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The active vocabulary of the unit.
| to assemble capital to make collections to check out to transfer funds to issue notes to take for granted extent to utilize funds checkable deposits NOW(Negotiable Order of Withdrawal) to make loans ultimate borrowers | pooling/spreading of risks to provide liquidity checking account to evaluate creditworthiness middle men settlement of payments clearing and settlement systems reservoir of funds credit intermediation to be paid overtime advance to deduct | huge reductions bank charges to promote interstate banking surplus funds to prevent losses execution trustworthiness liabilities of the bank assets of the bank interest rate to acquire liquidity risk |
Pre-reading task:
Think and discuss.
If there were no banks……
· Where would you go to borrow money?
· What would you do with your savings?
· What risks might you face as a saver (borrower)?
Text A
· Functions of Banks
The most important functions of banking may be classified as follows: to assemble capital and make it effective; to receive deposits and make collections; to check out and transfer funds; to discount or lend; to issue circulating notes. Every bank which expects to succeed must first of all prove its value to the community. The functions which a bank performs are so generally taken for granted that the public is unaware of the real extent of the facilities offered. Banks are equipped to utilize funds, for either a short or long period of time, safely, and with some profit.They operate by borrowing funds usually by accepting deposits. Banks today accept checkable deposits or a NOW(Negotiable Order of Withdrawal) accounts as well as time deposits, and use their depositors’ funds mainly to make loans and buy securities.
Banks are financial intermediaries that stand between primary lenders (depositors) and the ultimate borrowers. In this way they provide many services. One is the pooling of risks. A bank that makes many loans is spreading its risks. It is highly likely to experience losses on a few loans but most unlikely to experience losses on all or most. In contrast someone who makes a single loan faces all-or-nothing situation.
Another service of banks is providing liquidity. Someone who opens a checking account in a bank can get his or her money back whenever required. The bank meanwhile can make loans with his or her deposits.
Also banks provide expert judgment in making loans. Most savers cannot evaluate the creditworthiness of those who wish to borrow. Hence, instead of lending directly to the ultimate borrowers they lend their savings to banks by depositing them, and the banks then use those savings to make loans to the ultimate borrowers.
Notes: highly likely - дуже ймовірно all-or-nothing situation – безкомпромісна ситуація
2. Match the phrases to their definitions:
Functions of banking may be classified as the followings:
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