Unit 5 Banking

A Introduction
Before reading the section on Banking, check the following vocabulary.
investment fund (n.) bank account (n.) current account
UK
/ checking account
US
(n.) savings account
(n.) account balance (n.) account statement / bank statement (n.) cheque (n.) draw a cheque (v.)
deposit (n. & v.) term deposit (n.)
checkable deposit (n.) savings deposit (n.) issue (v.) banknote (n.) bond (n.) corporate bonds
(n.) government bonds (n.) securities (n.) advance (n.) loan (n.) instalment (n.) bank draft
(n.) overdraft (n.) payment instrument (n.)
safe deposit box / safety deposit box (n.) branch (n.) bank teller (n.)
insert (v.) contain (v.) access (v.) consist of sth (v.) conduct (v.) process (v.)
enable (v.) verify (v.) signature (n.) remote (adj.) data (n.) domain (n.)
mortgage (n.) mortgage loan (n.) business entity (n.) merger (n.) money supply (n.)
exchange rate (n.) advisory services (n.) distinguish (v.) liabilities (n.) assets (n.)

bank is a financial institution licensed by a government. !ts primary
activities include borrowing and lending money. "any other financial
activities were allowed over time. #or example banks are important
players in financial markets and offer financial services such as
investment funds.
B Traditional banking activities
$anks act as payment agents by conducting checking or current accounts for customers% paying cheues
drawn by customers on the bank% and collecting cheques deposited to customers& current accounts. $anks
also enable customer payments via other payment methods such as telegra!hic transfer% and AT".
$anks borrow money by accepting funds deposited on current accounts% by accepting term deposits% and by
issuing debt securities such as banknotes and bonds. $anks lend money by making advances to
customers on current accounts% by making instalment loans% and by investing in marketable debt securities
and other forms of money lending.
'he commercial role of banks is not limited to banking and it includes(
issue of banknotes
processing of payments by way of telegraphic transfer% internet banking or
other means
issuing bank drafts and bank cheues
accepting money on ter# de!osit
lending money by way of overdraft% instalment loan or otherwise
providing documentary and standby letters of credit% guarantees% performance bonds% securities
underwriting commitments and other forms of off)balance exposures
safekeeping of documents and other items in safe de!osit bo$es
currency exchange
$anking business means(
receiving from the general public money on current% deposit% savings or other similar account which
is repayable on demand or within less than a specified period of time (e.g. *% +% ,- months% etc.)
paying or collecting cheques drawn by or paid in by customers
.ince the advent of direct credit% direct debit and internet banking% the cheque has lost its primacy in most
banking systems as a payment instrument.
% Banking channels
$anks offer many different channels to access their banking and other services(
A branch% banking centre or financial centre is a retail location
where a bank or financial institution offers a wide array of face)
to)face service to its customers.
n auto#ated teller #achine &AT"' is a computeri/ed
telecommunications device that provides the customer with
access to financial transactions in a public space without the
need for a human clerk or bank teller. 0n most modern '"s% the customer is identified by inserting
a plastic AT" card with a magnetic stripe or a plastic s#artcard with a chip% which contains a
unique card number and some security information. .ecurity is provided by the customer entering a
!ersonal identification nu#ber &(I)'.
1sing an '"% customers can access their bank accounts to #ake cash withdrawals and check
their account balances. '"s are known by various names including automated banking machine%
money machine% cash machine% cash dispenser% cash point% $ancomat (in various countries in
2urope and 3ussia).
!n recent years% with the development of technologies and techniques% options for communication with banks
are expanding for clients. 4ew services are originating such as home banking% phone banking% internet
banking and others. *lectronic banking is a service that allows customers to use some form of electronic
communications to access account)specific information and conduct transactions from a remote location%
such as customer5s home or workplace.
+or#s of e,banking
2lectronic banking using a telephone connection(

(hone banking is the provision of banking services using a classic telephone line. bank client can
obtain the necessary information on dialing a telephone number specified in advance.
"obile banking is a method of using one5s mobile phone to conduct simple banking transactions by
remotely linking into a banking network.
S"S banking uses short text messages sent through the client5s mobile phone. client can
automatically receive information about his account balance. n .". is sent to the client
immediately after a certain operation is performed% or on request( a client sends the bank a correctly
formatted message which processes it and answers the client5s request by ."..
2lectronic banking using personal computers(
Internet banking (sometimes called online banking) is the service
provided through the !nternet. 6ustomers can perform financial
transactions and access their accounts from anywhere in the world by
logging on to a bank5s website.
-o#e banking is a service that enables a bank client to handle his accounts from a computer from
a place selected in advance% at home or in the office. 'he main features of home banking systems
are the high level of security% comfort% simplicity of use% openness of the system% wide
communication possibilities% networking% definition of users and their rights. home banking system
usually consists of two parts( a bank computer program and a program in the client5s computer. 'he
bank program works as a communication server. !t receives calls from clients% verifies their identity%
receives data from them% authenticates digital signatures% generates digital receipts and sends data
to clients.
"ail banking is another electronic banking service that makes it possible to communicate with the
bank by electronic mail or e)mail. 'he most frequently used service is sending account statements at
periodically to the client5s mailbox. 2)mail is not used for more complex operations.
. Ty!es of banks
'here are several types of banks in the world and each has a specific role and function
as well as a domain in which they operate. !n broad strokes% banks may be divided into
several groups on the basis of their activities and these include retail banks%
invest#ent banks% !rivate banks% business banks and cor!orate banks. "any of
the larger banks have multiple divisions covering some or all of these categories.
/etail banks deal directly with consumers and small business owners. 'hey focus on
mass market products such as current and savings accounts% mortgages and other loans% and credit cards.
(rivate banks normally provide wealth management services to high net worth families and individuals.
Business banks provide services to businesses and other organi/ations that are medium si/ed% whereas
the clients of cor!orate banks are usually major business entities.
Invest#ent banks are financial institutions that raise capital% trade in securities and manage corporate
mergers and acquisitions.
%entral banks are normally government)owned organi/ations responsible for managing banking activity.
'hey supervise the banking system% control the cash interest rate% issue banknotes% control the money
supply% influence exchange rates% etc.
Ty!es of retail banks
%o##ercial bank is the term used for a normal bank to distinguish it from an investment bank. fter
the 7reat 8epression% the 1... 6ongress required that commercial banks engage only in banking
activities (accepting deposits and making loans)% while investment banks were limited to ca!ital
#arket activities. 'his separation is no longer mandatory.
!t raises funds by collecting de!osits from businesses and consumers via checkable de!osits%
savings de!osits and ti#e &ter#' de!osits. !t makes loans to businesses and consumers. !t also
buys cor!orate bonds and govern#ent bonds. !ts primary liabilities are deposits and primary
assets are loans and bonds.
%o##unity develo!#ent banks serve customers from 9financially underserved: geographical
areas and encourage economic development in these areas.
(ostal savings banks are associated with national postal system.
(rivate banks are banks that manage the assets of high net worth individuals.
0ffshore banks are banks located in area with low taxation and regulation. 'hey provide financial
and legal advantages to their clients.
Savings banks are financial institutions whose primary purpose is accepting savings de!osits.
'hey may also perform some other functions.
Building societies are financial institutions that offer banking and financial services% especially
#ortgage lending.
Ty!es of invest#ent banks
Invest#ent bank issues stocks and bonds to the clients and then invests the money that the client
used to purchase the stocks and bonds. 'he client receives payments from the profits made on his
money. .ince these banks know the ins and outs of their trade% it is not unusual that companies seek
their help on matters regarding mergers% acquisitions and other corporate activities.
"erchant banks provide capital to firms in the form of shares rather than loans. 1nlike venture
capital firms (which invest money in start)up firms)% they tend not to invest in new companies. 'hey
also provide advisory services to companies.
*$ercise 1
"atch each of the verbs in the first colu#n with a word2words in the second colu#n in order to for#
!hrases. Then co!y the !hrases on the lines !rovided.
,. deposit a) identity% story% hypothesis
;. issue b) transactions% research% survey% experiment% negotiations
*. put c) money in a bank / bank account
<. verify d) information% data% application% food
=. go e) signature at the bottom of the page
+. draw% deposit% cash f) your bills online
>. insert g) a website% bank account online% classified material
-. process h) banknotes% bonds% securities
?. conduct i) into overdraft
,@. access j) a loan
,,. open k) a safe deposit box
,;. pay l) a cheque
,*. rent m) a bank / current / savings account
,<. take out n) a word% paragraph% '" card
,. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
;. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
*. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
<. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
=. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
+. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
>. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
-. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
?. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
,@. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
,,. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
,;. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
,*. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
,<. AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
*$ercise 3
%hoose the correct answer to co#!lete the sentences.
+or#s of #oney.
,. "oney in notes and coins is called BB
a) cash b) capital c) reserves
;. 'he dollar% the mark and the yen are all BB
a) funds b) currencies c) monies
*. "oney borrowed from a bank is a BB
a) deposit b) income c) loan
<. $orrowed money that has to be paid back constitutes a BB
a) debt b) fund c) subsidy
=. ll the money received by a person or a company is known as BB
a) aid b) income c) wages
+. 'he money earned for a week5s manual work is called BB
a) income b) salary c) wages
>. 'he money paid for a month5s (professional) work is a BB
a) loan b) salary c) wages
-. "oney placed in banks and other savings institutions constitutes BB
a) capital b) deposits c) finance
?. "oney paid by the government or a company to a retired person is a BB
a) pension b) subsidy c) fee
,@. 'he money that will ultimately be used to pay pensions is kept in a BB
a) budget b) deposit c) fund
,,. 'he money paid to lawyers% architects% private schools% etc. is called BB
a) fees b) instalments c) wages
,;. 3egular part payments of debts are called BB
a) deposits b) loans c) instalments
,*. 2stimated expenditure and income is written in a BB
a) reserve b) budget c) statement
,<. "oney given to producers to allow them to sell cheaply is called a
a) loan b) subsidy c) rebate
,=. "oney given to developing countries by richer ones is known as BB
a) debt b) subsidy c) aid
*$ercise 4
%hoose the correct answer to co#!lete the sentences.
Borrowing and lending.
,. !f you possess something% you can say that you BB it.
a) owe b) own c) owner
;. !f you have to reimburse or repay someone% you BB money.
a) owe b) own c) have
*. 'o let someone else have the use of your money for a certain period of time% after which it must be paid
back% is to BB
a) borrow b) lend c) credit
<. 'o take money that has to be repaid is to BB
a) borrow b) lend c) steal
=. n amount of money lent is a BB
a) debit b) debt c) loan
+. person who has borrowed money is a BB
a) creditor b) debtor c) owner
>. nother word for a lender is a(n) BB
a) creditor b) debtor c) owner
-. 'he income received by someone who lends money is called BB
a) dividend b) interest c) interests
?. 'he borrower has to pay back the loan itself% also known as the BB
a) principal b) principle c) premium
*$ercise 5
%hoose the correct answer to co#!lete the sentences.
Banking vocabulary.
,. ! don5t get paid in cash. "y salary is paid into my bank BB
a) deposit b) debt c) account
;. Cere is a small BB . Dou5ll get the rest of the money after the job is finished.
a) benefit b) advance c) preview
*. Ce doesn5t have any financial problems. Ce is fully BB
a) wealthy b) solvent c) thrifty
<. 9Cere5s a ten)pound BB:. 9Dour change% .ir.:
a) invoice b) bill c) note
=. !f you work longer than your usual working day% you should be paid BB
a) overtime b) outgoing c) overdue
+. 'he long)term loan that you take from a bank to buy a house or flat is called a BB
a) mortgage b) overdraft c) arrears
>. ! don5t have any cash on me. 6an ! pay by my BB cardE
a) deposit b) credit c) expenditure
-. !5d like to BB an account.
a) start b) make c) open
?. Dou don5t have any BB (F money) in your account.
a) funding b) funds c) fun
,@. document which shows all your withdrawals and deposits (usually for one month) is called a bank BB
a) statement b) bill c) report
,,. Ghat is another way to say 9to withdraw:E
a) to make out b) to fill out c) to take out
,;. !5d like to BB some money to my other account.
a) change b) transfer c) switch
,*. !f you5ve lost your bank card you can BB for a new one.
a) reply b) apply / reapply c) fill
,<. Dou BB rate determines the repayments you make on the money you borrow from a bank.
a) interest b) internal c) repayment
,=. ! have to BB another loan.
a) go for b) take in c) take out
,+. Dour home may be BB if you don5t keep up repayments on your mortgage.
a) retaken b) repositioned c) repossessed
,>. $anks usually have two types of personal accounts H checking and BB
a) saver b) savings c) saving
,-. Ghat5s the BB on my accountE ) !t5s <=@I. (F there5s <=@I on your account)
a) balance b) money c) sum
,?. "any banks currently offer their customers the opportunity to do their banking BB
a) web b) online c) the !nternet
;@. person5s credit BB is a formal evaluation of his/her loan)repayment history and potential.
a) level b) rate c) rating
;,. bank will not give you a loan unless you provide some kind of BB (F something of value as a
guarantee of repayment)
a) collateral b) collocation c) promise
;;. BB loan is a loan backed up with collateral.
a) security b) secured c) securities
;*. BB a mortgage or other type of loan can lower the monthly payments owed on the loan.
a) reworking b) redoing c) refinancing
;<. !5m sorry "rs. 8avis% but your check hasn5t B.. (F gone through) yet.
a) transferred b) cleared c) claimed
;=. 8o you have any BB debtsE (F debts that you have not paid off)
a) excellent b) outsourcing c) outstanding
;+. Dou5ll have to BB these forms. 0nce you do that% !5ll give them to our bank manager for approval.
a) fill out b) fill c) write
;>. Ge5ll BB your lost card. 4o problem.
a) replace b) redo c) remake
;-. Ge have to reset your BB number. (F the secret code for your bank/'" card)
a) secret b) J!4 c) private
;?. ! keep half of my savings in an account and the other half in a BB at my bank.
a) safety box b) safe keeping box c) safe deposit box
*@. 0ne of your responsibilities will be to BB (Fput together) weekly and monthly financial reports for
management.
a) control b) compile c) review
*,. BB bank account is one that you share with another person.
a) joint b) joined c) together
*;. check which a bank returns because it is not payable due to insufficient funds in an account is called
B.. or bad check.
a) binding check b) burnt check c) bounced check
**. !nformally% having a low credit rating is referred to as having BB
a) insufficient funds b) bad credit c) good credit
*<. !f your bank account goes into overdraft% it means BB
a) you owe the bank money b) the bank owes you money c) your balance is @
*$ercise 5
%o#!lete the te$t below with the words2!hrases in the bo$.
de!osit tele!hone banking bank card o!en a bank account interest rate
cheue book current account cash the cheue internet banking branch
savings account !ay in withdraw cash !in nu#ber
direct bank transfer #ortgage overdraft facility
!f you live for any period of time in the 1K% you&ll probably want toBBBBBBBBBB. .
'here are two main types of accounts( a BBBBBBBBBB and a BBBBBBBBBB.
Dou can use a current account for your day)to)day banking needs. Dour bank might give you a
BBBBBBBBBB% which allows you to write cheques to pay for goods and services. Dou&ll probably also
have a BBBBBBBBBB which allows you to BBBBBBBBBB from cash machines (also known
as '" or Lhole in the wallL machines) and to pay for goods in shops. Dou get a secret BBBBBBBBB..
(personal identification number) that you use when you withdraw cash.
!f you receive a cheque% you can pay it in or BBBBBBBB. it at your bank. Dou can also
BBBBBBBB. cash (money). !f you want to convert your cheque into cash% you can
BBBBBBBBBB. .ome companies can also pay money into your account via a
BBBBBBBBBB..
savings account should pay you interest. "ost banks give you a different BBBBBBBB. depending on
how much you are saving% and how much notice you give before withdrawing money.
!n the 1K% people traditionally use banks for a range of services. s well as an BBBBBBB....... (where
you borrow money from the bank)% people also get a BBBBBB (loan to buy a house)% personal loan% and
insurance from their banks. Cigh street banks (the sort of banks which you can find on any high street) are
also good places to change money.
"any banks now offer BBBBBBBBB. and BBBBBBBBBB. 'his means that you can manage
your finances without going to the local BBBBBBBB.. (office) of your bank.
*$ercise 6
All the words below can be co#bined with bank or banking in a two,word !artnershi!, e.g. bank
holiday or off-shore banking. Add the word bank or banking either before or after each of the words
below.
,. .................... account ....................... >. .................... holiday ......................
;. .................... balance ....................... -. .................... investment .......................
*. .................... central ......................... ?. .................... manager .........................
<. .................... clerk ............................ ,@. .................. merchant ........................
=. .................... commercial ................. ,,. .................. note ................................
+. .................... deposit ........................ ,;. .................. robbery ...........................
,*. ................. savings ........................
,<. ................. statement ....................
,=. ................. retail ............................
,+. ................. system ........................
,>. ................. off)shore .....................
*$ercise 7
%o#!lete the te$t about banking !roducts using the words in the bo$. Then answer the uestions
below.
cash dis!enser cheue credit card current account de!osit account
foreign currency !ay#ent sli! invest#ent advice loan #ortgage
overdraft !ension standing order
"y salary is paid directly into a low)interest BBBBBBBBBB . ! can withdraw money from automatic
BBBBBBBBBB with a cashcard% so ! hardly ever actually go into a bank. ! pay regular% monthly bills
by way of a BBBBBBBBBB ( the bank pays them according to my instructions% and debits my
account. ! pay irregular bills by BBBBBBBBB.. . 4early everyone ! know in $ritain has a chequebook%
but when ! lived on the 6ontinent% ! found that people hardly used them. 'hey often paid in cash% or paid bills
at a post office with a BBBBBBBBBB
! also have a BBBBBBBBBB% which is useful for ordering things by post or on the telephone% or for
travelling worldwide. ! also use it in shops and restaurants% but try not to spend more than ! can pay when the
bill comes a month later% as this is a very expensive way of borrowing money. 'he annual interest is
exorbitant H well over ;@M.
! used to have a BBBBBBBBB. in a building society which paid higher interest than the current
account at the bank% but had restrictions as to how and when ! could withdraw my money. $ut then we
bought a flat. ! got a ?@M BBBBBBBBB. from the building society( i.e. we had to pay a deposit of ,@M
with our own savings.
'hat is why ! have no more money and no more deposit account. !n fact ! have arranged an
BBBBBBBBBB with the bank% which means ! can occasionally withdraw more money than is actually
in my account. !nterest is calculated daily. Nast year ! asked the bank for a BBBBBBBBB.. to buy a
car. ! only wanted two months salary% but they refused. .ince ! don5t like the high interest rates that the
garage charges% ! bought a cheap second)hand car instead.
! always use the bank to buy BBBBBBBBB. when ! go abroad% because their rates are better than at
the exchange office. ! don5t like travellers5 cheques% and !5ve never had my money stolen H yet.
"y bank is also trying to sell me a private BBBBBBBBB plan% for when ! retire% but !5m not interested.
'hey also keep offering me BBBBBBBBBB about shares% bonds% unit trusts% mutual funds% and so on.
'hey don5t seem to reali/e that if ! could afford to buy all these things% ! wouldn5t need an overdraft.
,. Ghich synonym for '" is used in the textE
;. Ghat is a standing orderE
*. Ghat is the name of the printed form that you use when you put money into your bank accountE
<. Ghat are the advantages and disadvantages of credit cardsE
=. Ghat are the advantages and disadvantages of depositing money in a building societyE
+. 8o people in your country more often buy foreign currencies in banks or exchange officesE GhyE
>. Ghich types of loans are most often taken out in banks in your countryE
-. 6an students in your country take out loansE
*$ercise 8
%o#!lete the dialogue using the words in the bo$. Then !ractice the dialogue with your !artner.
state#ent access sounds transfer account nu#ber key in balance
sign u! stocks and bonds #enu of o!tions available day,to,day
Tele!hone banking
/e!resentative9 Cello. Cow can ! help you todayE
%usto#er9 Cello. !&d like some information on the telephone banking services offered at by your bank.
/e!resentative9 6ertainly. Ghat is your BBBBBBBBBBE
%usto#er9 +*-@=?,.
/e!resentative9 Ghat would you like to knowE
%usto#er9 Cow do ! BBBBBBBBBBE
/e!resentative9 Oust let me know% !&ll sign you up immediately.
%usto#er9 6an you tell me how the telephone banking services workE
/e!resentative9 Dou can do all your BBBBBBBB. banking over the telephone% ;< hours a day.
%usto#er9 'hat&s great. Cow do ! BBBBBBBB.. my accountE
/e!resentative9 Oust call the bank% BBBBBBBB.. your J!4 number and listen to the
BBBBBBBBBB available.
%usto#er9 Cow do ! choose which option ! wantE
/e!resentative9 Oust press the number for the service stated by the recording.
%usto#er9 Ghat kind of things can ! doE
/e!resentative9 Dou can check your BBBBBBBB.% pay bills% order a BBBBBBBB. or even
BBBBBBB. money to another bank.
%usto#er9 'hat&s fantasticP 6an ! trade BBBBBBBBB...
/e!resentative9 !&m afraid you will have to have a special account for that.
%usto#er9 Ghat about getting help if ! have any problemsE
/e!resentative9 'here&s an automated answering machine and staff are BBBBBBBB.
? to = seven days a week.
%usto#er9 !t all BBBBBBBB. very good to me. !&d like to sign up.
/e!resentative9 lright% can you answer a few questions pleaseE
%usto#er9 6ertainly...
*$ercise :
%o#!lete the sentences about %entral Banks using the words in the bo$.
6entral $anks(
act fi$ i#!le#ent issue control function influence su!ervise
,. BBBBBBBB. as banks for the government and for other banks.
;. BBBBBBBB. monetary policy H either the government5s% as in $ritain% or their own% if they are
independent% as in 7ermany and the 1..
*. BBBBBBBB. the money supply% measured by different aggregates such as "@% ",% ";% "*% etc.
<. BBBBBBBB. the minimum interest rate.
=. BBBBBBBB. as lender of last resort to commercial banks with liquidity problems.
+. BBBBBBBB. coins and banknotes.
>. BBBBBBBB. exchange rates by intervening in foreign exchange markets.
-. BBBBBBBB. the banking system.
*$ercise 1;
a' .iscuss the following uestions with your !artner.
,. Ghat are different banking channels and what are their advantages and disadvantagesE
;. Ghat are different types of banksE Ghat are the advantages of offshore banksE
b' Task. <o to a bank in your town or log on to its website and find out about the !roducts and
services it offers. %hoose one of the !roducts 2 services and #ake a short !resentation of its
advantages and disadvantages fro# your !oint of view.