- •Reading Practice in English for Students of Finance
- •Block 1. Functions of the Financial System and the Financial Markets a. Functions of the Financial System
- •Savings Function
- •Wealth Function
- •Liquidity Function
- •Credit Function
- •Payments Function
- •Policy Function
- •B. The Financial Markets and Financial System
- •Vocabulary Notes
- •Block 2. The Study of Money and Capital Markets
- •A. The Money Market versus the Capital Market
- •B. Divisions of the Money and Capital Markets
- •Vocabulary Notes
- •A. Money and Functions
- •The Medium of Exchange
- •Other Functions of Money
- •B. Central Banking. The Bank and the Money Supply
- •Reserved Requirements
- •C. The Discount Rate
- •D. A Plain Man's Guide to Investment
- •Vocabulary Notes
- •Exercises
- •Block 4. The Central Bank of the Russian Federation
- •Open-market Operations
- •Monetary and Exchange-Rate Policy Central-bank Policy
- •Vocabulare Notes
- •Exercises
- •Block 5. British Banking
- •Overseas Banks
- •Foreign Banks
- •The Merchant Banks
- •The Stock Exchange
- •Vocabulary Notes
- •Block 6. Barclays Bank Account Why a Bank Account Makes Sense
- •A Current Account with Three Options to Choose from
- •The Options in Brief
- •Interest Option
- •Instant Option
- •Bank Charges
- •Your Statement
- •Using Barclays Cheque Book What is a Cheque?
- •How to Pay for Goods and Services by Cheque
- •How to Obtain Cash with a Cheque
- •How to Get a New Cheque Book
- •How to Stop a Cheque
- •If you have used a Barclays cheque guarantee card to issue a cheque, it cannot be stopped. Using your Barclays plastic cards
- •How to pay for goods and services using Barclays connect
- •How to obtain cash using your Barclays connect or Barclaybank card
- •Making regular payments
- •Standing orders
- •1. Dialogue
- •Brokerage services
- •2. Dialogue
- •Governmental controls 3. Dialogue
- •Structure and functions of a bank in the u.S.
- •4. Dialogue
- •Currency and other forms of exchange in the u.S.
- •5. Dialogue
- •Block 8. Financial Reports Consolidated financial report of the large financial holding company
- •1. Consolidated statements of income of Citicorp and subsidiaries
- •Vocabulary Notes
- •2. Consolidated balance sheets of Citicorp and subsidiaries
- •Vocabulary Notes
- •3. Consolidated statement of cash flows of Citicorp and subsidiaries
- •Income taxes
- •4. Financial report of the small enterprise. 'Balance sheet of HiFi Sounds'
- •Vocabulary Notes
- •5. Income Statement of HiFi Sounds
- •Vocabulary Notes
- •Grammar Reference Грамматический справочник Личные формы глагола в предложении.
- •1. Времена глагола в действительном и страдательном залогах. Изъявительное наклонение.
- •Сводная таблица
- •Образование времен в страдательном залоге
- •Перевод сказуемого в страдательном залоге
- •Сводная таблица
- •2. Сослагательное наклонение
- •Формы сослагательного наклонения
- •Употребление сослагательного наклонения
- •3. Модальные глаголы и их эквиваленты
- •Сочетание модальных глаголов с Perfect Infinitive
- •Сочетание модальных глаголов с infinitive passive
- •4. Многофункциональные глаголы Функции глаголов should и would
- •Функции глагола то do в предложении
- •Функции глагола то have в предложении
- •Функции глагола то be в предложении
- •Он, она, оно (о неодушевленных предметах)
- •Указательное местоимение «это»
- •Наиболее употребительные составные союзы и предлоги и сочетания с as
- •What is a bank?
- •Bank Services: Old and New
- •Payments
- •Intermediation
- •Figure 1.2. Bank Goals and Constraints
- •Interest Rate Risk
- •Risk management
- •Importance of capital budgeting
- •Generating ideas for capital projects
- •Oject classifications
- •Increasing importance of financial management
- •The financial manager's responsibilities
B. Central Banking. The Bank and the Money Supply
In this section we study the ways in which a central bank can affect the supply of money in the economy. The narrowest measure of the money supply is currency in circulation outside the banking system plus the sight deposits of commercial banks against which the private sector can write cheques. Thus money supply is partly a liability of the Bank (currency in private circulation) and partly a liability of commercial banks (chequing accounts of the general public).
*We now describe the three most important instruments through which the Bank might seek to affect the money supply: reserve requirements, the discount rate, and open market operations.
Reserved Requirements
A required reserve ratio is a minimum ratio of cash reserves to deposits that the central bank requires commercial banks to hold.
If a reserve requirement is in force, commercial banks can hold more than the required cash reserves but they cannot hold less. If their cash falls below the required amount, they must immediately borrow cash, usually from the central bank, to restore their required reserve ratio.
Suppose the commercial banking system has 1 million in cash and for strictly commercial purposes would normally maintain cash reserves equal to 5 per cent of sight deposits. Since sight deposits will be 20 times cash reserves, the banking system will create 20 million of sight deposits. Suppose the Bank now imposes a reserve requirement that banks must hold cash reserves of at least 10 per cent of sight deposits. Now banks can create only p. 10 million sight deposits against their cash reserves of p. 1 million.
Thus, when the central bank imposes a reserve requirement in excess of the reserve ratio that prudent banks would anyway have maintained, the effect is to reduce the creation of bank deposits, reduce the value of the money multiplier, and reduce the money supply for any given monetary base. Similarly, when a particular reserve requirement is already in force, any increase in the reserve requirement will reduce the money supply.
When the central bank imposes a reserve requirement in excess of the reserves that banks would otherwise have wished to hold, the banks are creating fewer deposits and undertaking less lending than they would really like. Thus a reserve requirement acts like a tax on banks by forcing them to hold a higher fraction of their total assets as bank reserves and lower fraction as loans earning high interest rates. Can the banks do anything about it?
*Although there are profitable lending opportunities, the banks can take advantage of them only if they can increase their cash reserves. In principle, they could try to borrow cash from the central bank. If the point of a reserve requirement is to reduce the money supply, the central bank will be reluctant to lend banks the cash they want to make additional loans, increase deposits, and expand the money supply. *With lucrative lending opportunities around - the banks may be able to induce the private sector to exchange cash in circulation for bank deposits. Banks can offer more generous interest rates on time deposits or stay open later to encourage people to make greater use of chequing facilities.
One form of reserve requirement that has been especially popular in the UK is the use of special deposits. Commercial banks were required to deposit some of their cash reserves in a special deposit at the Bank, and this money could not be counted as part of the banks'cash reserves in meeting their reserve requirements. Varying the amount required as special deposits gave the Bank another level for controlling deposit creation by the banking system and the size of the money multiplier.