Vocabulary notes

G) organizer of interbank settlements.

The NBU manages the activity of the State Treasury of Ukraine and builds up gold and foreign exchange reserves for its own account.

to stem - походити

statehood - державність

to refinance - рефінансувати

to grant - давати

to impose - нав'язувати

registry - реєстр

on behalf of- від імені когось, на користь когось to mint - карбувати compliance - відповідність

UNIT 2. CENTRAL BANKS

22 — 4-789

L Amsmer mejoMammg questions:

• lai b making system exists in Ukraine?

2. How is the Ukrainian banking system organised?

3. What role does the NBU play in the making of economic policy?

4. What are the functions of the NBU?

5. What services does the NBU perform for banks and the government?

6. What are the means of carrying out the state's monetary policy?

II. Monetary policy.

a) Supply the prepositions where necessary.

b) Describe the impact of 'easy' and 'tight' monetary policy on an economy.

Monetary policy is the branch of financial policy that is concerned______ controlling the

supply of money and credit. Monetary policy is important because of its impact ___________

inflation and on interest rates.

If a government pursues an 'easy' monetary policy it means that it allows the amount
of money___ circulation to rise and it lets banks increase the volume of loans.

If government pursues a 'tight' monetary policy, it restricts the amount________ money in

circulation and reduces the funds available____ banks____ making loans.

When money is tight:

1. Interest rates rise, because commercial banks have to borrow______ a higher rate_____

the interbank market.

2. Credit falls, because people and businesses borrow less______ higher rates.

3. Aggregate demand falls, because people and businesses buy less as they have less money.

4. Output falls, too, because____ less consumption, firms produce less.

5. Unemployment rises, because companies are producing and selling less, and so need
__ less labour.

6. Inflation falls, because there is less money in circulation.

7 The exchange rate will probably rise, if there is the same demand but less money, or if there is higher demand, as foreigners take advantage of the higher interest rates to

invest___ the currency. Increasing the money supply,_____ making more reserves available,

has the opposite effects.

The amount of money_____ circulation and its velocity of circulation determine the

average level of prices and wages. Many central banks now set money supply targets._______

increasing or decreasing the money supply, the central bank indirectly influences __________

interest rates, demand, output, growth, unemployment and prices. The central bank can

reduce the reserves available _____ commercial banks by changing the reserve

requirements. This reduces the amount_____ money that banks can create and makes the

money tight or scarce.

Alternatively, the central bank can engage ______ what are called open-market

operations, which involve selling short-term government bonds (such as three-month
Treasury bills)____ the commercial banks, or buying them back.

WORDS YOU MAY NEED

money is tight - грошей бракує

interbank market - міжбанківський

ринок

velocity of circulation - швидкість обігу

to set targets - встановлювати орієнтири,

показники

alternatively - тут навпаки short-term government bonds - державні короткотермінові облігації Treasury bill - казначейський вексель

PART III. BANKING

III. Choose the correct statement.

1.	a) The NBU has direct contact with the general public. b) The NBU has no contact with the general public. c) The NBU operates under control of the general public.
2.	a) The NBU acts as a commercial bank. b) The NBU acts as a 'banker's bank'. c) The NBU acts as a major bank.
3.	a) The NBU makes loans at interest rates it determines. b) The NBU makes loans at fixed interest rates. c) The NBU does not make loans at interest rates it determines.
4.	a) The NBU makes loans from its holdings of the gold reserves. b) The NBU makes loans from its holdings of the government securities. c) The NBU makes loans from its holdings of the cash reserves of commercial banks.
5.	a) The NBU operates dependently of its government. b) The NBU operates independently of its government. c) The NBU operates independently of state banks.

IV Foreign Exchange Policy of the NBU. Choose the best alternative to complete the text.

1.	a) defines	b) determines	c) discovers	d)chooses
2.	a) finds	b) takes	c) runs	d) carries
3.	a) balance	b) terms	c) conditions	d) parts
4.	a) credit	b) debt	c) transactions	d) borrowings
5.	a) terms	b) restrictions	c) limits	d) rates
6.	a) stocks	b) amounts	c) provisions	d)reserves
7.	a) grants	b) awards	c) confesses	d) permit
8.	a) rates	b) prices	c)reserves	d) scales
9.	a) guidance	b) control	c) authority	d) jurisdiction
10.	a) deals	b) agreements	c) transactions	d) contracts

The National Bank of Ukraine (1)_____ foreign exchange policy. In the area of foreign

exchange regulation the National Bank performs as follows:

• (2) ___ out foreign economic policy based on general principles of Ukrainian

economic policy;

• together with the Ukrainian Cabinet of Ministers compiles the (3)_______ of payments

of Ukraine;

• controls compliance with limits on the external public (4)_________ approved by the

Ukrainian Verkchovna Rada;

• establishes (5)____ on foreign exchange debt of banks authorized to borrow from

non-residents;

• accumulates, stores and uses foreign currency (6) _______ to carry out the national

foreign exchange policy;

• (7)___ (and revokes) foreign exchange licenses.

• determines the foreign exchange (8)_____ amounted to the Ukrainian currency, the

rates of currency values, amounted to foreign currency or clearing units.

In the sphere of foreign exchange control the National Bank is required:

• to exercise (9)____ over compliance with the rules for foreign exchange (10)_______ in

Ukraine;

• to ensure that the banks authorized to perform foreign exchange control fulfill
their functions properly.

UNIT 2. CENTRAL BANKS

22*

V Central Banks. Choose the correct answer for each question.

1. How many countries have a central bank?

a) all of them b) some of them c) most of them d) none

2. To what extent do the central banks of the USA, France, Ukraine, Japan, the United
Kingdom differ?

a) very much b) slightly c) fairly d) essentially

3. What is the function of the central bank?

a) It is a bank to the government

b) It is a bank to the banking system

c) It is a bank to the general public

d) It is a bank both to the government and the banking system

4. Who is the head of a central bank?

a) director b) president c) governor d) chairman

5. How important are central banks in carrying out policies affecting the availability of
money and credit?

a) very b) slightly c) quite d) fairly

6. How can central banks be powerful in the world markets?

a) When their own economies are strong

b) When they are influential

c) When they do something together

d) When they do something individually

7 Is the Bank of England involved in supervising financial markets?

a) no b) yes c) only sometimes d) very often

8. When was the Bank of England founded?

a) in 1664 b) 1946 c) 1805 d) 1694

9. When was the Bank of England brought under state ownership?

a)1944 b)1946 c)1971 d)1914

10. By whom the Federal Reserve System was founded?

a) President b) Senate c) Congress d) Parliament

11. Who appoints the members of the Fed's Board of Governors?

a) President of the USA b) banks c) Congress d) Senate

12. When the Federal Deposit Insurance Corporation (FDIC) was set up? a)1913 b)1934 c)1929 d)1986

13. The Ukrainian banking system is:

a) two-tier b) three-tier c) dual

14. The National Bank of Ukraine keeps the State registry of:

a) banks

b) foreign currency exchanges

c) banks and foreign currency exchanges

d) banks, foreign currency exchanges and other financial institutions

VI. Match the terms and definitions.

1. controller	a) that part of a company's profits that are put aside for a particular purpose.
2. interest rate	b) the strong-room in a bank where the cash reserves, valuables and securities are kept and which is usually below ground level.
3. holding	c) money that is difficult to borrow because of high interest rates. Governments use such policy to limit spending.
4.reserves	d) an item of value belonging to a person or a company, such as a share, a piece of land, a building or a machine, especially if it can be sold to pay a debt.
5. funds	e) expression of the amount of interest charged on a loan in a specified time period and usually expressed as a percentage per annum.
6. assets	f) secure place where money or goods are stored (deposited). Differs from banks in that they do not transact other financial business and do not necessarily offer ready access to the assets stored, e.g. Fort Knox.

PART III. BANKING

7 liabilities	g) the total value of the land, buildings, machinery, etc. (assets) belonging to a business less the sum of any debts it has.
8. discount rate	h) the amount of financial investment a person or group of people has in a company.
9. vault	i) money owed by a company, a debt.
10. capital	j) rate at which bill of exchange is discounted.
11. dear money	k) a public functionary appointed to oversee the accounts of others.
12. depository	1) financial resources

VII. Group work. Give extensive answers to these discussion questions:

1. What is monetary policy? Why is monetary policy necessary?

2. How does the NBU ensure the banking stability?

3. Is the entry of foreign banks welcome to Ukraine?

4. What are the shortcomings of the financial system in Ukraine?

5. What happens when a country pursues a 'tight' or an 'easy' monetary policies?

6. How can money supply be regulated''

VIII. Writing Practice. Make a short summary about the NBU from the text "The National
Bank of Ukraine" Use the opening phrases from Appendix 1.

UNIT 2. CENTRAL BANKS

UNIT3.

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