banking vocabulary. N. C donWt get paid in cash. Dy salary is paid into my bank dd a) deposit b) debt c) account ]. eere is a small dd . fouWll get the rest of the money after the job is finished. a) benefit b) advance c) preview L. ee doesnWt have any financial problems. ee is fully dd a) wealthy b) solvent c) thrifty ^. [eereWs a tenKpound dd\. [four changeG Pir.\ a) invoice b) bill c) note _. Cf you work longer than your usual working dayG you should be paid dd a) overtime b) outgoing c) overdue M. Ihe longKterm loan that you take from a bank to buy a house or flat is called a dd a) mortgage b) overdraft c) arrears `. C donWt have any cash on me. Xan C pay by my dd cardg a) deposit b) credit c) expenditure O. CWd like to dd an account. a) start b) make c) open a. fou donWt have any dd (h money) in your account. a) funding b) funds c) fun Nb. B document which shows all your withdrawals and deposits (usually for one month) is called a bank dd a) statement b) bill c) report NN. ihat is another way to say [to withdraw\g a) to make out b) to fill out c) to take out N]. CWd like to dd some money to my other account. a) change b) transfer c) switch NL. Cf youWve lost your bank card you can dd for a new one. a) reply b) apply / reapply c) fill N^. fou dd rate determines the repayments you make on the money you borrow from a bank. a) interest b) internal c) repayment N_. C have to dd another loan. a) go for b) take in c) take out NM. four home may be dd if you donWt keep up repayments on your mortgage. a) retaken b) repositioned c) repossessed N`. Fanks usually have two types of personal accounts j checking and dd a) saver b) savings c) saving NO. ihatWs the dd on my accountg K CtWs ^_bk. (h thereWs ^_bk on your account) a) balance b) money c) sum Na. Dany banks currently offer their customers the opportunity to do their banking dd a) web b) online c) the Cnternet ]b. B personWs credit dd is a formal evaluation of his/her loanKrepayment history and potential. a) level b) rate c) rating ]N. B bank will not give you a loan unless you provide some kind of dd (h something of value as a guarantee of repayment) a) collateral b) collocation c) promise ]]. B dd loan is a loan backed up with collateral. a) security b) secured c) securities ]L. dd a mortgage or other type of loan can lower the monthly payments owed on the loan. a) reworking b) redoing c) refinancing ]^. CWm sorry Drs. ZavisG but your check hasnWt d.. (h gone through) yet. a) transferred b) cleared c) claimed ]_. Zo you have any dd debtsg (h debts that you have not paid off) a) excellent b) outsourcing c) outstanding

]M. fouWll have to dd these forms. Rnce you do thatG CWll give them to our bank manager for approval. a) fill out b) fill c) write ]`. ieWll dd your lost card. Vo problem. a) replace b) redo c) remake ]O. ie have to reset your dd number. (h the secret code for your bank/BID card) a) secret b) lCV c) private ]a. C keep half of my savings in an account and the other half in a dd at my bank. a) safety box b) safe keeping box c) safe deposit box Lb. Rne of your responsibilities will be to dd (hput together) weekly and monthly financial reports for management. a) control b) compile c) review LN. B dd bank account is one that you share with another person. a) joint b) joined c) together L]. B check which a bank returns because it is not payable due to insufficient funds in an account is called d.. or bad check. a) binding check b) burnt check c) bounced check LL. CnformallyG having a low credit rating is referred to as having dd a) insufficient funds b) bad credit c) good credit L^. Cf your bank account goes into overdraftG it means dd a) you owe the bank money b) the bank owes you money c) your balance is b

*$ercise 5
%o#!lete the te$t below with the words2!hrases in the bo$. de!osit tele!hone banking current account direct bank transfer savings account bank card !ay in o!en a bank account interest rate branch

che ue book

cash the che ue #ortgage

internet banking !in nu#ber

withdraw cash

overdraft facility

Cf you live for any period of time in the SmG youHll probably want todddddddddd. . Ihere are two main types of accountsJ a dddddddddd and a dddddddddd. fou can use a current account for your dayKtoKday banking needs. four bank might give you a ddddddddddG which allows you to write cheques to pay for goods and services. fouHll probably also have a dddddddddd which allows you to dddddddddd from cash machines (also known as BID or nhole in the walln machines) and to pay for goods in shops. fou get a secret ddddddddd.. (personal identification number) that you use when you withdraw cash. Cf you receive a chequeG you can pay it in or dddddddd. it at your bank. fou can also dddddddd. cash (money). Cf you want to convert your cheque into cashG you can dddddddddd. Pome companies can also pay money into your account via a dddddddddd.. B savings account should pay you interest. Dost banks give you a different dddddddd. depending on how much you are savingG and how much notice you give before withdrawing money. Cn the SmG people traditionally use banks for a range of services. Bs well as an ddddddd....... (where you borrow money from the bank)G people also get a dddddd (loan to buy a house)G personal loanG and insurance from their banks. eigh street banks (the sort of banks which you can find on any high street) are also good places to change money. Dany banks now offer ddddddddd. and dddddddddd. Ihis means that you can manage your finances without going to the local dddddddd.. (office) of your bank.

*$ercise 6

All the words below can be co#bined with bank or banking in a two,word !artnershi!, e.g. bank holiday or off-shore banking. Add the word bank or banking either before or after each of the words below. N. .................... account ....................... ]. .................... balance ....................... L. .................... central ......................... ^. .................... clerk ............................ _. .................... commercial ................. M. .................... deposit ........................ NL. ................. savings ........................ N^. ................. statement .................... N_. ................. retail ............................ NM. ................. system ........................ N`. ................. offKshore ..................... `. .................... holiday ...................... O. .................... investment ....................... a. .................... manager ......................... Nb. .................. merchant ........................ NN. .................. note ................................ N]. .................. robbery ...........................

*$ercise 7
%o#!lete the te$t about banking !roducts using the words in the bo$. Then answer the uestions below. cash dis!enser foreign currency che ue overdraft credit card !ension current account standing order de!osit account loan #ortgage

!ay#ent sli!

invest#ent advice

Dy salary is paid directly into a lowKinterest dddddddddd . C can withdraw money from automatic dddddddddd with a cashcardG so C hardly ever actually go into a bank. C pay regularG monthly bills by way of a dddddddddd J the bank pays them according to my instructionsG and debits my account. C pay irregular bills by ddddddddd.. . Vearly everyone C know in Fritain has a chequebookG but when C lived on the XontinentG C found that people hardly used them. Ihey often paid in cashG or paid bills at a post office with a dddddddddd C also have a ddddddddddG which is useful for ordering things by post or on the telephoneG or for travelling worldwide. C also use it in shops and restaurantsG but try not to spend more than C can pay when the bill comes a month laterG as this is a very expensive way of borrowing money. Ihe annual interest is exorbitant j well over ]bo. C used to have a ddddddddd. in a building society which paid higher interest than the current account at the bankG but had restrictions as to how and when C could withdraw my money. Fut then we bought a flat. C got a abo ddddddddd. from the building societyJ i.e. we had to pay a deposit of Nbo with our own savings. Ihat is why C have no more money and no more deposit account. Cn fact C have arranged an dddddddddd with the bankG which means C can occasionally withdraw more money than is actually in my account. Cnterest is calculated daily. past year C asked the bank for a ddddddddd.. to buy a car. C only wanted two months salaryG but they refused. Pince C donWt like the high interest rates that the garage chargesG C bought a cheap secondKhand car instead. C always use the bank to buy ddddddddd. when C go abroadG because their rates are better than at the exchange office. C donWt like travellersW chequesG and CWve never had my money stolen j yet. Dy bank is also trying to sell me a private ddddddddd planG for when C retireG but CWm not interested. Ihey also keep offering me dddddddddd about sharesG bondsG unit trustsG mutual fundsG and so on. Ihey donWt seem to realiQe that if C could afford to buy all these thingsG C wouldnWt need an overdraft.

N. ihich synonym for BID is used in the textg ]. ihat is a standing orderg L. ihat is the name of the printed form that you use when you put money into your bank accountg ^. ihat are the advantages and disadvantages of credit cardsg _. ihat are the advantages and disadvantages of depositing money in a building societyg M. Zo people in your country more often buy foreign currencies in banks or exchange officesg ihyg `. ihich types of loans are most often taken out in banks in your countryg O. Xan students in your country take out loansg

*$ercise 8
%o#!lete the dialogue using the words in the bo$. Then !ractice the dialogue with your !artner. state#ent sign u! access sounds transfer account nu#ber available key in balance

stocks and bonds

#enu of o!tions

day,to,day

Tele!hone banking /e!resentative9 eello. eow can C help you todayg %usto#er9 eello. CHd like some information on the telephone banking services offered at by your bank. /e!resentative9 Xertainly. ihat is your ddddddddddg %usto#er9 MLOb_aN. /e!resentative9 ihat would you like to knowg %usto#er9 eow do C ddddddddddg /e!resentative9 qust let me knowG CHll sign you up immediately. %usto#er9 Xan you tell me how the telephone banking services workg /e!resentative9 fou can do all your dddddddd. banking over the telephoneG ]^ hours a day. %usto#er9 IhatHs great. eow do C dddddddd.. my accountg /e!resentative9 qust call the bankG dddddddd.. your lCV number and listen to the dddddddddd available. %usto#er9 eow do C choose which option C wantg /e!resentative9 qust press the number for the service stated by the recording. %usto#er9 ihat kind of things can C dog /e!resentative9 fou can check your dddddddd.G pay billsG order a dddddddd. or even ddddddd. money to another bank. %usto#er9 IhatHs fantasticr Xan C trade ddddddddd... /e!resentative9 CHm afraid you will have to have a special account for that. %usto#er9 ihat about getting help if C have any problemsg /e!resentative9 IhereHs an automated answering machine and staff are dddddddd. a to _ seven days a week. %usto#er9 Ct all dddddddd. very good to me. CHd like to sign up. /e!resentative9 BlrightG can you answer a few questions pleaseg %usto#er9 Xertainly...

*$ercise :
%o#!lete the sentences about %entral Banks using the words in the bo$. Xentral FanksJ act fi$ i#!le#ent issue control function influence su!ervise

N. dddddddd. as banks for the government and for other banks.

]. dddddddd. monetary policy j either the governmentWsG as in FritainG or their ownG if they are independentG as in Yermany and the SPB. L. dddddddd. the money supplyG measured by different aggregates such as DbG DNG D]G DLG etc. ^. dddddddd. the minimum interest rate. _. dddddddd. as lender of last resort to commercial banks with liquidity problems. M. dddddddd. coins and banknotes. `. dddddddd. exchange rates by intervening in foreign exchange markets. O. dddddddd. the banking system.

*$ercise 1;
a' .iscuss the following uestions with your !artner. N. ihat are different banking channels and what are their advantages and disadvantagesg ]. ihat are different types of banksg ihat are the advantages of offshore banksg b' Task. <o to a bank in your town or log on to its website and find out about the !roducts and services it offers. %hoose one of the !roducts 2 services and #ake a short !resentation of its advantages and disadvantages fro# your !oint of view.