Revision exercises. IX. Pair work. Incorrectly Made-out cheques

PART III. BANKING

IX. Pair Work. Incorrectly Made-out Cheques.

If a bank finds a mistake in a cheque it will return the cheque to the drawer. So banks normally examine all cheques to make sure they have been correctly made out. Here is a list of the ways in which a cheque can be incorrectly made out.

1. Post-dated to a future date.

2. Amount in words is not the same as the amount in figures.

3. Currency in which cheque is made out is not available.

4. Signature is not the usual signature of the account holder.

5. Cheque is signed by someone else other than the account holder.

6. Cheque is unsigned.

7. Correction in cheque is not initialled by the drawer.

8. Amount in words is not written.

9. Amount in figures is not written.

10. Part of the cheque is illegible (= unreadable).

11. Not enough money in the account or not enough credit.

12. Cheque is damaged.

13. The cheque becomes illegal if the drawer dies, goes mad or becomes bankrupt.

Most of the above mistakes can be identified by the payee's bank who can return the cheque to the payee. But some of the mistakes can only be identified by the drawer's bank. Which faults in the above list can be identified only by the drawer's bank?

X. Writing Practice. Make a short summary about clearing system. Use information from the text "The Cheque Clearing System" and the opening phrases from Appendix 1.

I. The Nature of Banking. Supply the prepositions where necessary.

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
to emerge - виникати, з'являтися expected return - очікувана

the former/the latter - перший/останній (розрахункова) дохідність

toissue liabilities- видавати боргові зобов'язання media of exchange- засіб обміну velocity- швидкість chequable deposit- депозит, який може вилучатися за допомогою чеків publicly traded- що продаються та купляються на фондовій біржі

(з двох)

savings deposit - ощадний вклад

to lend long - надавати довготермінові

кредити

to borrow short - одержувати

короткотермінові кредити

real sector - реальний сектор

evaluator - оцінювач

screen - сортувати, проводити перевірку

II. Financial Intermediation. Complete the text with the correct word.

president	saved	lending	associations
deposits	economy	channelled'	local
funds	money	creation	intermediaries

REVISION EXERCISES

1Л__ 4.7R9

Banks create money not by printing banknotes but by (1)________. Banks' loans create

checking account deposits, a large component of the (2)_____ supply.

If you wanted to make a loan to some companies, you would not go directly to the (3)

__ of the company and offer a loan. Instead, you would lend your money to such

companies indirectly through financial (4) ______, institutions such as commercial banks,

savings and loan (5) _____, mutual savings banks, credit unions, insurance companies,

mutual (6)___, pension funds, and finance companies that borrow funds from people who

have (7)___ and in turn make loans to others.

Banks are the financial intermediaries that the average person interacts with most frequently. A person who needs a loan to buy a house or a car usually obtains it from a (8)

__ bank. Most Americans keep a large proportion of their financial wealth in banks in

the form of checking accounts, savings accounts, or other types of bank (9)______.

Financial intermediation is an important activity in the economy because it allows

funds to be (10)____ from people who might otherwise not put them to productive use to

people who will. In this way, financial intermediaries help to promote a more efficient and
dynamic (11)___.

Thus, banks are the most important of a number of financial intermediaries that channel funds from people who might not put them to productive use to people who can

do so. Banks also play a critical role in the (12)_____ of money and have been important in

the rapid pace of recent financial innovation.

VOCABULARY NOTES
to accept - приймати, акцептувати money supply - грошова маса

savings and loan association - кредитно- mutual funds - взаємний фонд,
ощадна асоціація інвестиційна компанія відкритого типу

mutual savings bank - взаємно-ощадний checking account - чековий рахунок

банк credit union

savings account - ощадний рахунок

кредитна спілка

III. Use the words in the box to complete the text below.

functions

financial intermediaries

private banks banks

borrowers loans

Under the communist regimes the only (1)_____ in the countries of Eastern Europe and

the Soviet Union were state-owned banks, which lent directly to state enterprises. In the

communist system the (2)_____ did not have to worry whether their (3)________ were being

used to support productive investments because even if a firm was unprofitable, it would still be allowed to stay in business by being given subsidies from the state.

With the collapse of communism and the break-up of the Soviet Union, the state-
owned banks and newly created (4) _______ were completely unprepared to promote

economic efficiency by lending to borrowers with the most productive investment opportunities. As a result, funds continue to be channelled to unproductive firms. A

major objective of economic reform in these countries is to establish a set of (5)________ that

will perform the essential (6) _____.

IV Functions of a Central Bank. Read the part of interview and fill in the gaps.

a) commercial banking supervision

b) act as a lender of last resort

c) setting interest rate ceilings and floors

d) printing money or destroying it

e) open-market operations

f) exchange rate supervision

The first one is to implement monetary policy. There are roughly three ways to do it.

First (1) ____, which means limiting, upwards or downwards, the fluctuations of the

interest rate. The second way to implement monetary policy is simply (2)__________ - coins,

banknotes. The third one, which is a bit more modern, is those (3)_______, which are simply

buying and selling government bonds to and from commercial banks.

PART III. BANKING

So that was the first main task of a central bank. The second one is (4)_______.

Third main task (5)______ I would say - make sure that the commercial banks have

enough liquidities, for instance, to avoid any bank ran.

The fourth main task of the central bank would be to (6)______, in case, actually one of

these commercial banks goes bankrupt and the investors, the people putting money in the bank, have to get back their money.

V From the History of British Banking. Complete the text with a correct word.

1.	a) insurance	b) banking	c) lending	d) auditing
2.	a) operated	b) experienced	c) introduced	d) practised
3.	a) functions	b) activities	c) features	d) practice
4.	a) supervision	b) note issue	c) auditing	d) crediting
5.	a) investments	b) payments	c) loans	d) deposits
6.	a) receipts	b) bills	c) applications	d)cheques
7.	a) plastic	b) near	c) quasi	d) paper
8.	a) earnings	b) installments	c) repayments	d) interests
9.	a) solvency	b) creditworthiness	c) honesty	d) stability
10.	a) deposited	b)kept	c) withdrawn	d) paid
11.	a) paid	b) charged	c) demanded	d) expected

The business of (1) ______ in Britain effectively dates from the emergence of the

goldsmith bankers in the early 17th century. Elementary forms of banking had been (2)

__ by various groups since the Norman Conquest, such as the Jews and Lombards, but

the goldsmiths were the first to combine the three essential banking (3) __________: deposit-
taking, lending and (4)____.

The goldsmiths made extensive (5) ______ to the Crown as well as to merchants and

noblemen and their (6)_____ or "'notes" circulated as a form of (7)_______ money. In 1672,

however, Charles II's suspension of (8)______ on his loans caused a wave of bankruptcies

and severely dented confidence in the (9)_____ of the goldsmith bankers.

Merchants and men of business increasingly called for some form of more broadly-based public or national bank, similar to those already in existence on the Continent such

as Bank of Amsterdam, where capital could be safely (10) ________ without fear of royal

confiscation and money borrowed at lower rates of interest than those (11)_________ by the

goldsmiths.

VI. Give extensive answers to these discussion questions:

1. What is the nature of banking? How do banks earn their living?

2. What services do banks offer to individuals/corporations?

3. What kinds of banks exist? Describe their activities.

4. How can an individual get a bank loan?

5. What does the stability of a bank depend on?

6. What are the functions of central banks?

7. In what way do the discount houses earn money?

8. How is banking developing these days abroad/in Ukraine?

9. How do banks obtain funds?

10. Describe the banking system of Ukraine. What problems does Ukrainian banking system face with?

VII. Opening Business Accounts. Complete the text with the correct word.

1.	a) capital	b) clearing	c) giro	d) personal
2.	a) preregistration	b) legal	c) ownership	d) commodity
3.	a) set up	b) built up	c) organised	d) created

REVISION EXERCISES 203

4.	a) boundary	b) limitation	c) restriction	d) border
5.	a) keepers	b) holders	c) owners	d) tenants
6.	a) receipt	b) counterfoil	c)voucher	d)cheque
7.	a) limited	b) chartered	c) joint-stock	d) private
8.	a) clearing	b) issuing	c) drawing	d) writing
9.	a) sole	b) retail	c) wholesale	d) single
10.	a) meet	b) collect	c) pick up	d) heap up
11.	a) property	b) liabilities	c) estate	d) assets
12.	a) advantages	b) services	c) advices	d) benefits
13.	a) assets	b) business	c) premises	d) partnership
14.	a) mandate	b) order	c) form	d) application

Business accounts are more complicated to open than (1) ________ accounts. Clearly, a

business was formed to carry on certain activities. The bank is interested in what kind of

business it is. If the business has some (2)_______ form such as limited company, the bank

needs to have documents to show how it was (3)______ in case there is some (4)_____ on the

drawing of the cheques.

There may be many people working in the business and the bank needs to know the

names and signatures of the (5)____ of the business and who has the right to sign cheques.

Sometimes the company may want two signatures on each (6)_____.

Banks need information on how (7) ________ companies were formed, because the

formation can affect borrowing or the (8)_____ of cheques. But they do not want details of

how non-limited companies such as partnerships or (9)______ traders were formed. On the

other hand some banks do try to (10)_____ as much information about the owners of the

business as possible at the account opening stage. Whole sections of the account opening

form ask for details of the (11)_____ of the owners of the business - other bank accounts,

home ownership, life insurance policies and pension schemes. This information is given by customers only if they wish. They may refuse to give it and provide only the information needed to open an account.

Naturally there are many (12)_____ in addition to those offered to personal customers

that can be offered to businesses. The type of service depends on the type and size of (13)

__ and it is the information on the account opening (14)_________ that helps banks to sell

further services to customers later on. So when a firm opens a business account, many banks use the opportunity to collect information about the customers and to find out what services they need.

VIII. International Transfers. Choose the best alternative to complete the text.

1.	a) within reach	b) available	c)handy	d) free
2.	a) drafts	b) accounts	c) loans	d) bills
3.	a) foreign	b) overseas	c) correspondent	d) sending
4.	a) telegraphic	b) mail	c) airmail	d) post
5.	a) transfers	b) transmissions	c) remittances	d) payments
6.	a) telegraphic	b) mail	c) postal giro	d) cash
7.	a) parent	b) correspondent	c) primary	d) confirming
8.	a) agent	b) intermediary	c) arbitrator	d) intermediate
9.	a) distributed	b) provided	c) sent out	d) issued
10.	a) vostro	b) numbered	c) named	d)reserve

There are four types on international transfer which are (1)________ to personal account

customers - telegraphic transfers, banker's (2) ________, instant cash transfers and mail

transfers. Instant cash transfers are only possible when the (3)________ bank has computer

links with the receiving bank. The (4)______ transfer is almost as quick because banks now

PART III. BANKING

use SWIFT services. Where possible, they put a large number of smaller (5)_______ on to one

SWIFT transmission.

In the past (6) _____ transfers were the fastest method of sending money from one

country to another - and the most expensive. If the sending and receiving banks are (7)

__ banks and have accounts with each other it is a simple matter for them to adjust these

accounts. Otherwise another bank which is a correspondent has to be used, which can act
as an (8)___ between the remitting and receiving banks.

A cheaper but slower way of sending money is for the customer to buy a banker's draft and post it to the person or bank at the other end. A banker's draft is simply a cheque (9)

__ by a bank drawn on itself or on a correspondent bank in another country. It is better

than a personal cheque because it has the backing of the issuing bank. Also it can be
made out to pay a (10)____ account at a specific bank to give it absolute security.

IX. Choose the best alternative.

1. PROVISION means:

a) convention

b) a part of agreement

c) allocation

2. YIELD is not a synonym for:
a) profit

b)revenue

c) charge

d) earnings

3. The synonym for PROCEEDS is:

a) procedure

b) process

c) processing

d) income

e) expenditure

4. DISCLOSURE is:

a) description

b) discretionary order

c) distribution

5. APPRECIATION and DEPRECIATION means:

a) good or bad attitude to smth.

b) change in value

c) admiration or despise

6. LOANS ARE CARRIED means:

a) analysed

b) recorded

c) transferred to another account 7 COLLECTIBILITY is:

a) possibility to get money back

b) working in big team

c) ability to bring people together

8. INTEREST IS ACCRUED means:

a) collected

b) accumulated

c) gathered

d) paid

9. NONPERFORMING LOANS are those that:

a) have not been provided

b) are not paid back

c) are not profitable enough

10. Provide the opposites for:

assets losses income

increase wholesale net

REVISION EXERCISES

X. Provide English/Ukrainian terms to fit these definitions:

1.

. - a group of customers who are willing and able to buy the goods

produced by a business enterprise.. - the net amount at which an asset appears on the books of account.

3. 4. 5. 6. 8. 9. 10. 11. І2.

Usually cost less accumulated depreciation.. - the amount for which an asset can be sold in the marketplace.

- the decline in value of an asset over a period of years.

. - a reduction in the official value of a currency by government action

under a fixed exchange rate system.. - token coin and paper money in circulation.. - items such as cash, accounts receivable, goods in inventory and fixed

assets and other property owned by the enterprise.

- a review of accounting records by independent, outside public accountants.

- the claims against the assets of the enterprise held by creditors; or in other words, the enterprise's outstanding debts.

- a type of depository financial institution that encourages individual savings.

- a tax or tariff on goods imported from a foreign country.

- the principal or nominal value (as distinct from market value) appearing on a bond, note, coupon, piece of money, or other instrument.

XI. Quiz. How many of these questions can you answer?

1. The Dow Jones Index is found on Wall Street. What is Tokyo's equivalent?

2. It's three o'clock in the afternoon in London. What time is it in New York?

3. The four Ps are important in marketing; but what are they?

4. G7 (Group of Seven) is an organization of seven of the most economically powerful countries in the world. Which countries are members?

5. If you describe someone as a 'cowboy' you think they are very professional. True or false?

6. 7. 8. 9. 10. 11. 12.

What currency is used in China? Dollar is to pound as cent is to...? How many states are there in the USA? How many millions are there in a trillion?

If someone gave you a 'freebie' would you be happy or unhappy? What is the difference between a bull and a bear? If you were spending naira what country would you be in?

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