Introduction to Banking and Financial Markets

A commercial bank borrows money from the public, crediting them with a deposit. The deposit is a liability of the bank. It is the money owed to depos­itors. In turn the bank lends money to firms, households, or governments wishing to borrow.

Commercial banks are financial intermediaries with a government license to make loans and issue deposits, including deposits against which cheques can be written1.

Major important banks in most countries are included in the clearing sys­tem in which debts between banks are settled by adding up all the transac­tions in a given period and paying only the net amounts needed to balance inter-bank accounts2.

The balance sheet of a bank includes assets and liabilities. We begin by discussing the asset side of the balance sheet. Cash assets are notes and coins kept in their vaults and deposited with the Central Bank. The balance sheet also shows money lent out or used to pur­chase short-term interest-earning assets such as loans and bills. Bills are fi­nancial assets to be repurchased by the original borrower within a year or less. Loans refer to lending to households and firms and are to be repaid by a cer­tain date. Loans appear to be the major share of bank lending. Securities show bank purchases of interest-bearing long-term financial assets. These can be government bonds or industrial shares. Since these assets are traded daily on the Stock Exchange, these securities seem to be easy to cash whenever the bank wishes, though their price fluctuates from day to day.

We now examine the liability side of the balance sheet which includes, mainly, deposits. The two most important kinds of deposits are sure to be sight deposits and time deposits. Sight deposits can be withdrawn on sight3 whenever the depositor wishes. These are the accounts against which we write cheques, thus withdrawing money without giving the bank any warning. Therefore, most banks do not pay interest on sight deposits, or chequing accounts.

Before time deposits can be withdrawn, a minimum period of notification must be given within which banks can sell off some of their high-interest se­curities or call in some of their high-interest loans in order to have the money to pay out depositors. Therefore, banks usually pay interest on time deposits. Apart from deposits banks usually have some other liabilities as, for instance, deposits in foreign currency, cheques in the process of clearance and others. write cheques against the account — выписывать чеки против счета balance an account — уравнять, погасить счет; сбалансировать статьи

3.on sight — по предъявлении (без предварительного уведомления)


Выберите правильный ответ и переведите предложения на русский язык.

4.1. Banks borrow money from the public in order to … .

a) invest in a business

B) meet their liabilities

c) lend money to firms, households

4.2.The clearing system enables banks … .

a) to purchase interest-bearing securities

b) to settle debts between banks

c) to cover cash deficit

4.3. Bills are fi­nancial assets to be repurchased by … .

a) the borrower within a year or less

b) a creditor within a year and a half

c) insurance company within a year

4.4.Securities are traded daily on the Stock Exchange and …

a) their price is stable

b) their price fluctuates considerably

c) their price fluctuates in the afternoon

4.5. To withdraw a time deposit one must give the bank a period of notification … a) within which banks can buy some high-interest se­curities

b) within which banks can get money from government reserve

c) within which banks can sell off some of their se­curities or call in

some loans


I. Выберите правильный ответ, обращая внимание на видовременную форму и залог сказуемого, и переведите предложения на русский язык.

1.1. Auditing … very fast now.

a) was developing

b) is developing

c) has developed

1.2. The International Federation of Accountants (IFAC) … in 1977.

a) established

b) was established

c) is established

1.3. The bankers were informed that Mr. Roger … the interest on the loan a few

days ago.

a) has paid

b) had paid

c) pays

1.4. The investment interest … to the stockholder’s account in the bank next


a) will be sent

b) was sent

c) is sent

1.5. The accountant … a balance by 5 p.m.

a) will be drawing up

b) will draw up

c) will have drawn up

II. Выберите правильный ответ, обращая внимание на модальные глаголы и их эквиваленты. Переведите предложения на русский язык.

2.1. In a command economy, government … plan production and consumption.

a) was able to

b) are to

c) have to

2.2. If free migration between countries is allowed, people from poor

countries … go elsewhere looking for higher incomes.

a) can

b) must

c) will be able to

2.3. Only when demand equals supply, people … buy or sell as much as they


a) can

b) must

c) had to

2.4. You … prepare this account today, you can do it tomorrow. It is not urgent.

a) mustn’t

b) needn’t

c) can’t

2.5. In order to earn income, we … work.

a) have to

b) may

c) are to

III. Выпишите предложения , в которых причастие II является определением, и переведите их на русский язык.

3.1. Grain markets have greatly changed for the last 25 years in the USA and


3.2. Consumer groups often study the quality of goods offered by foreign producers

at a particular market.

3.3. In English-speaking countries, public auditors are usually certified.

3.4. Consumers typically buy a smaller quantity of the good sold at a higher price..

3.5. As seen from the article the study of economics is of great use even to those

students who have no wish to become professional economists.

IV. Прочитайте и устно переведите текст, затем выполните тест по тексту:

Accounting Information

Accounting provides informational access to a company's financial condi­tion for three broad interest groups. First, it gives the company's management the information to evaluate financial performance over a previous period of time, and to make decisions regarding the future. Second, it informs those who are interested in buying its stock, about the fi­nancial position of the company. Third, accounting provides reports for the tax and regulatory departments of the government. In general, accounting informa­tion can be classified into two main categories: financial accounting (or public information) and managerial accounting (or private information).

Managerial accounting deals with cost and profit relationships, efficiency and productivity, planning and control, pricing decisions, capital budgeting, etc. This information pro­vides a wide variety of specialized reports for division managers, department heads and project directors.

A standard set of financial statements is expected to be prepared regularly by financial accounting and published in an annual report at the end of the fiscal year. These statements include the following items: 1) the balance sheet, 2) the statement of cash flows, 3) the income statement, 4) the statement of retained earnings.

Information relating to the financial position of a company, mainly about assets and liabilities, is presented in a balance sheet. The statement of cash flows shows the changes in the company's financial position and provides information which is not available in either an income statement or a balance sheet.

Another financial statement disclosing the results of the company's activ­ity is known as the income and expense statement. Prepared for a defined time interval, this statement summarizes the company's revenues, expenses, gains and losses and shows whether a company has made a profit within the period. Income is considered to be the difference between revenues and expenses. Revenues are transactions that represent the inflow of assets as a result of operations — that is, the assets received from selling goods and rendering services. Expenses are transactions involving the outflow of assets in order to generate revenue, such as wages, salaries, rent, interest and taxes. The income statement excludes the amount of assets withdrawn by the owners, in a corporation such withdrawal of assets being called dividends.

The separate statement of retained earnings and stockholder's equity shows inves­tors what has happened to their ownership in the company, how earnings and new stock issuance have increased its value, and what dividends were paid.

Each of these reports contains figures for previous years and for the cur­rent period, providing a way of comparing present and past company perfor­mance. Being prepared for the use of management, the financial statements contain neither debit nor credit columns. These statements are accompanied by additional data about the particular accounting method used, as well as explanations about the most important events within the previous year.


Выберите правильный ответ и переведите предложения на русский язык.

4.1. Accounting gives the company's management the information to evaluate

financial performance … .

a) over a previous period of time