Exercise 2. Complete sentences by matching their parts at left and right boxes.

1 The financial services industry is the largest	Ato pay for goods without cash at hand and to arrange wire transfers.
2 Companies, providing financial services, are	Bthat accepts deposits, makes business loans, and offers basic investment products.
3 A commercial bank is a type of bank	Coffer safe keeping in vaults, safe deposit boxes, checking and savings accounts.
4Taking care of the security of customers’ money, commercial banks	D in terms of earnings and equity market capitalization.
5The use of debit cards allows account holders	Ekey players on the money, the currency, the stock, and the futures and derivatives markets.

Exercise 3. Find the words matching the following definitions:

1) People who place money in bank accounts.

2) Anything of value owned by a business; for a bank, the loans it has made.

3) The total amount of income earned by all the people and institutions within a country.

4) The monetary value of all the finished goods and services produced within a country's borders in a specific time period.

5) The money owed to someone else.

6) The date on which a loan must be repaid, or the length of time until this date.

7) The money put into a bank account.

8) The difference between the interest rate a lender pays and the rate it charges its borrowers.

9) The maximum amount that a bank can lend to a customer.

10) A loan to buy property.

11) Money paid regularly at a particular rate for the use of money lent or for delaying the repayment of a debt.

12) A regular payment made during a person’s retirement.

 

Exercise 4. Complete the sentences using the words and expressions in the box.

commercial bank, savings, debit card, interest, interest rates, current, online banking, Automatic Teller Machine (ATM)

 

1. A _____account is for paying everyday bills and expenses.

2. A _____ account can also be called a deposit account.

3. The bank pays its customers higher____ on their savings accounts.

4. A _____is a type of bank that provides services such as accepting deposits, making business loans, and offering basic investment products.

5. Banks offer new customers a _____for paying their current expenses.

6. You have to find an ____if you need to withdraw limited amounts of cash.

7. Customers who do not want to go to a bank to make transfers use _____.

8. Banks often rise _____ for savings accounts at times of insufficient money supply.

Exercise 5. Part a) Fill in the gaps in the table below.

Noun	Verb	Person
	Develop
retail
lending
		depositor
	lose
borrowing

Part b) Complete these sentences using the words from the table above.

1. We spent more than we earned so had to ____ money from a bank.

2. The ____of the financial sector in Asian countries is very fast.

3. _____are the most common clients of commercial banks.

4. ___ banks are most suitable for attracting low value cash deposits.

5. Can you ___ me some money? The bank is closed.

6. The company suffered big ___due to the devaluation of national currency.

 

Exercise 6. Arrange words in the correct order to make up a sentence.

1. banks, credit, commercial, is the, of, most, significant, creation, function

2. can be, month, capital, interest, repaid, together, each, with

3. income, than, the size, has been, of bank, national, growing, deposits, faster

4. estate, purchase, loan, real, used to, is, a mortgage, a debt, instrument

 

Exercise 7. Write about your plans of choosing a specific area of finance where you would like to work after graduation from the University, and the reasons of that choice.

UNIT II

RETAIL BANKING

Warm up

1. Can you name some world famous firms, offering investment services?

2. Which of the two banks – commercial or investment – acts as an intermediary between the issuer of stocks and investors?

3. Are there any reasons for investors to buy bonds issued by companies with a bad credit rating?

 

Section A

Reading 1

Investment Banking

Investment banks, also called merchant banks, function primarily in higher finance. They play a huge role in the workings of Wall Street and are represented by such giants of financial business as Goldman Sachs, Morgan Stanley, JPMorgan, Wells Fargo, UBS, Credit Suisse and Deutsche Bank.

The main and most traditional function of such financial institutions is to help companies, business owners and even government agencies to raise capital for their operations by selling investment securities to the general public. For example, when a company wants to raise money for expansion or other needs by issuing stocks or bonds, investment bankers facilitate its access to respective markets, introducing there new stock or bond issues through an IPO (initial public offering). By doing so, investment banks act as the agents, brokers or intermediaries between the issuer and investors. They can insure bonds, help to find buyers for the securities, and handle all paperwork, along with a team of lawyers and accountants. On the buy side, such banks work with pension funds, mutual funds, hedge funds and the investing public to help them maximize returns when trading or investing in securities. Of course, the banks charge a commission on the securities they sell or buy.

But the banks can also earn money by creating securities, including stocks and bonds, and trading them for their own accounts. Besides originating and distributing new security issues, investment banks may underwrite securities by buying large blocks of previously issued shares and then reselling them to institutional investors, such as mutual fund companies. An investment bank can use its own money to speculate in gold futures, acquire call options on gold mining firms or purchase gold bullion for storage in secure vaults.

Performing a variety of other tasks, the banks can act as consultants on mergers, acquisitions and other corporate reorganizations, prepare the company prospectus, which presents important data about the company to potential investors.

For high-net-worth individuals some private banks arrange exclusive wealth management and tax planning. Such investment banking services are more personalized than those of normal retail banks.

Discussion

Answer the following questions:

1. What is the main and most traditional function of merchant banks?

2. What is the role of investment banks in relations between security issuers and investors?

3. What interest do investment banks get for trading in securities on behalf of their clients?

4. In what other ways do investment banks earn money?

5. What do banks do to underwrite securities?

 

Reading 2