Topic 1: Banking

References: ESP – International Banking and Finance,

Foreign Trade University

investopedia.com

A. TERMS, THEORIES AND DEFINITIONS                             

1. Bank (ngân hàng): An organization, ussually a corporation, chartered by a state or fereral government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discount notes, makes loans, and invests in securities; collecting checks, drafts, and notes; certifies depositor’s checks; and issues drafts and cashier’s checks.

2. Banking (hoạt động ngân hàng): The business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.

3. Check/cheque (séc): A written order of a depositor upon a bank to pay to or to the order of a designated party or to bear, a specified sum of money on demand.

4. A bank overdraft (thấu chi): When someone is able to spend more than what is actually in their bank account.

5. Underwriting (bảo lãnh): The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities.

6. Deposit (gửi tiền/tiền gửi): (i) A transaction involving a transfer of funds to another party for safekeeping; (ii) A portion of funds that is used as security or collateral for the delivery of a good. 

7. Current account/checking account (tài khoản vãng lai): One that generally pays little or no interest, but allows the holder to withdraw his or her cash without any restrictions.

8. Time deposit account (tài khoản tiền gửi kì hạn): One that pays interest, but ussually cannot be used for paying cheques, and in which withdrawals can be made only after giving notice or with loss of interest.

9. Standing order (ủy nhiệm chi): an intruction to a bank to pay fixed sums of money to certain people or organization at stated time.

10. Mortgage (cho vay thế chấp): a loan, ussually to buy property, which serves as a security for the loan.

11. Debit card (thẻ ghi nợ): An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services. 

12. Credit card (thẻ tín dụng): A card which guarantees payment for goods and services purchased by the cardholder, who pays back the bank or finance company at a later date.

B. READING

Read the text below and write short headings for each paragraph:

Types of bank

1........................

Commercial or retail banks are businesses that trade in money. They receive and hold deposits, pay money according to customer’s instructions, lend money, offer investment advice, exchange foreign currencies, and so on. They make a profit from the difference (known as a spread or a margin) between the interest rates they pay to lenders or depositors and those they charge to borrowers. When lending money, bankers have to find a balance between yield and risk, and between liquidity and different maturities.

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

Investment banks, often called merchant banks in Britain, raise funds for industry on the various financial markets, finance international trade, issue and underwrite securities, deal with takeover and mergers, and issue government bonds. They also generally offer stock broking and porfolio management services to rich coporate and individual client. Investment banks make their profits from the fees and commissions they charge for their services.

3.....................

In some European countries (notably Germany, Switzerland and Austria) there have always been universal banks combining deposit and loan banking with share and bond dealing and investment services, but for much of the 20^th century, American legislation enforced a strict separation between commercial and investment banks. The Glass – Steagall Act, passed during the Depression in 1934, prevented commercial banks from underwriting securities. This act was repealed in 1999. The Japanese equivalent was abolished the previous year, and the banking industry in Britain was also deregulated in 1990s, and financial conglomerates now combine the services previously offered by banks, stockbrokers, and insurance companies.

4......................

A country’s minimum interest rate is usually fixed by the central bank. This is the discount rate, at which the central bank makes secured loans to commercial banks. Banks lend to blue chip borrowers pay more, depending on their credit standing (or credit rating or creditworthiness): the lender’s estimation of their present and future solvency. Borrowers can usually get a lower interest rate if the loan is secured or guaranteed by some kind of asset, known as collateral.

5......................

In most financial centers, there are also branches of lots of foreign banks, largely doing Eurocurrency business. A Eurocurrency is any currency held outside its country of origin. The first significant  Eurocurrency maket was for US dollars in Europe, but the name is now used for foreign currencies held anywhere in the world (e.g. yen in the US, euros in Japan). Since the US$ is the world’s most important trading currency – and because the US for the many years had a huge trade deficit – there is a market of many billions of Eurodollars, including the oil – exporting countries’ “petroldollars”. Although a central bank can determine the minimum lending rate for its national currency it has no control over foreign currencies. Furthermore, banks are not obliged to deposit any of their Eurocurrency assets at 0% interest with the central bank, which means that they can usually offer better rates to borrowers and depositors than in the home country.

C. READING COMPREHENSION EXERCISES

1. Find the words or expressions in the text which mean the following:

a)    To place money in a bank, or money placed in a bank

b)    The money used in countries other than one’s own

c)    How much money a loan pays, expressed as a percentage

d)    Available cash, and how easily other assets can be turn into cash

e)    The date when a loan become repayable

f)     To guarantee to buy all or part of the new shares that a company issues, if they cannot be sold to the public

g)    When a company buy or aquires another one

h)   When a company combines with another one

i)     Buying and selling stocks or shares for clients

j)      Taking care of all a client’s investments

k)    The ending or relaxing of legal restrictions

l)     A group of companies, operating in different fields, that have joined together

m)  A company considered to be without risk

n)   Ability to pay liabilities when they become due

o)    Anything that acts as a security or guarantee for a loan

2. Match up the verbs and nouns below to make common collocations:

charge	advice
do	bonds
exchange	business
issue	currencies
make	deposits
offer	funds
pay	interest
raise	loans
receive	profits
underwrite	securites issues

3. Complete the text using these words:

accounts	bank loan	cheque	customers’
current account	debt	depositors	deposits
lend	liabilities	liquidity	optimize
overdraft	salary	spread	standing order
return	transfer	wages	withdraw

There are still many people in Britain who do not have bank (4).......................... Traditionally, factory workers were paid (5)...................... in cash on Fridays. Non – manual workers, however, usually receive a monthly (6)......................... in the form of cheque or a (7)....................... paid directly into their bank account.Commercial banks are businesses that trade in money. They receive and hold (1)...................., pay money according to (2).......................instructions, (3)...................money ect.

A (8).......................... usually pays little or no interest, but allows the holder to (9)........................ his or her cash with no restrictions. Deposit accounts pay interest. They do not usually provide (10)..................... facilities, and notice is often required to withdraw money. (11).............................. and direct debits are ways of paying regular bills at regular intervals.

Banks offer both loans and overdrafts. A (12)...................... is a fixed sum of money, lent for a fixed period, on which interest is paid, bank usually require some form of security or guarantee before lending. An (13)........................... is an arrangement by which a customer can overdraw an account, i.e. run up a debt to an agreed limit; interest on the (14)...................... is calculated daily.

Banks make a profit from the (15)..................... or differential between the interest rates they pay on deposits and those they charge on loans. They are also able to lend more money than they receive in deposits because (16)....................... rarely withdraw all their money at the same time. In order to (17)..................... the return on their assets (loans), bankers have to find a balance between yield and risk, and (18)....................... and different maturities, and to match these with their (19)...................... (deposits). The maturity of a loan is how long it will last; the yield of the loan is its annual (20)....................... – how much money it pays – expressed as a percentage.

D. GUIDE

1. a)    deposit b)    foreign currency c)    yield d)    liquidity e)    maturity f)     underwrite g)    takeover h)   merger i)     stock broking j)      porfolio management service k)    deregulation l)     conglomerate m)  blue chip company n)   solvency o)    collateral 2. charge interest, do business, exchange currencies, issue bonds, make profits, offer advice, pay loans, raise funds, receive deposits, underwrite security issues

3. (1)  deposits (2)  customers’ (3)  lend (4)  accounts (5)  wages (6)  salary (7)  transfer (8)  current account (9)  withdraw (10)       cheque (11)       standing order (12)       bank loan (13)       overdraft (14)       debt (15)       spread (16)       depositors (17)       optimize (18)       liquidity (19)       liabilities (20)       return

Note: These are my own answers, not the official ones.

E. FURTHER STUDY

Reading:

http://as.cornell.edu/academics/careers/explore/banking-finance.cfm

Listening:

http://podcast.ft.com/p/2244