UNIT III

THE UKCOMMERCIAL BANKS

After reading this chapter, you will be able to:

• Identify the types of banks and explain their major activities.

• Identify major categories of bank accounts.

• Explain the purpose of each type of account.

• Discuss the major services offered by banks.

BEFOFE YOU READ

Discuss the following questions.

1. What do you know about the banking system of the uk?

2. Does it differ from that of other European countries?

Text A

Banking sector

The banking sector in the United Kingdom is unique in its size, breadth and diversity. The UK, and not just London, is home to a large domestic banking industry and a large international industry.

However, classification of financial institutions is becoming progressively more difficult as the distinctions between them are being blurred, due primarily to changes in the regulatory framework and to competitive forces within the industry. Nevertheless, some classification is necessary for expository purposes, and there is a need to look at each group of financial institutions in turn, in order to attain a better understanding of their activities and their place within the financial system. In doing so, however, always bear in mind the extent to which financial institutions are increasingly offering a range of financial services which were traditionally offered by separate institutions.

Retail and wholesale activities of financial institutions

Before looking at each of the groups of financial institutions in more detail, we must first ask the question: what is the difference between the retail and wholesale activities of financial institutions?

The major distinction between retail and wholesale activities undertaken by financial institutions is in the size of transactions involved. Retail activities are concerned with deposits and loans that are of relatively low value, and wholesale activities are concerned with high-value deposits and loans. While no hard distinction between retail and wholesale is possible, a transaction of less than £1000,000 would usually be regarded as a retail transaction.

The distinction between retail and wholesale activities also relates to the type of customer involved. Predominantly, retail activities of banks will involve taking in deposits from and making loans to personal customers and small businesses. Notwithstanding this, note that very large organisations will often also need to make use of the retail financial services offered by banks. For example, if an organisation has a number of retail outlets, it will make use of local branches of banks in order to deposit cash and cheques.

A third aspect of the distinction between the retail and wholesale activities of financial institutions relates to the distribution system for the services provided.

Usually, the provision of retail activities has involved branch networks – best typified by the retail banks and by building societies. Although this is the usual format, note that developments in the technology, in particular, are enabling many retail financial services to be provided without a branch network, while some institutions – such as unit trusts – have never operated a branch network. Thus, telephone banking has been developed, while some building societies have launched ‘postal accounts’. Nowadays, retail financial services are widely available on the internet.

A consequence of retail activities involving transactions of relatively low value is the volume of such transactions will generally be very high. The banks, and increasingly the building societies, are as a consequence partly involved in money transmission facilities (such as cheque book accounts, electronic funds transfer and so on) to enable the transfer of funds from one individual or business to another to take place.

Wholesale activities, being concerned with high-value transactions, typically involve customers that are larger businesses or else other financial institutions. Since these high-value transactions will be of limited volume, a branch network to support such activities is unnecessary. Due to the high level of competition found in wholesale markets and due to the lower total costs arising to be gained from dealing with limited numbers of high value transmissions, the interest rates on wholesale transactions will generally be market-related rates and will usually be at a much finer margin in comparison to retail transactions.

Although the distinction between retail and wholesale activities is a useful one, remember that the distinction is in relation to activities rather than institutions. Many financial institutions will be engaged in both wholesale and retail activities. The retail banks, for example, are heavily engaged in wholesale activities, both in terms of obtaining funds and in lending. The larger building societies typically obtain a proportion of their funds from wholesale sources. The basis of classifications is therefore in terms of an institution’s dominant activity, rather than on its exclusive activity.

Ex.1. Find in the text the following word combinations and translate the sentences in which they are used:

High-value deposits, retail transactions, retail outlets, branch network, distribution system, telephone banking, postal account, low-value transactions, limited volume, money transmission facilities, high-value transactions, lower total costs, cheque-book accounts, electronic funds transfer, wholesale transactions, market related rates, finer margin, dominant activity, exclusive activity, retail financial services.

Ex.2. Find English equivalents to the word combinations given below:

Поштовий рахунок, засоби переказу грошей, електронний переказ грошей, операції з великими сумами грошей, менша маржа, зменшені загальні витрати, обмежений обсяг, банківські послуги по телефону, окремі покупці, основна діяльність, додаткова діяльність, чековий рахунок, невеликі торгівельні заклади, операції з невеликими сумами грошей, загальноринкові процентні ставки, великі суми депозитів.

Ex.3. Understanding details

Mark the sentences T (true) or F (false) according to the information in the text. Find and read out the part of the text, which gives the correct information.

1. Classification of financial institution is difficult because too many types of them operate in the British banking market.

2. The major distinction between retail and wholesale financial institution is only in the type of customers they serve.

3. All retail banks have a wide network of branches.

4. Most banks are involved in different forms of money transfers.

5. The number of transactions made by wholesale banks is generally less than that made by retail financial institutions.

6. Wholesale banks usually charge more for their services.

7. Exclusive activities of financial institutions aren’t usually used as a basis for their classification.

Ex.4. Answer the following questions:

1. In relation to size of transactions and types of activities, what are the differences between retail and wholesale activities undertaken by financial institutions?

2. Are there any other aspects of distinction between retail and wholesale activities? Characterize them.

3. What is the normal form of distribution channel for retail financial services?

4. What are the consequences of retail activities involving transactions of relatively low value?

5. For what reason may wholesale banking activities operate on narrower margins than retail banking activities?

6. Why is the basis of classification in terms of an institution’s dominant activity rather than on its exclusive activity?

Ex.5 . All the words below can be combined with bank or banking in a two-word partnership, e.g. off-shore banking (офф-шорний банківський бізнес, який знаходиться за кордоном). Add the word bank or banking either before or after each of the words below. Demonstrate the meaning of these word combitations in the sentences of your own.

1. ………… account …………	10. ………… merchant …………
2. ………… balance ………….	11. ………… note ………………
3. ………… central …………..	12. ………… off-shore …………
4. ………… clerk …………….	13. ………… retail ……………..
5. ………… commercial ……..	14. ………… robbery …………..
6. ………… deposit ………….	15. ………… savings …………..
7. ………… holiday ………….	16. ………… statement ………...
8. ………… investment ………	17. ………… system …………...
9. ………… manager …………	18. ………… wholesale ………..

Ex.6. Whether commercial or public, government or private - there are numerous types of banks, each serving its own specific role. Read the text, compete the following chart and report your findings to the class.

TYPE OF BANK	SERVICE PROVIDED	CUSTOMERS

There 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. In broad strokes, banks may be divided into several groups on the basis of their activities and these include investment banks, retail, private, business, and also corporate banks. Many of the larger banks have multiple divisions covering some or all of these categories.

Retail banks deal directly with consumers and small business owners. They focus on mass market products such as current and savings accounts, mortgages and other loans, and credit cards. By contrast, private banks normally provide wealth management services to high net worth families and individuals.

Business banks provide services to businesses and other organizations that are medium sized, whereas the clients of corporate banks are usually major business entities.

Lastly, investment banks provide services related to financial markets, such as mergers and acquisitions.

Another way in which banks may be categorised is on the basis of their ownership. They might either be privately held or publicly owned banks.

Privately owned banks are motivated by profit in their business operations. Publicly owned banks are held by the state governments of the individual countries and they serve as a nation’s centralized bank, as well as an economic backbone for that particular country. They are also known as central banks.

Publicly owned banks, which are controlled by the government, have numerous responsibilities pertaining to the banking sector of the country, such as administering various activities for the commercial banks of that country. They also determine the rates of interest offered by banks doing business in that country, as well as playing a major role in maintaining liquidity in the banking sector.

There are several types of notable retail banks. These include the offshore, community and savings banks, as well as the community development banks, building societies, postal savings banks, ethical banks, etc.

Offshore banks operate in areas of reduced taxes, as compared to the country in which the investor lives in. This is why most offshore banks are private banks.

Community banks are monetary organizations operated on a local basis, while community development banks cater to the populations, or markets, that have typically not been served properly.

Postal savings banks are basically savings banks that operate in conjunction with the national postal systems of that country.

Building societies where traditionally mutually owned by their customers. They provide a full range of retail banking services, but with a particular focus on mortgages.

Ethical banks do their business based on their own code of conduct. They only accept investments that they perceive to be useful from a social and environmental point of view.

There are two types of investment banks - the investment banks that perform underwriting activities, and the merchant banks, a traditional form of banking, that performs trade-financing activities.

Ex.7. Do you know what types of banks operate in the UK?

Read the text and note down some questions. Then ask your partners your questions and answer theirs.

CHOOSING A BANK Most high street banks provide roughly the same basic services and accounts. To choose a bank, look at the specific areas you are interested in and then select the bank which offers the best combination of services and fees that suits your personal requirements. There are also a number of online-only banks. These banks provide traditional personal banking services to their customers, however they do not have branches and you can only access their services by using the Internet or a telephone. Banks are also like any other company, and you do not have to stay with a single bank. If you become unhappy with the service you are receiving, you can move your account and banking business to another bank or building society. While it is true that this can be a time consuming process, most banks will provide help and assistance with moving your accounts. High Street Banks and Building Societies High Street banks or building societies, are commercial banking businesses whose primary market is in consumer finance. High Street Banks There is a large number of High Street banks in the UK. The name High Street Bank comes from the positioning within towns and cities of branches of the bank, usually on the main shopping street or primary route through the town, commonly known as the High Street. The list of High Street banks can be found on the internet. Top 5 are considered to be HSBC Royal Bank of Scotland Group Lloyds Banking Group Barclays Santander (Spanish owned) Private Banks Private Banks provide a much more personal and tailored set of services compared to high street banks. Opening a private bank account involves a large minimum deposit, and private banks are geared towards providing financial services to individuals who are rich and have large incomes. Most of the larger multinational banks also provide private banking facilities, although there are a large number of private banks in the UK. Investment Banks An investment bank is a securities firm, financial company or brokerage house. It provides a number of financial services, the most common of which is the purchase of new issues of securities from private corporations. The investment bank will then form a syndicate to sell these securities to their customers and the general public. They do not offer specific personal or business banking services to the general public. Online Banks Online Banking is a relatively new phenomenon for personal banking customers. Electronic access to bank services has been available to corporations and business banking customers for a while now. The accepted definition of Online Banking nowadays relates to accessing normal banking facilities through the use of a PC or other electronic device that is connected via the internet to the bank. Business Banking Most banks also provide a range of services that are tailored to businesses. These often include services that are specifically helpful to small business, such as small business loans, asset purchase loans, or invoice finance. Offshore Banking Offshore Banking is defined as opening and using a bank account in a bank located in another country. A country that has relaxed tax laws such as the Caymen Islands, Gibralter or the Channel Islands. Offshore banking also refers to banking transactions undertaken in a foreign currency.

Ex.8. Sum up what the following text said about:

1. The British banking system today.

2. The main function of commercial banks.

3. The sources of making profits.

4. The services rendered by commercial banks.

Banks, like other economic institutions, have been created out of definite needs. The wide use of money and credit increased the importance of financial institutions, which do not serve only as depositories of funds, but also as sources of credit. Without the services of the banks it is unlikely that our modern industrial order could function efficiently.

Today the British banking is a complicated tripartite system like a three-layer cake. The system is headed by the Bank of England.

The other two layers are:

• the commercial or joint stock clearing banks

• specialized banking institutions such as merchant banks.

The commercial or joint-stock banks deal with the general public. Commercial banks are designed to make a profit for their stockholders. They receive money in the form of deposits, savings or repayments from the public, and then lend it at interest to borrowers. Profit is made primarily from interest.

A bank may not necessarily be in business to make a profit. Central banks, for example, provide a country with a number of services, while development banks exist to increase the economic growth of a country and raise the living standard of its population. On the other hand, the aim of commercial banks is to earn profits. They therefore provide and develop services that can be sold at a price that will yield a profit. Obviously, banks do not keep most of the money they receive; indeed the bank will have on hand only enough to pay those customers who want to withdraw their money on a given day. A modern bank usually needs no more than 2 percent of its money in cash. Yet law inquires this same bank to deposit a sixth or seventh of its resources in non-earning funds.

Commercial banks render various services to companies and individuals. Some of the services are:

• to receive or accept from their customers the deposit of money

• to collect and transfer money both at home and abroad against deposit and current accounts

• to provide overdrafts to both personal and business customers

• to lend loans to their customers

• to exchange money

• to supply economic information and to prepare economic reviews to be published

• to make foreign exchange transactions, including spot transactions, forward transactions and swap transactions

• to issue various banker’s cards

A commercial bank which provides the same range of services year after year is less likely to be successful than one which assesses changes in the demand for its products and which tries to match products to its customer’s needs. New services are constantly being introduced and developed by commercial banks, and the full-service philosophy of many banks means that they are akin to financial supermarkets, offering a wide variety of services.

Ex.9. The following reading contains information about typical features of a bank. Some parts of the text are missing. Complete the text with the words and word combination from the box and translate it into Ukrainian.

lends out money; custodian of funds; borrowers and lenders; financial institution; negotiable instruments; deposits; expansion and diversification; payment and withdrawal facility; service oriented

A bank is a (1) … which deals with other people's money i.e. money given by depositors. A bank acts as a connecting link between (2) … of money. Banks collect money from those who have surplus money and give the same to those who are in need of money. A bank accepts money from the people in the form of (3) … which are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a (4)… of its customers. A bank (5)… in the form of loans to those who require it for different purposes. A bank provides easy (6)… to its customers in the form of cheques and drafts. It also brings bank money in circulation. This money is in the form of cheques, drafts and other (7)…. A bank is a profit seeking institution having (8)…approach. Banking is an evolutionary concept. There is continuous (9)…of the functions, services and activities of a bank.

Ex.10. Read the text, suggest an appropriate title, then prepare a 100- word presentation.

This reading describes the structure and function of retail banks, the services they provide, and the factors to be considered when selecting one. In the United Kingdom retail banks are also known as high street banks.

Retail banks offer a range of services to individual customers and small businesses, rather than to large companies and other banks. The services can include current accounts, savings accounts, investment advice and broking, and loans and mortgages. Retail banks perform two crucial functions for customers: firstly, they enable customers to bank their money securely, access it easily, and conduct transactions; and secondly, they provide access to additional money to fund large purchases, such as buying a home. In return for holding customers’ funds, which they can then invest, banks pay customers interest.

Traditionally, retail banks have provided these services directly to the customer via branches. While many still do this, retail banks now offer their services by telephone and the internet as well. Some operate solely via the internet and do not have facilities to serve customers at physical outlets. Other organizations, such as supermarkets, have now entered the banking sector and also offer a wide range of banking services.

It has become more difficult to identify the traditional retail bank—a bank that funds itself through customer deposits and lending—because retail banks now often combine retail and wholesale banking. It is therefore more relevant to today’s banking structure to regard retail banking as a series of processes rather than as an institution.

The intermediation services offered by retail banks (such as looking after customers’ money and making loans) and the payment services (allowing customers to make transactions using debit cards, checks, etc.) mean that they have to make funds available to customers at very short or immediate notice. This inevitably means that a retail bank has to manage the risk that more money will be requested by customers than it has available and of customers defaulting on loans. Banks do this by holding stocks of liquid assets, maintaining a cushion of capital, lending to different types of borrower, adjusting interest rates, and screening potential borrowers (credit scoring).

Ex.11. Complete the sentences using your own words:

1. The aim of commercial banks is …

2. The way in which a bank is organized and operated is determined …

3. Banks are classified according to …

4. Many banks offer a combination of …

5. The wholesale banking provides …

6. The retail banking provides …

7. Both types of banking have their essential functions which are …

8. It is difficult to identify traditional retail bank because …

9. They make it possible for banks to …

10. Banking is an evolutionary concept because …

11. Commercial banks diversify their services in order to …

Ex.12. Do you know what BBA stand for?

Read the text about the British Bankers’ Association and make a short presentation of it in 100 words.

What is the BBA?

The BBA is the leading trade association for the UK banking and financial services sector. They speak for over 200 member banks from 60 countries on the full range of UK and international banking issues.

They promote a legislative and regulatory system for banking and financial services - in the UK, Europe and internationally - which takes account of their members’ needs and concerns and provides an effective and competitive market place in which their businesses can prosper.

They engage with government, devolved administrations and Europe as well as the media and other key stakeholders to ensure the industry’s voice is heard and to highlight the strength and importance of UK banking.

The BBA represents over 200 banks. These member banks collectively provide the full range of banking and financial services and make up the world’s largest international banking centre, operating some 150 million accounts and contributing £50 billion annually to the UK economy.

Thfey also represent 45 Professional Associate (PA) member firms. These firms enjoy many benefits of BBA membership, including access to up-to-the-minute information about key industry developments and also the ability to directly contact BBA policy directors should specialist help be required.

The BBA is governed by the Board, which meets 4 times per year and comprises the BBA Chief Executive and the Chief Executives of the largest banks operating in the UK, both retail, wholesale and from overseas. The Board represents the whole of the BBA membership. In addition to this the BBA Council meets twice yearly.

The BBA Board is made up of senior executives from: Barclays Bank plc ; BNP Paribas; Citibank NA; Credit Suisse; Deutsche Bank AG; Hampshire Trust plc; HSBC Bank plc; J.P. Morgan Europe Limited; Lloyds Banking Group; Santander UK plc; Standard Chartered Bank; The Royal Bank of Scotland plc.

One of the aims of the association is to communicate their members’ views and to ensure the industry’s messages are accurately and speedily provided to the media. They speak on issues which affect the whole of the banking industry and not individual banks. The BBA provides information to help customers get the most out of their relationship with their bank.

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The BBA aims to provide leadership in developing solutions to the changing face of financial services in the UK. Their subject experts cover the full range of banking issues and work closely with member committees and key external third-parties to co-ordinate the industry’s response to policy initiatives and developments.

The BBA provides value-added industry data in a variety of forms. They collect and publish monthly statistics from the major high street banks setting out the figures for mortgage borrowing, unsecured credit, credit card use and deposits.They gather information for both personal customers and businesses and also produce figures on lending to small and medium sized enterprises (SMEs). The BBA publishes a wide-ranging portfolio of leaflets, books and reports for the banking and financial services industry.

Ex.13. Task1. Check the meaning of the words in the box in the dictionary and complete the text using these words:

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

Commercial banks are businesses that trade in money. They receive and hold (1)..., pay money according to (2) ... instructions, (3) ... money, etc.

There are few 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 a cheque or a (7) ... paid directly into their bank account.

A (8) ... (US: checking account) usually pays little or no interest, but allows the holder to (9) ... his or her cash with no restrictions. Deposit accounts (in the US also called time or notice accounts) pay interest. They do not usually provide (10) ... (US: check) 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; banks 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 a loan is its annual (20) ... – how much money it pays – expressed as a percentage.

Task 2.Read the text again and answer the following questions:

1. What have you learned about different types of accounts offered by banks?

2. What is the difference between a bank loan and an overdraft?

3. How do banks make their profit? What is necessary to optimize it?

Ex.14. Find synonyms and opposites to the words in the table

	Synonym		Opposite
unique
diversity
distinction
to undertake
wholesale
to engage
dominant
exclusive
specific
development
offshore (adj)
complicated
available
to accept
safety
to consider
inevitably
crusial

Ex.15. Taks1.Read the following text and make its detailed presentation. The following questions may be helpful.

1. Who owns the bank?

2. How does a bank start?

3. Who chooses the board?

4. What’s the board’s task?

5. Who hires the employees?

6. How are the profits distributed?

7. How are the stockholders kept informed?

The structure of a Bank

The English commercial banks have branches in all the major towns and a similar structure and mode of working is common to them all. The owners are the shareholders. At the outset they provide the necessary capital. They are all organised on the joint stock principle and are registered pub­lic companies.

The Chairman and Board of Directors are elected by the ordinary shareholders at the Annual General Meeting and are responsible for the efficient management of the bank. The Board is concerned with the overall policy of the bank and the major decisions which put that policy into effect.

The Board will appoint a Managing Director who is directly responsible to them and a member of the Board. They will also appoint the most senior executives who in turn appoint the rest of the clerical staff who will be responsible in differ­ent capacities for the day to day running of the bank.

At the end of each business year the Directors recommend and the Annual General Meeting decides how much of the profit should be distributed to the shareholders as dividend, and how much should be retained in the business. In preparation for the Annual General Meeting, a bank publishes its Report and Accounts. These must be sent to every share­holder and are also available for anyone with an interest in the affairs of the bank. From the published accounts shareholders can easily determine the total profits the bank has earned and how much is available for distribution.

Task2. Using the information in the text, say what is true and what is false. Correct the false sentences.

1. Members of the Board of Directors are shareholders.

2. All the shareholders participate in running the bank.

3. All the bank's profits are divided among the shareholders.

4. All the retained profits of the bank belong to the shareholders.

5. The reserves are shown in the statement as retained.

Ex.16. Join the halves.

The retail banks, as their name suggests, … Such services traditionally… In recent years, banks have been actively peeking to increase business and other services have been introduced… The larger banks either own or have established links with security traders and also … Retail banking is nowadays contrasted with wholesale banking … A large part of such business is … The distinction between retail and wholesale banking is conceptual rather than the legal … Other banks specialize largely or entirely … Barclays, Lloyds, Midland and National Westminster are the main retail banks of England and Wales; Bank of Scotland, Clydesdale Bank and Royal Bank of Scotland are the main retail banks in Scotland, although … A subset of the retail banks, comprising the main English and Scottish banks, owns the Cheque and Credit Clearing Company which … Each bank presents for payment cheques that it has received from clients and … Banks may also present cheques for payment on behalf of other banks … There is a separate electronic clearing system for direct debits, standing orders etc., … A third clearing company deals with all high-value same-day clearings which include electronic credit transfers from across the country and high-value cheques (over £100,000) drawn on and … The participants here are again the main English and Scottish banks plus a few other banks actively … Banks involved in the clearing of payments are known as clearing banks and …

settle debts between themselves by pay­ments in or out of accounts at the Bank of England. where the participants include a slightly wider range of banks as well as three large building societies. receives for payment cheques drawn by its clients and paid into other banks. paid into certain bank branches within the City of London. in wholesale banking. involved in City of London money markets. who do not participate directly in the clearing and for whom they act as agents. and most of the banks classified as retail banks are, in reality, mixed banks which undertake both types of banking. notably automated teller machines, eurocheques (cheques which may be written in foreign currencies), long-term mortgage lending, and opportunities for mutual investment in securi­ties through bank-managed unit trusts. offer facilities for buying and selling securities. cover the taking of deposits at sight and at notice, the provision of chequebooks and the clearing of cheques, the making of loans, sale and purchase of foreign currency and travellers' cheques, dealing with international remittances, safe-deposit facilities, financial advice and maybe insurance broking. operates the daily clearing of cheques. the last named also has a number of branches in England and Wales; and Allied Irish Banks, Bank of Ireland, Northern Bank and Ulster Bank are the main retail banks in both Northern Ireland and in the Republic of Ireland. are banks which offer retail banking services to business and personal clients, both small and large, through a network of branches. which involves dealing in large sums of money (typically one million pounds and over) in both sterling and foreign currencies. undertaken in organized short-term financial markets in international centres such as London, New York, Tokyo and Paris.

Ex.17. Match terms to their definitions

Wholesale bank	a)The amount that a customer pays the bank for the service it provides.
Retail banking	b)An arrangement that you have with a bank that allows you to keep you money there, to pay in or take out money, etc.
Investment bank	c)A written record of all the money paid into and out of a customer’s bank account within a particular period.
Bank charge	d)A financial institution that looks after shares bonds etc. and their certificates on behalf of their investors.
Merchant bank	e)A printed form that you can write on and sign as a way of paying for something instead of using cash.
Bnk deposit	f)A plastic card that enables the user to buy goods and services on credit.
Bank account	g)An amount by which withdrawals are greater than the balance in an account.
Loan	h)A person or a company that borrows money, especially from a bank.
Financial instrument	i)The amount of money that somebody has intheir bank account at a particular time.
Borrower	j)An instruction that you give to a bank to pay somebody a fixed amount of money from your account on the same day each week, month, etc.
Bank balance	k)The bank that provides services for other banks and large businesses and not to individual customers and small businesses.
Custodian	l)A plastic card that can be used to take money directly out of your bank account when you pay for goods and services.
Cheque	m)A bank that provide finance for companies by buying their shares and selling them to the public.
Debit card	n)An amount of money that you leave in a bank.
Credit card	o)A system allowing individuals to perform banking activities at home, via the internet.
Overdraft	p)A bank that deals with large buisnesses, for example, providing finance for trade with foreign countries, helping with the sales of hares or bonds, or giving advice on investments.
17. Standing order	q)A fixed sum of money borrower for a fixed period of time.
18. Internet banking	r)The part of a bank’s business that involves providing services to members of the public.
19. Bank statement	s)Any investment that has a cash value and can be bought and sold in an organized system such as share, bonds, etc.

Ex.18. Case Study:

The teacher of English offers his students some literature in Ukrainian and in English describing the structure of commercial banks. The task of the students is to prepare a presentation “Organization structure of a bank”. They may use information from official web site of any UK bank to illustrate their reports.

Organization Chart for a Small Community Bank

Комерційні банки є основною ланкою кредитної системи держави. В зв’язку з тим, що їх діяльність залежить від суспільної довіри та значно впливає на економічне життя країни, їх організаційна структура і управління ними повинні бути на самому високому рівні.

Акціонери банку вибирають Раду Директорів, які мають великі повноваження для виконання своїх зобов’язань. Від них очікується прийняття таких стратегічних рішень і така якість керування діяльністю банку, які забезпечать безпеку фондів та рентабельність операцій. Однак Рада Директорів не керує безпосередньо повсякденними операціями банку. Директори вибирають голову Ради Директорів (голова правління), який постійно інформує Раду Директорів про становище банку та про практичну реалізацію прийнятої ним політики.

Президент є адміністративним головою банку і відповідає за управління оперативною діяльністю банку. Голова правління, президент, а також віце-голова складають вище керівництво банку. Вони ведуть справи банку, наймають службовців та контролюють їх роботу. До числа інших високих посадовців у банку відносять віце-президентів, що очолюють лінійні управління, робітників траст-відділу, скарбника і інших службовців, що відповідають за здійснення банківських операцій.

У банківських відділах вищою посадовою особою є управляючий, який підпорядковується керівнику відповідного управління у головній конторі.

Кількість банківських управлінь та відділів залежить від величини та характеру діяльності банку. Але відсутність того чи іншого відділу зовсім не означає, що ці операції банком не виконуються. Спеціальні відділи організують тільки в тих банках, де об’єм операцій настільки великий, що для виконання їх потребують декілька працівників.

В організаційній структурі банків реалізуються як оперативні так і штабні функції. До перших відносять функції, що безпосередньо пов’язані з виконанням поставлених перед банком завдань, - це такі види діяльності як кредитування, інвестування, довірчі операції, прийом внесків та їх обслуговування та ін. Функції штабного персоналу – це надання консультацій, а також бухгалтерський облік, аналіз господарської діяльності, прийом на роботу (надання робочих місць) та підвищення кваліфікації службовців, маркетинг, контроль, методична робота, планування будівництва та ремонт. У невеликих банках ці функції не розділяють і деякі керівники та рядові службовці займаються і тим, і іншим. Чим більший банк, тим чіткіше розмежовуються оперативні та штабні функції.

Ex.19. Translate the following text into English.

Аналіз багатовікової світової історії банків­ської справи та механізму функціонування гро­шового ринку дає підстави віднести до банків­ської діяльності комплекс з трьох посередниць­ких операцій:

— приймати грошові вклади від клієнтів;

• надавати клієнтам позички і створювати нові платіжні засоби;

• здійснювати розрахунки між клієнтами. Виконання цього комплексу операцій мож­на вважати визначальною економічною ознакою банку взагалі — як центрального, так і комерційного". Вказані операції є базовими, вони створюють первинну сферу банківської діяльності. Це місце їх визначається самою природою грошового ринку.

Уявімо собі таку гіпотетичну ситуацію, коли на грошовому ринку діє тільки один фінансовий посередник. Щоб ринок міг функціонувати нор­мально, цей посередник повинен прийняти на вклади всі вільні грошові кошти від продавців, передати їх покупцям і здійснити розрахунки по їх зобов'язаннях один з одним та з третіми особа­ми. Тільки в цьому випадку попит і пропозиція на грошовому ринку будуть реалізовані і такий посередник виконає повністю свою посередниць­ку місію. При невиконанні будь-якої з цих опера­цій зв'язок між попитом і пропозицією на грошо­вому ринку буде розірваним або він повинен буде здійснюватися у формі прямих контактів між продавцями і покупцями грошей.

Отже, комплекс з трьох базових операцій створює первинну сферу банківської діяльності, а фінансовий посередник, що виконує цей комп­лекс, є банківським інститутом, банком в еконо­мічному розумінні.

В дійсності фінансові посередники, крім базових, можуть виконувати й багато інших, не базових, але потрібних для грошового ринку операцій. Такі банки прийнято називати універсальними. Але якщо фінансовий посередник виконує не всі базові операції (тільки одну чи дві з них), чи можна вважати банком в економічному розумінні, На нашу думку, якщо такий посередник не забезпечує комплексу базових операцій грошового ринку, він не є банком в повному розумінні цього слова, а скоріше це частина такого банку, яка може існувати тільки в кооперації з іншими подібними посередниками, що виконують решту базових операцій грошового ринку. Такі банки прийнято називати спеціалізованими.

Якщо ж посередник грошового ринку не виконує жодної з названих базових операцій, тобто позбавлений ознак банку, його відносять до небанківських фінансових інститутів.

Text B

BEFORE YOU READ

Answer the following questions.

When did you visit a bank last? Why?

Read the text about the services British banks provide to their clients and compare them to those provided by the banks in Ukraine.

BANK SERVICES

Commercial banks offer a wide range of services to their clients. These services can be broadly classified into 3 parts. They are:

• Payment services

• Financial intermediation

• Other or ancillary services

Payment services. The Payment service is a backbone of the entire money flow in the economy. Payments are an essential part of everyday life, which underpin all forms of economic activity, and affect everyone – as individuals and businesses.

We all make a variety of payments every day with the expectation that these payments are secure and reliable. Most consumers are unaware of what happens behind the scenes, but, by their very nature, payment systems require a high degree of co-operation by numerous different stakeholders for a payment system to function.

The UK payment industry environment can be broadly categorised into the following payment types:

Cash	Banknotes and coins
Bulk electronic payments	Direct Debits Bacs Direct Credits Standing orders
Phone and online banking payments	Faster Payments Standing Orders
High-value payments	CHAPS Sterling
Card-based instruments	Debit cards Pre-paid cards Contactless cards Credit cards Charge cards
Paper-based instruments	Cheques and paper credits

Compared with other countries, the UK payments market is categorised by high proportions of electronic and card payments. Whilst the vast majority of payments are made between UK counterparties, payments to and from Europe and the rest of the world are steadily increasing.

Financial intermediation. This is one of the oldest functions of banks which received deposits from customers and then on-lent these funds to borrowers. This is the core business of the banking system and it will continue as long as the Banking system exists.

There are three general types of bank accounts offered by the banks, a basic bank account, a current account and a savings account.

Whether you are starting or expanding a business, you may need to seek financial help from an external source. Banks offer short- and long-term debt finance via loans and overdrafts as well as other types of finance. These are available by application to any high street bank, usually involving a quick decision process.

Other or ancillary services. These are newer services which were launched by different financial institutions are available by application to any high street bank. These services include investment advice, foreign exchange facilities, wealth management, brokerage, safe deposit boxes and vaults, custody services, and so on. These services generate income for the bank in the form of commission which is also termed as Non-fund income for banks. We will consider them later.

Ex.1. Find in the text the following word combinations and translate the sentences in which they are used:

A backbone of the entire money flow; a high degree of co-operation; to be made between UK counterparties; to on-lend funds to borrowers; an external source; to be available by application to any high street bank; generate income.

Ex.2. Find English equivalents to the word combinations given below:

Лежати в основі економічної діяльності; бути безпечним та надійним; за лаштунками; електронні та карткові платежі; постійно зростати; основний вид діяльності; розширювати діяльність підприємства; шукати фінансової допомоги з зовнішніх джерел; швидке прийняття рішень; послуги з обміну валюти; управління активами; брокерські послуги.

EX.3. Understanding details

Mark the sentences T (true) or F (false) according to the information in the text. Find and read out the part of the text, which gives the correct information.

1. Thereis no exact classification of financial services.

2. Payment services are crusial for the economy.

3. All customers are familiar with the procedures of processing payments.

4. Banks use few types of payments.

5. Most payments in the UK are cashless.

6. Very few British banks are engaged in financial intermediation.

7. Banks try to diversify their services.

Ex.4. Answer the questions.

1. What categories of services do the banks provide to their customers?

2. Why payment services considered so essential for the economny?

3. What categpries do payment services fall into?

4. Which is the oldest function of banks?

5. What are the tree main types of bank accounts offered by the banks?

6. What sort of financial help can banks offer to their customers?

7. What does the category of ancillary services comprise?

Ex.5. Read the text about different types of payments in the UK. Make detailed presentation dwelling upon the features of each type of payment.

Types of Payments

Automated Payments

In the same way that technology has impacted the way we choose to live and work, so it has changed our payments. Increasingly, we are choosing to use automated payments rather than paper-based payments behaviour such as cheques and bankers' drafts. In 2009 there were a record 6.2 billion automated transactions (5.6 billion of those were processed by Bacs (Bankers' Automated Clearing Services)). 92% of automated transactions are bulk transactions generated by organisations and businesses both large and small and are:

• Direct debits, used mainly to pay utility bills, life and general insurance premiums and various subscriptions;

• Direct credits, used mainly for salary payments, pensions, annuities and child benefit.

• The remaining 8% is made up of inter-bank telephone and online banking payments and standing order payments.

Standing Orders

A standing order is an instruction you give to your bank or building society to make payments, usually on a regular basis, to a UK bank or building society account.

Any person or company with a current account at a bank or building society in the UK can set up a standing order.

Your bank or building society will, on the day specified, debit your account and transfer the money to the bank or building society account of the recipient.

The money will be transferred either through the Bacs system or increasingly from June 2008 through the Faster Payments Service.

Bacs Direct Credit

A Direct Credit enables large and small organisations to make payments by electronic transfer directly into bank or building society accounts.

Direct Credit is mainly used for paying wages and salaries - over 70% of the UK workforce is paid via Direct Credit. In total, Direct Credit is used to pay over four million wages every week and nearly 20 million salaries a month.

Direct Credit can be used for a wide variety of other payments. Over 150,000 organisations use Direct Credit for supplier payments, pensions, employee expenses, insurance settlements, dividends and refunds.