banking central banking
DESCRIPTION
BANKING CENTRAL BANKING. MK, U 14 RB, pp.26-29. INTRODUCTION. “Neither a borrower, nor a lender be.” (from Hamlet, Shakespeare) “If you owe your bank a hundred pounds, you have a problem. If you owe it a million pounds, it has a problem.” (J. M. Keynes). CURRENT ACCOUNT SAVINGS ACCOUNT - PowerPoint PPT PresentationTRANSCRIPT
BANKINGCENTRAL BANKING
MK, U 14RB, pp.26-29
INTRODUCTION
“Neither a borrower, nor a lender be.”(from Hamlet, Shakespeare)
“If you owe your bank a hundred pounds, you have a problem. If you owe it a million pounds, it has a problem.”
(J. M. Keynes)
VOCABULARY
WHICH OF THESE BANKING SERVICESDO YOU USE?
CURRENT ACCOUNTSAVINGS ACCOUNTDEBIT CARDCREDIT CARDCHEQUEBOOKCASH DISPENSER
(ATM)
→p. 73
STANDING ORDERLOANSOVERDRAFTMORTGAGEEXCHANGE OF
FOREIGN CURRENCY INTERNET BANKING
WHICH VERB IS MISSING?
1. If I _________money from a bank, I need to ________it one day.
2. The current account allows me to _______money when I need it.
3. Banks________ high interest to borrowers.
4. Banks _________low interest to depositors.
WHICH VERB IS MISSING?
5. Clients who took out a loan must _________the
principal and interest.
6. Clients can _________ a standing order.
7. If you _________your account (are in the red) you
pay high interest.
8. Banks _______mortgages to people who need a
place to live.
WHICH WORD IS MISSING?
I have a c________account in Zagrebačka
banka. Since I don’t like carrying cash with me I
mostly use my d_______ card (cash card) when I
go shopping. If I really need cash I find a c______
d_________ nearby. I sometimes use my Diners
c_______card as well.
I’m always on the run and I never have time to go
to my bank’s branch office to pay bills. That is why
I contracted a s______ o________which settles
all my regular utility bills. When I’m at home I
sometimes use I_______b_________to check my
balance.
Every December I go in the red. Luckily, my o_________is quite big so it comes in handy but I pay high interest on it and I try to avoid this option.
I also opened a s_______account to keep money safe long term. It pays a little interest though.
I also took out a l______ to renovate my flat. The i______ is quite high, so I’m thinking whether I should sell this flat and get a m________to buy a house that I’ve always wanted.
In today’s financial crisis I’m afraid my money will
run out. If it does, I’ll probably be forced to e________ the last dollars I still keep under the mattress.
RB, 26, 27
READING TYPES OF FINANCIAL INSTITUTIONS(MK, P. 73)
1. RETAIL (COMMERCIAL) BANKS2. INVESTMENT BANKS3. LARGE FINANCIAL CONGLOMERATES (AFTER
DEREGULATION)4. CENTRAL BANK5. HEDGE FUNDS6. INSURANCE COMPANIES7. BUILDING SOCIETIES… VOCABULARY
CENTRAL BANKING
Central banks implement monetary p________supervise exchange r_________regulate the credit s________supervise commercial b_________act as a lender of last r________ maintain the national currency s________
→ LISTENING, MK 2ND ED. TRACK 9, RB p. 29
COLLOCATIONS (LISTENING)CENTRAL BANKS…
IMPLEMENT …
SET…
LIMIT…
SUPERVISE /
OVERSEE…
CONTROL…
ESTABLISH…
ENSURE…
INTERVENE…
LEND…
SELL/BUY…
MAKE QUESTIONS BEGINNING WITH HOW/ WHY/ WHEN. USE THE PROMPTS
BELOW.e.g. How do central banks implement monetary
policy?
MONETARY POLICY THE MONEY SUPPLY THE INTEREST RATE NATIONAL CURRENCY
PAIR WORK: ANSWER EACH OTHER’S QUESTIONS.
LAST RESORT COINS AND BANK
NOTES EXCHANGE RATES THE BANKING
SYSTEM
CENTRAL, RETAIL OR INVESTMENT BANK…?offers portfolio
management servicesissues and underwrites
securitiesexchanges foreign
currencieslimits the fluctuations of
interest ratesalters the money supplyraises funds for industryreceives deposits
lends money to customers
sets interest rates ceilings and floors
makes a profit from spread
lends to commercial banks
makes a profit from fees and commissions
issues government bonds
READINGNORTHERN ROCK BANK CRISIS (Reader, p.35)
VOCABULARYbank run - the concerted action of depositors who try to
withdraw their money from a bank because they think it will fail
shakeout -an elimination of some competing businesses, products, etc., as a result of intense competition in a market of declining sales or rising standards of quality.
credit squeeze- a restraint or limitation of credit;
restricted bank lending that is accompanied by rising
short-term interest rates and a decline in economic
growth
The Treasury -the department of government that has
control over the collection, management, and
disbursement of the public revenue.
The Chancellor -the British cabinet minister responsible
for finance
SUBPRIME MELTDOWN (www.investopedia.com) ANTICIPATE THE ANSWER TO THE QUESTION AT THE
END OF THE SENTENCE.
Following the tech bubble and the events of September 11, the
Federal Reserve stimulated a struggling economy …HOW?
..by cutting interest rates to historically low levels. WHAT WAS
THE RESULT OF ON THE HOUSING MARKET?
As a result, a housing bull market was created. People with
poor credit got in on the action when mortgage lenders created
non-traditional mortgages.
Eventually, interest rates climbed back up… WHAT WAS THE CONSEQUENCE FOR BORROWERS?
…and many subprime borrowers defaulted when their mortgages were reset to much higher monthly payments.
This left mortgage lenders with property that was worth …HOW MUCH?
…less than the loan value.Defaults increased; the problem snowballed, and several
lenders (financial institutions) …WHAT HAPPENED TO THEM?
…went bankrupt.
Investors and hedge funds also suffered because lenders
had sold mortgages they originated into …WHICH
MARKET?
…the secondary market.
Here the mortgages were bundled together and sold to
investors as collateralized debt obligations (CDOs) and
mortgage-backed securities (MBSs). When the higher risk
underlying mortgages started to default, WHAT
HAPPENED TO THE VALUE OF ASSETS UNDERLYING
THESE SECURITIES?
…investors were left with properties that were quickly
losing value.
In the wake of the meltdown, …WHAT DID CENTRAL
BANKS DO?
…central banks released liquidity into the market place,
which allowed struggling lenders and hedge funds to
continue operations and make the necessary payments on
their obligations.
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