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Banking.Тема 4 по английскому

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Economic topic 4. Banking

Bank investments. The investment policy of a bank is based upon the reconciliation of two conflicting aims. There are two things that the bank must therefore do. First, it must keep a proportion of its assets in the form of cash to meet demands. Second, the bank must ensure that the investments it chooses are safe. Bank advances to its customers are the least liquids of their assets since there are few borrowers able to repay a loan at a very short notice. However, there are also the most profitable of them, yielding the highest rate of return. Advances to customers are likely to account for more than two thirds of the bank investment portfolio although this will vary on a day to day basis since overdrafts are the most common form of advance and are not immediately controllable by the bank. In general, banks do not lend industry money for long time periods or for investment projects. They regard themselves as providing working capital rather than fixed capital.

Investment risk. After the upheaval of the post-war period, world industrial countries are struggling, so far with mixed success, to get back on the path of balanced, non-inflationary growth. The United States has probably been the most successful. After a strong burst of growth in output and employment, many observers foresee a sharp slowing in the rate of advance. The bias against long-lived assets is evidenced by new orders for fabricated structural steel, a measure of the most durable investment assets. While the causes of this high degree of investment risk vary from country to country, at root is a profound uncertainty of future economical environmental shape, in which new facilities might be functioning. Although many reasons could be cited, the most important is inflation, the fear of its increasing rate in the years ahead, the instability following it. The contributor to higher risk premiums is escalating business regulation. Since the rise of concern over health and environment the regulatory process has mushroomed. Regulatory changes have directly increased the cost of new faculties in a major way. However, far worse for capital investment decision making is the fact that regulations may be changed in future in the way, unknown at present. This, rather than known costs, has engendered uncertainty and hesitation among businessmen.

Money market. Foreign exchange trading in Britain is centered wholly in London. London foreign exchange market is a telephonic market consisting of 3 groups: authorized banks, 11 foreign exchange brokers and the Bank of England. British operations are to some degree overseen and controlled by the Bank of England, which limits outstanding positions and calls regular returns. The major controlling factors that affect exchange rates are speculation, interest rates and the balance of payments. Political events can move the market quite significantly. Exchange rates were controlled and monitored by the central banks under the Bretton Woods Agreement. The affected member countries of the International Monetary Fund have parity for their currency against the US dollar, tied to gold. Also their currency is protected against the dollar to a maximum spread of 3/4 per cent for either side of this parity.