B) Say what you have learnt from the text about international banks

Ex. 10. a) Open the brackets putting the verbs in the correct form.

B) The Nature of Banking

The nature... banks can best be understood... examining both their long-established functions and new emerging roles. The former include the provision of payment services and intermediation services. The latter include the merging... investment and commercial banking activities. The banking firm is recognized as a major force... the financial markets. As intermediaries they collect the deposits of the household sector, held... the form of demand and savings deposits, and recycle them... real investment capital. They perform maturity transformation – lending long and borrowing short. Banks provide the real sector... funds, the major source of financing for the industrial sector. Besides, banks are viewed now as evaluators of investment opportunities available... both the primary and secondary markets. The bank's role is to screen potential projects, to determine expected return and risk... the not-always-objective data presented... the demanders of funds.

What differentiates banks from other financial intermediaries? First, banks issue liabilities that are media of exchange in that the transactions velocities of chequable deposits tend to be much higher than the transactions velocities of other assets. Second, banks differ... other financial intermediaries with regard... the nature of the assets they hold. While most of the assets held... mutual funds are publicly traded, bank assets tend not to be traded... securities markets.

Words you may need:

nature n природа, характер

emerge v появляться, возникать

the former/the latter первый/ последний (из двух)

Savings deposit сберегательный вклад

to lend long предоставлять долгосрочные ссуды

to borrow short получать краткосрочные ссуды

real sector реальный сектор

evaluator n оценщик

screen v сортировать, проводить проверку

expected return расчетная (ожидаемая) доходность

to issue liabilities выдавать долговые обязательства

media of exchange средства обмена

velocity n скорость

chequable deposit депозит, который может изыматься с помощью чеков

publicly traded продаваемые и покупаемые на фондовой бирже

Basic principles of commercial banking best (to demonstrate) in the case of international banks. These institutions are the dominant traders in the Euromarkets and the foreign exchange markets and are very active in some domestic credit and bond markets. The Eurocurrency market (to consist) of banks, commonly referred to as "Eurobanks", which accept deposits and (to lend) in foreign currencies. Most of the banks active in the Eurocurrency market also (to trade) extensively in the foreign exchange markets. The Eurobanks concerned include some of the largest banks in the world.

Eurobanks are typically London branches of these large international banks and primarily (to engage) in intermediation in short-term deposits denominated in currencies other than Sterling. Eurosterling dealing (to take) place outside of British jurisdiction. The large American and Japanese banks (to dominate) the Eurocurrency business, but major British banks also (to be) very active throughout the 1980's. Some of the large world commercial banks also (to form) "consortium" banks as special purpose joint ventures set up to deal in the Eurocurrency market. From the parent bank's point of view, the Eurobank branch or consortium (to be) able to operate outside the range of domestic banking regulations and therefore (to achieve) considerable cost economies due to the absence of reserve requirements and other regulatory costs. International co-operation on capital adequacy standards (to begin) to erode this privileged position. As a result, the global financial intermediation activities of international banks are now increasingly subject to some form of international control. A further advantage of Eurobanking (to stem) from the scale of borrowing and lending in this market. This means that major economies of scale can be realized by banks. These factors explain why Eurocurrency deposit and lending rates fall within the equivalent domestic values. Thus the Eurosterling loan rate (to be) lower than the British domestic bank loan rate and the Eurosterling deposit rate (to be) higher than the British deposit rate. The resulting very narrow profit margin in the Eurocurrency market is only possible due to the transaction and regulatory cost savings achievable in this market compared with equivalent domestic markets.

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