- •Part III text 1. History of economics
- •Text 2. Money
- •American money
- •English money.
- •Text 3. The functions of money
- •Text 4. The role of banks in theory
- •Text 5. Central bank
- •Text 6. Finance
- •Text 7. Recruitment
- •Finance Analyst
- •Text 8. Job specification
- •Text 9. People in organization
- •Insert the correct verb.
- •Text 10. Behaviour patterns
- •Text 11. Dismissal procedure
- •Text 12. The company structure The Company Organization
- •Text 13. Board of directors
- •Text 14. What you need to become a successful leader
- •In both these examples a modal verb is used to express mild obligation or advice. What do the following verbs express?
- •Text 15. How to motivate your employees
- •Text 16. Meetings
- •Part IV text 1. Advertising in early western history
- •Text 2. Advertising
- •Text 3. Advertising and promotion
- •Text 4. Major methods of advertising and promotion How to Write Ads?
- •What Should You Write in Your Ads?
- •Major Methods of Advertising
- •An Example of the Definitions
- •Text 5. Adventages and disadventages of different advertising medium
- •Newspaper Advertising
- •Some Advantages in Newspaper Advertising
- •Some Disadvantages with Newspaper Advertising
- •Magazine Advertising
- •Direct Mail
- •Specialty Advertising
- •Conclusion
- •Text 6. Public relations and advertising
- •The Advertising Pyramid: a Guide to Setting Objectives
- •Text 8. Controvercial advertising
- •Text 9. The right design is the shortest way to success
- •Text 10. Does advertising make us too materialistic?
- •Text 11. Commercials aimed at kids
- •Text 12. Consumer behaviour from the advertising perspective
- •1. Explain, in your own words, why advertising people must understand the complexity of human behaviour.
- •2. What three processes is consumer behaviour governed by?
- •3. Explain your understanding of perception, learning and motivation.
- •Text 13. Advertising as a business
- •If you want to use English in a natural way, you should note down and learn expressions like these.
- •Text 14. What does it take to become an ad manager?
- •Text 15. Advertising as a career in the usa
- •Рекомендуемая литература
Text 4. The role of banks in theory
Banks are financial intermediaries, similar to credit unions, savings and loan associations, and other institutions selling financial services. The term financial intermediary simply means a business that interacts with two types of individuals or institutions in the economy: (1) deficit-spending individuals or institutions whose current expenditures for consumption and investment exceed their current receipts of income and who, therefore, need to raise funds externally by negotiating loans with and issuing securities to other units; and (2) surplus-spending individuals or institutions, whose current receipts of income exceed their current expenditures on goods and services so they have surplus funds to save and invest. Banks perform the indispensable task of intermediating between these two groups, offering convenient financial services to surplus-spending individuals and institutions in order to raise funds and then loaning those funds to deficit-spending individuals and institutions.
There is an ongoing debate in the theory of finance and economics about why banks exist. What essential services do banks provide that other businesses and individuals couldn't provide for themselves?
This may at first appear to be an easy question, but it has proven to be extremely difficult to answer. Why? Because research evidence has accumulated over many years showing that our financial system and financial markets are extremely efficient. Funds and information flow readily to both lenders and borrowers, and the prices of loans and securities seem to be determined in highly competitive markets. In a perfectly efficient financial system, in which pertinent information is readily available to all at negligible cost, in which the cost of carrying out financial transactions is negligible, and all loans and securities are available in denominations anyone can afford, why are banks needed at all?
Most current theories explain the existence of banks by pointing to imperfections in our financial system. For example, all loans and securities are not perfectly divisible into small denominations that everyone can afford. To take one well-known example, U.S. Treasury bills — probably the most popular short-term marketable security in the world — have a minimum denomination of $10,000, which is clearly beyond the reach of most small savers. Banks provide a valuable service in dividing up such instruments into smaller securities, in the form of deposits, that are readily affordable for millions of people. In this instance a less-than-perfect financial system creates a role for banks in serving small savers and depositors.
Another contribution banks make is their willingness to accept risky loans from borrowers, while issuing low-risk securities to their depositors. In effect, banks engage in risky borrowing and lending activity across the financial markets by taking on risky financial claims from borrowers, while simultaneously issuing almost riskless claims to depositors.
Banks also satisfy the strong need of many customers for liquidity. Financial instruments are liquid if they can be sold quickly in a ready market with little risk of loss to the seller. Many households and businesses, for example, demand large precautionary balances of liquid funds to cover expected future cash needs and to meet emergencies. Banks satisfy this need by offering high liquidity in the deposits they sell.
Still another reason banks have grown and prospered is their superior ability to evaluate information. Pertinent data on financial investments is both limited and costly. Some borrowers and lenders know more than others, and some individuals and institutions possess inside information that allows them to choose exceptionally profitable investments while avoiding the poorest ones. Banks have the expertise and experience to evaluate financial instruments and choose those with the most desirable risk-return features.
Moreover, the ability of banks to gather and analyze financial information has given rise to another view of why banks exist in modern society—the delegated monitoring theory. Most borrowers and depositors prefer to keep their financial records confidential, shielded especially from competitors and neighbors. Banks are able to attract borrowing customers, this theory suggests, because they pledge confidentiality. Even a bank's own depositors are not privileged to review the financial reports of its borrowing customers. Instead, the depositors hire a bank as delegated monitor to analyze the financial condition of prospective borrowers and to monitor those customers who do receive loans in order to ensure that the depositors will recover their funds. In return for bank monitoring services, depositors pay a fee that is probably less than the cost they would have incurred if they monitored the borrowers themselves.
By making a large volume of loans, banks as delegated monitors can diversify and reduce their risk exposure, resulting in increased deposit safety. Moreover, when a borrowing customer has received the bank's stamp of approval, it is easier and less costly for that customer to raise funds elsewhere. In addition, when a bank uses some of its owners' money as well as deposits to fund a loan, this signals the financial marketplace that the borrower is trustworthy and has a reasonable chance to be successful and repay its loans.
EXERCISES
Exercise 1. In each paragraph, find the sentences supporting the main idea of the text. What paragraph contains the most important information?
Exercise 2. Answer the questions.
l. What does the term 'financial intermediary' mean?
2.Explain the meaning of the following terms 'deficit-spending individuals' and 'surplus-spending individuals'.
3.What task do banks perform?
4.Why do bank exist?
Exercise 3. Complete the sentences. Provide, banks, explain, popular, evaluate, debate, risk, market, afford, data, confidential, system, need.
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There is an ongoing … in the theory of finance and economics about why banks exist.
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What essential services do banks … ?
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Our financial ... and financial markets are extremely efficient.
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Most current theories … the existence of banks by pointing to imperfections in our financial system.
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Loans and securities are not divisible into small denominations that everyone can ….
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U.S. Treasury bills are the most … short-term marketable security in the world.
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Pertinent … on financial investments is limited and costly.
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Banks satisfy the strong … of many customers for liquidity.
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Financial instruments are liquid if they can be sold quickly in a ready … with little risk of loss to the seller.
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Banks have the expertise and experience to … financial instruments and choose those with the most desirable risk-return features.
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… can gather and analyze financial information.
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People prefer to keep their financial records ….
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Banks can diversify and reduce their … exposure by making a large volume of loans.
Exercise 4. Write down the Russian equivalents.
Financial intermediary, savings, loan, to interact, deficit-spending individuals, surplus-spending individuals, current receipts of income, current expenditures, an ongoing debate, to provide, evidence, lenders and borrowers, a highly competitive markets, to afford, a less-than-perfect financial system, financial instruments, financial investments, profitable investments, trustworthy.
Exercise 5. Match the nouns and the verbs as they are used in the text.
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to perform A. the financial condition
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to offer B. emergencies
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to provide C. borrowing customers
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to take D. a fee
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to engage E. information
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to satisfy F. services
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to cover G. in risky borrowing
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to meet H. expected cash needs
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to evaluate I. financial information
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to gather J. the indispensable task
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to keep K. financial services
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to attract L. an example
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to analyze M. the strong need
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to pay N. a loan
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to make O. a large volume of loans
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to fund P. financial records сonfidential