Text Vocabulary. Ø Skim the text to find out what it is about

COMPREHENSION

READING SKILLS

Ø Skim the text to find out what it is about.

Ø Headline the text.

v ____________________________________________________

One of the marks of a highly developed economy is the existence of a sophisticated financial system. Any financial system exists to mediate between those who wish to lend money and those who wish to borrow it. Mediation is necessary because lenders and borrowers have different needs. Lenders want low-risk outlets for their money, which also offer attractive returns. They want to be able to lend without having to search for a suitable borrower, and to get their money back quickly if their own need for liquidity changes. Borrowers, on the other hand, often need to borrow money for longer periods of time, as in the case of industrial investment or house purchase. They need to be able to obtain funds quickly and easily and in return they are willing to issue IOUs such as bills or bonds which are, in effect, claims against themselves. These pieces of paper can be sold by those who hold them (i.e. lenders) on financial markets such as the Stock Exchange or the discount market if money is needed before the loan is due to be repaid. The buyers of these claims are often the financial institutions, who buy them in order to hold them as assets.

The whole process of matching the needs of lenders and borrowers is known as ‘financial intermediation’, and the institutions which play a part in this process are known as ‘financial intermediaries’. Their main function is to channel funds from those willing to lend to those willing to borrow, given that lenders and borrowers often have very different needs. Paper claims can be generated either by the financial intermediary issuing a claim to the lender – for instance, a certificate of deposit, or the borrower issuing a claim to the financial intermediary – for instance, a bond or a share. As we see, these claims may then be traded on the ‘secondary’ market, the market for already existing securities.

Ø Why is mediation necessary in any financial system?

Ø Define financial intermediation.

Ø What is the secondary market?

IOU	долговая расписка сокр. от I owe you – я вам должен	She gave us an IOU for three million pounds and told us to get lost.
loan	заем; ссуда	While others advertise building societies, he has enough problems securing a loan.
to repay	возвращать (ссуду; займ)	But to repay the loan, you pay monthly contributions to a Personal Equity Plan.
assets	активы	Most banks are requested by their central bank to keep a certain proportion of their assets in a liquid form.
certificate of deposit	депозитный сертификат	A certificate of deposit is a promissory note issued by a bank.

Дата добавления: 2014-12-27