UNIT V BANKING

OBJECTIVES:

-familiarize with specific professional vocabulary

-change of the meaning from general to specific professional
-passive voice
-listening, writing, reading skills

I. Answer the questions before reading the text:

1. How do you think that banks appeared?
2. What is their role in market economy?
3. Is there any difference in banking in a command economy and market economy?

Reading comprehension

History and Organization of Banking in England

Modern banking has its origin in the finance of foreign trade. In the great medieval trading states
of Venice, Genoa and later Florence, a need arose to exchange one currency with another and the
early changers also began the practice acceptance of deposits of cash and valuables or
safekeeping. They also undertook the financing of commerce at the great medieval trade affairs,
and they also were called upon to provide finance of the rulers of the states in which they were
established, and they often became involved in financing the running of their own and other
countries. Because of the power they were seldom popular. Readily indefinable groups, such as
Jews, were persecuted and sometimes expelled, and the laws against usury were strict.
Since modern banking originated in the cities of northern Italy, it is not surprising that some of
its basic vocabulary has Italian roots. The word "bank" itself comes from the Italian word
"banco" meaning a bench. The "bankrupt" has the same origin and refers to the practice of
breaking the money-changers bench to indicate that he was no longer able to honor his
obligations and therefore unable to continue his business.
When Jews were expelled from England by Edward I in 1290, the Lombards, who were already
established in England, took their place. They became the merchants and the important financiers
in many European countries. The name of "Lombard Street" in the heart of the city of London is
the permanent reminder of the importance of these early times.
The accepting of deposits, the making of loans and the transfer of funds evolved during the
seventeenth century with the growth of the goldsmiths-bankers who had by that time, taken over

from the Lombards as major financiers in England.

Because of the nature of their trade, their premises had to be secured, and even before the 1640
seizure, there is evidence that they accepted coin on deposit from their customers, issuing
receipts for them.
The receipts entitled the holder to the return of his actual deposit, but they later became
promissory notes, giving the holder the promise that he would be able to withdraw, on demand,
an equivalent to that deposited.
Gradually, these notes themselves began to circulate among the merchants in the settlement of
their debts. Thus, these receipts became the forerunners of the modern banknote. Then, the words
"on bearer" were added after the name of the original depositor and they became "bearer
instruments", giving them a greater circulation.
The practice of placing money with goldsmiths with a given notice of required repayment had
emerged, thereby originating what we call today "deposit accounts". The private banknote came
into being, but in the following century the Bank of England gradually took over the function of
exclusive note issuer, when it appeared as a historical necessity, when the Government of the day
was in need for funds to pursue the war against France.
In 1773 the London private bankers also established a Clearing House that increased the ease of
transfer and allowed the individual banks to keep a smaller total of cash in their tills with which
to meet withdrawals and transfers. The fluctuating economic conditions at the beginning of the
19th century were attributed to the relatively unrestricted right to issue banknotes and the
problems caused by over-issue, so the Bank Charter Act provided the control of note issue that
eventually led to the Bank of England acquiring a monopoly of the note issue.
Further developments took place as legislation and other changes brought about a restructuring
in the supply of financial services. Increasing overseas competition and the freedom of building
societies offered a much wider range of financial services.
This is a far cry indeed from the goldsmiths' shops, wooden mills and mercers' premises where it
all began three hundred years ago.

VOCABULARY
I.

Fill in the blanks the missing words:

money changers, future earnings, letters of credit, coinage, wealth, trade, foreign
exchange, culture of financial services, financial center, paper money
Banking appears to have originated in Ancient Mesopotamia, several thousand years before
.. . All the modern practices such as deposits, interest, loans and .
existed from the time of the first great civilizations on earth. The clay tablets were
the forerunner of our modern systems that emerged in China by 900 AD
and in Western culture by the 18th century. A vibrant banking industry emerged in ancient Egypt
whereby the state provided warehouses in which farmers deposited their grain, who would
receive a deposit receipt showing the amount of . that was held by the bank in question.
Written receipts eventually became used for payment of debts to a third party. As the
standardization of coinage was needed for fair transactions, the profession of .. .

appeared. The episode in the New Testament where Christ overturns the tables of the money
changers in the Temple of Jerusalem (Matthew 21.12) demonstrates how wide spread the
banking industry and .. dealing was. The tables used by the money changing
trade were trapezium in shape, which is the origin of the word trapezitai the name used for
Greek bankers. The fall of the Roman Empire led to banking disappearance in the chaos of
barbarian invasions that produced the breakdown of .. and social organization. The
rebirth place of the banking industry was the Italian medieval society which began to broaden the
. . It was the Knights Templar that began to provide banking
services. Economics credits the birth of capitalism with the Protestant Reformation, as before it
banking activity was exclusively conducted by the Jewish community, due to their religion
permitting it. With the Revolution in Britain in 1688, the Bank of England was established by the
Royal Charter in July 27th, 1694. The rise of the British Empire made London become the
primary . within Europe. As with all things in life, the development of the
banking industry has its side effects. While leverage allows an individual to purchase items today
using tomorrows . .., it also tends to create greater levels of inflation.
Throughout the monetary history of the world, credit made business cycle over-expand and overcontract. Nonetheless, the absence of banking and credit discourages human interaction that
could destroy the very foundations of civilization.
II. Answer the questions before reading the following text:
1. What is role that central banking has in economy?
2. Is it important that central banking be autonomous?
The Bank of England
The Bank of England was established in 1694 by the Act of Parliament and Royal Charter as a
corporate body; the entire capital stock was acquired by the Government under the Bank of
England Act in 1946. The main functions of the central bank are to execute monetary policy, to
act as banker to the Government, to act as a note-issuing authority and to exercise prudential
supervision over and to provide banking facilities for the banking system. The central bank is
also responsible for arranging government borrowings and managing the National Debt. It also
oversees the soundness of the financial system as a whole.
As the single note-issuing authority, The Bank of England issues banknotes in England and
Wales, banknotes that are no longer backed by gold that is fiduciary. The Scottish and Northern
Ireland banks have limited right to issue notes that are mostly covered by holdings of Bank of
England notes.
The Bank of England has also the right to influence money market conditions through its
dealings with the discount houses that appeared and developed in the nineteenth century as bill
brokers for industrialists. The discount houses hold mainly treasury, local authority and
commercial bills, and negotiable certificates of deposit financed by short-term loans from the
banks. For covering a shortage of cash in the banking system, the Bank can release it either by
buying bills from the discount houses or by lending directly to them. This way the banks can
replenish their cash balances at the Bank by recalling some of their short-term loans to the
discount houses.

The main wholesale markets in London for money, foreign exchange and gold bullion operated
by professionals, are also supervised by the same central Bank.
All the deposit-taking organizations require authorization from the Bank of England and are
subject of its supervision. The present banking legislation increased the Bank's power to modify
the conduct of banking institutions, to investigate cases of illegal deposit-taking, to block bankmergers and takeovers on prudential grounds. It also enables information to be shared, in strictly
controlled ways, among supervisors in different financial services, and permits auditors to make
reports to the Bank of England about a bank if the circumstances require it.
The Bank may intervene in the foreign exchange markets to check undue fluctuations in the
exchange value of sterling. As Europe moves towards economic and monetary union (EMU), the
Bank of England will join The European Central Bank, which has its central office in Frankfurt
and it is independent of instructions.
III. Finding a title for each fragment, you will identify the main functions of the Bank of
England:
Bank-notes issuer, Supervision of Monetary Policy, Supervision of Commercial banking, Money
Market Regulator
A. ______________________
The Bank is responsible for arranging government borrowing or repaying debt and for managing
the National Debt. The Bank's principal role in government finance is to borrow money in the
markets and from the public. The main forms of borrowing are through Treasury Bills,
government bonds (known as gilts or gilt-edged stock) and occasional foreign exchange
borrowings. The bank is responsible for issuing and redeeming these securities and maintains a
register of gilts.
The Bank is directly involved in executing the Government' monetary policy, thus providing a
framework for non-inflationary economic growth. The Government Treasury has an important
role in providing advice and is closely involved in implementing government decisions on the
appropriate level of interest rates through dealings in money markets.
B. _________________________
The Banking Act in 1987 created a Board of Banking Supervision and increased the Bank's
powers to modify the conduct of banking institutions, to investigate cases of illegal deposittaking, to block bank mergers and takeovers on prudential grounds and to require information
from banks. The Bank is also responsible for the supervision of the main wholesale markets in
London for money, foreign exchange and gold bullion. The Bank may also intervene in the
foreign exchange markets to check undue fluctuations in the exchange value of sterling.
C. ___________________
The Bank has the sole right to issue banknotes that are no longer backed by gold but by
government stock and other securities (known as the fiduciary issue of notes). Scottish and
Northern Ireland banks have limited rights to issue notes.
D. ________________________
The Bank's money market operations are designed to smooth out fluctuations in the flow of cash

between government and the private sector. Shortage of money is offset by the Bank buying
short-dated bills and maturities from the market and lending funds to the market. When there is a
surplus of money, the Bank seeks to offset this by selling Treasury and other bills. Normally, the
pattern of government and Bank operations results in a shortage of cash in the market each day
with the result that the Bank is the final provider of liquidity in the system and can help to
implement and direct monetary policy by choosing the interest rates at which it provides funds.
When the Bank changes its dealing rate the commercial banks tend to follow suit promptly and
change their own rates from which deposit and lending rates are calculated.
VI. Find the following words in the dictionary and place them in the blanks of the text:
1) deal; 2) maturity; 3) margin; 4) render; 5) investment; 6) flexible; 7) difference; 8) cater; 9)
supermarket
Commercial banks, or retail banks a) _________ the service of holding deposits, paying money
at customers' instruction, lending money for investment, exchanging foreign currency, and so on.
The difference between interest rates paid and their yield to the customers represents its profit
and it is named spread or b) _________. But when lending, the commercial banks must always
find a balance between the yield and the risk on one hand and liquidity and c) _________ of the
loans on the other hand. The recent developments have enabled banks to emphasize and d)
_________ for different customers needs, extending from retail financial services, including
counseling advice, to business development needs.
Merchant banks have proved to be some of the more e) ________ financial institutions. They
have no longer the financial muscle of the nineteenth century but they still f) _________ funds
for industry on financial markets, finance international trade, issue and underwrite securities and
deal with mergers and takeovers. Similar banks are called g) _________ banks in SUA,
rendering services in industry, without offering loans.
In recent years the h) ________ between commercial or retail banks and merchant or investment
banks became lesser and lesser visible. Huge financial institutions appeared which render
services of banking, insurance, stock broking, investment advice, making financial i) ________.

SPEAKING
I. Read the text and answer the questions:
1 What were the main functions of the Central Romanian banking before 1990?
2. What are now the main functions of the Central Bank in Romania?
The structure of the banking system prior to 1990 in Romania combined the functions of a
central bank and some functions of a commercial bank. Together with other state institutions it
conceived the drafts of the credit and cash plans of the economy and monitored their
implementation. It organized the granting of short-term credits on the basis of approved plans
and extended credits to enterprises and economic organizations that had accounts with it. The
main monetary and credit objectives were to provide enterprises with required credit, so that they
could meet their plan targets, to provide sufficient liquidity in the economy, consistent with the
planned availability of goods.
Now, the functions of the National Bank of Romania changed and they are covered by the

Statute Law (Law No 34/1991). Under this status, in order to preserve the political independence
of the central bank, the Governor and the Board of Administration are appointed by the
Parliament, at the recommendation of the Prime Minister, for an eight-year renewable term.
The first article of the Status defines the role of the National Bank formulates and conducts
monetary and credit policy within the framework of the country's economic and financial policy
with the goal of preserving the stability of the national currency. The National Bank of Romania
determines the money supply in the economy conducts the foreign exchange policy and
supervises the commercial banks. The National Bank of Romania is also the single institution to
issue banknotes and coins, to manage the international reserves of the country, and grant
advances to the Central State Budget to cover temporary deficits.
The Board of Administration of the Bank meets regularly. It determines the broad parameters of
the monetary policy and decides on such matters licensing of banks, introduction of new or
changes in existing prudential regulations, actions on operating banks (extension of special
loans, imposition of penalties, etc) and other policy in internal budgetary matters.
II. How can you recognize a banker? Describe him.
III. Answer the following questions after having read the text:
1. At what time the staffs of the bank come at work?
2. Who is to open the bank and what are his responsibilities?
3. Who is to replace the manager while he is away? Is he empowered for any job of the
manager?
4. What happens to the safe and the cash dispensers at night?
5. What kind of documents needs expert knowledge and who is to handle them?
6. Explain who is the "waste clerk"
The Morgantown branch of the Shoe-string Bank has a staff of eight people.
Manager
Chief Clerk
Senior or Securities Clerk
Junior Clerk
Typist/Clerk
Computer/Clerk
Cashier
Cashier
There is a lot of work to be done during the day and the staff in a small branch has to be able to
do many different jobs. Here is a typical day.
After 9 o'clock the manager reads the letters and dictates replies. He has interviews with
customers and often leaves the branch during the day to visit customer's offices and look round
their businesses. While he is away, the chief clerk is in charge.
Two members of staff arrive and open the bank. The staff takes turns at this. They open incoming
mail and sort it. The typist deals with the mail typing the branch's letters and organizes the
outgoing mail also handles the enquiries at the counter. She is responsible for Standing Orders.
At 9 30 the Chief clerk opens the safe and begins organizing the work for the staff. He takes over

from the manager when he is out from the office. He is responsible for staff training and helps
and advises the staff. He also does the accounting.
The night safe is emptied and the content checked by the Securities clerk. He also checks the
cash dispenser balances and the machine is refilled with cash. Cheques from central clearing
system are checked too. The senior or securities clerk handles the difficult paperwork. He often
handles the problems that need expert knowledge, such as wills, loans and securities and foreign
business.
The computer operator enters all the customers' credits and debits through the computer terminal.
The Junior Clerk has general duties. He works on the counter during busy times, handling
statements and the telephone. The junior clerk is usually the "waste clerk".
The cashiers collect the cash for their tills from the safe and work at the counter, taking in and
paying out money (including foreign transactions in a small bank). They also give out statements
and clear desks and balance cash, and return cash from till to safe.
At 5 o'clock the staff closes the bank and leave.
IV. Develop the meanings of the following
1. "Neither a borrower nor a lender be." (William Shakespeare)
2. "Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual
income twenty pounds, annual expenditure twenty pounds ought and six, result misery". (Charles
Dickens)
3. "Debt is the prolific mother of folly and crime." (Benjamin Disraeli)
4. "I wish it were possible to obtain an additional article to our Constitution. ... I mean an article
taking from the federal government the power of borrowing." (Thomas Jefferson
5. "Who goeth a borrowing goeth a sorrowing". (Benjamin Franklin)
6. "At the heart of our national finances there is a simple, inescapable act ... that our government
- any government - like individuals and families - cannot spend and continue to spend more than
they take in without inviting disaster." (Clarence Cannon)

WRITING
I. Rebuild the history of the Central Bank of Romania following the milestones information.

GRAMMAR
I. Turn the propositions into passive voice, according to the model:
Most people produce goods and services.
Goods and services are produced by most people.
Economists study the economic phenomena to discover new tendencies.
Economic changes affect our lives
He told me how the capitalist system works.
He tried to prove how farmers produced more in their country.
II. Write a paragraph describing actions going on in a bank when it opens. Use some verbs +
adverbial particles given below in the passive infinitives) present and b) perfect. The infinitive
expresses simultaneity, while the infinitive perfect indicates anteriority.
Model:
a) flowers- water
The flowers must be watered.
b) flowers - water
The flowers should have been watered.
1. switch on - the lights
2. hang up - the coats

3. take out - the pens

4. dust bin - empty
5. fill in - the documents forms
6. lay down - the rates of exchange
7. give explanations - the customers asking for loan conditions
8. invite - young people to use youth deposit facilities
9. prepare the documents - customers withdraw money from their accounts
10. check - the banking documents
IV. Turn the previous sentences into active voice sentences.
V. Practice the passive gerund (being + Past Participle)
Situation: The manager's secretary has come to ask for some information. He is preparing
a report, and he doesn't want to be disturbed.
The manager: I object to being disturbed during my work./while I am working.
Practice with:
1. interrupt
2. ask questions
3. trouble
4. call to the phone
5. worry
6. interview

TRANSLATION
A
"Informaa este la fel de important, ba chiar mai important dect pmntul, munca, materiile
prime i capitalul" (Alvin Toffler-Corporaia adaptabil, 1993).
Informeaz-te dimineaa, ia o decizie la amiaz i treci la aciune a doua zi, dup o noapte de
reflecie. (anonim)
"Morala i economia politic resping deopotriv pe individul care consum fr s produc."
(H.de Balzac-Maxime si cugetri, 1979).
Cnd ai ndoieli, ntreab, cnd nu ai ndoieli, ntreab.
Ceea ce merit s fie fcut, merit s fie bine fcut. (Cugetri engleze, 1980).
Doar cei ce se ajut singuri tiu cum s-i ajute pe al ii i s respecte dreptul lor de a se ajuta
singuri. (Cugetri engleze - 1980).
Nici o zi fr s tragi o linie. (cugetare latin).
Exist totdeauna motive excelente pentru a nu aciona; numai c, dac motivele predomin,
lucrurile rmn nefcute (G.B.Shaw).
B.
Perioada de nflorire a negoului cu orientul, respectiv secolele XIV-lea i al XV-lea marcheaz
apogeul centrelor comerciale italiene ale afaceritilor din peninsul. Deoarece n trguri stteau

n spatele unei tejghele pe care o numeau banca, mnuitorii de bani poart tot mai mult
apelativul de bancheri. Asocierea pentru sporirea forei financiare i mprirea riscurilor lua
forma de societate care i trimitea ageni pentru extinderea afacerilor la sucursale din tar i din
strintate. In cele doua republici intrate in acerba concurenta inca din secolul al XII-lea, Genova
i Veneia, se practicau dobnzi ruintoare in slujba crmuitorilor, contribuind totui la stimularea
activitii comerciale i mestesugreti.
C.
Cel mai puternic, ntins i influent angrenaj bancar de la dispariia Ordinului Templierilor, a fost
casa Fugger din Augsburg, iar perioada sa de apogeu a fost n secolul al XVI-lea. Faima i
influena i-au fost aduse, pentru mai multe generaii, de afacerile bneti n care au reu it s
ajung pe primul loc pe continent. Datorit resurselor acumulate i a prestigiului dobndit, un
numr imens de clieni capete ncoronate, nobili, comerciani, mesteugari, navigatori apelau
la serviciile sale, depuneau capitaluri spre pstrare, luau mprumuturi, efectuau transferuri de
fonduri.
Intreaga sa evoluie a fost legat i influenat de evenimentele politice ale vremii care treceau
prin curile regale. Reeaua de sucursale i agenii i crease un adevarat serviciu de informa ii
confideniale care urmrea atent micrile pe scena politic i anticipa schimbrile de palat sau
operaiunile militare, existnd o permanent preocupare i pentru urmrirea pulsului economic
internaional.