Banks and business

Text

Banks are different in different countries. Let's speak about the banks in the United Slates of America. There, commercial banks are classified into two main groups. First, there are national banks. They are charted and supervised by the Federal Government. Secondly, there arc slate banks. They arc charted and supervised by the state in which they are operated. All commercial banks can make loans to borrowers.

Major commercial banks in such cities as Tokyo, Pans, Rio cooperate with each other. In this way they finance imports and exports between countries.

An importer buys merchandise from another country using the currency of that country. For that purpose he buys this currency from the foreign exchange department of his bank. And in the same way if an exporter receives foreign money from sales to other countries, he sells this currency to his bank. By this method the currency of any country can usually be exchanged.

Active Vocabulary

commercial bank комерційний банк

national bank національний банк

to charter започатковувати, створювати

to supervise завідувати, контролювати

state bank державний банк

merchandise товар

currency валюта, гроші

foreign exchange department відділ обміну валют

to exchange currency обмінювати валюту

Comprehension Questions

1. What do all commercial banks do?

2. What kinds of commercial banks in the USA do you know? What are they called?

3. Who supervises the operations of national bank?

4. What kind of currency does an importer generally use when he buys goods from

another country?

5. What do you know about the "international exchange"?

6. What is the currency of this country called?

What is the exchange rate between your currency and the currency of the USA and

Germany? How can you find it out if you don't know it?

Vocabulary Practice

Exercise 1. Choose the necessary word and put it in the sentence.

1. Federal government..... and ..... all national banks. 1 merchandise

2. International cooperation between banks makes it possible 2 currency

..... imports and exports. 3 commercial

3. It is possible to convert American dollars to Swiss francs 4 foreign exchange

in ..... department.

4. The..... of Germany is the mark. 5 to finance

5. All..... banks make loans to borrowers. 6 to supervise

6. If the importer buys ..... from another country he will

pay for it in the currency of this country. 7 to charter

Dialogue

( A banker's office in New York City. Mr. Smith, a Vice President, is speaking to Bill Wilson).

Smith O.K. Bill. As a secretary you ought to know certain things about banking.

Bill That's what I want. I hope to make my career in banking.

Smith And what bank services are you familiar with?

Bill Oh, let me see. I am familiar with checking and savings accounts, safety deposit

boxes, insurance and things like that.

Smith It is something.

Bill But I don't have a clear idea of the services which banks offer to business.

Smith O.K. Let's discuss it then. In fact it is more directly concerned with what passes

over my desk.

Bill I think businesses come to the banks for loans.

Smith You are right. Banks make loans to corporations, to organizations, individuals and

to small companies. For this service, we always charge interest.

Bill But how can a bank decide whether a business should receive a loan.

Smith First of all we request a financial statement. It shows what the company has in

inventory, accounts receivable and other assets and liabilities. Profit and loss

statement shows the company's income and expenses.

Bill In other words you look over the financial situation of a business.

Smith Exactly. If the company is eligible for a loan, it may choose a long-term loan or

a short-term loan.

Bill I see. And how much interest does the bank charge on these loans?

Smith It can be different. We have so-called prime-rate, that is the lowest interest rate

available at the particular time. Only preferred customers can have it.

Bill Who decides on prime-rate then?

Smith Major lending banks do.

Bill Oh, I must know that. And very often I hear the term "a line of credit". I have a

vague idea what it is.

Smith A line of credit is the maximum amount of money that a company can borrow

from a bank. This top amount of customer's credit is based on the profits and

earnings of a business.

Bill Well. Then it is very important to have a good line of credit, isn't it?

Smith Sure. A bank also issues letters of credit. Such letter says that its holder can

borrow up a certain sum of money. Or a bank can also issue a letter of credit for a

person who goes to the other country where another bank is involved. Then there

is the credit reference letter which recommends a company to its suppliers, and

well - I could go on all morning.

Bill Thank you. It's very useful information.

Smith O.K. We can pass on to a more complicated subject. That is tax service.

Active Vocabulary

banking - банківська справа

to make a career in smth. - робити