UNIT 5. MONEY AND BANKING I.

Read the following text and answer the questions:

A HISTORY OF THE BANKING SYSTEM IN ENGLAND Modern Banking has its origins 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 moneychangers also began the practice of accepting deposits of cash and valuable for safekeeping. The merchants and money-changers of these cities also undertook the financing of commerce, the great medieval trade affairs, and they also called upon to provide finance for the rulers and the states in which they were established and they often became involved in financing the running of their own and other countries. Because of their power, they were seldom popular. 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 honour his obligations and therefore unable to continue his business. When the Jews were expelled from England by Edward I in 1290, their place was taken by the Lombards, who were already established in England. 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 17th century with the growth of the goldsmith 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 a sum equivalent to that deposited. Gradually, these notes themselves began to circulate among the merchants in 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 issue, when it appeared as a historical necessity, in 1694, 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 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. The Bank of England was nationalised in 1946.

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 woollen mills and mercers premises were it all began three hundred years ago. 1. Where are the origins of money-changers placed? 2. What does Lombard Street suggest to you? 3. What is the forerunner of the modern banknote? 4. How did the promissory note appear? 5. What was the Clearing House meant for? 6. How did the Bank of England acquire the monopoly of the note issue? II. Match each job title on the left with the correct definition on the right: a. The person who is responsible for an individual bank. b. someone who advises people on how to manage their financial affairs. c. Someone who prepares an individuals (or a companys) tax return. d. The person who is responsible for the financial side of running a business. e. A government official who checks that you are paying enough tax. f. The person who finds you the best insurance policy at the best price. g. Someone who buys and sells stocks and shares for clients and charges a commission. h. Someone who advises you or a company on how to pay less tax. i. Someone who comments on business and share prices in a particular sector of the economy. j. Someone who buys and sells large quantities of goods, especially food products such as tea, coffee and cereals, or raw materials such as wood or metal.

1. tax inspector 2. tax consultant 3. bank manager 4. commodity trader 5. accountant 6. finance director 7. market analyst 8. financial advisor 9. insurance broker 10. stockbroker

III. Choose the appropriate answer: 1. I'd like to _________________ an account. a. open; b. start; c. commence 2. You don't have any _________________ ( = money) in your account. a. funds; b. fun; c. funding 3. The bank _________________ my husband's credit card because he didn't pay his credit card bills. a. reneged; b. retracted; c. cancelled 4. A document which shows all your withdrawals and deposits (usually for one month) is called a "bank __________________"

a. stapler; b. statement; c. bill 5. What's another way to say "to withdraw"? a. to make out; b. to stake out; c. to take out 6. I'd like to _________________ some money to my other account. a. transfer; b. change; c. switch 7. A cashier's check is a check that's _________________ by a bank. a. guaranteed; b. guarantee; c. warrantee 8. Another way to say "debit card" is _________________. a. credit card; b. plastic card; c. bank card 9. Is there _________________ around here somewhere? ( = a cash machine) a. an electronic machine; b. an ATM; c. a money machine 10. If you've lost your bank card you can _________________ for a new one. a. reply; b. apply/reapply; c. fill 11. Your _________________ rate determines the repayments you make on the money you borrow from a bank. a. interest; b. internal; c. repayment 12. The money you borrow from a bank is called a _________________. a. loaner; b. loan; c. lone 13. I have to _________________ another loan. a. take out; b. go for; c. take in 14. If you'd like to buy a house, you will probably have to take out a _________________. a. statement; b. mortgage; c. marriage 15. A _________________ mortgage ensures that your interest rate will not change. a. variable rate; b. fixed level; c. fixed rate 16. Your home may be _________________ if you don't keep up repayments on your mortgage. a. retaken; b. repositioned; c. repossessed 17. Usually banks have two types of personal accounts - checking and _________________. a. savings; b. save; c. saver 18. You can _________________ paying account fees if you keep a minimum daily balance of $1000 on your account. a. access; b. avoid; c. avert 19. What's the _________________ on my account? It's $450. ( = there's $450 in your account) a. bail; b. money; c. balance 20. Usually, higher balances earn higher _________________ . a. rates; b. cash; c. levels IV. Fill in the gaps with the right phrase from the ones given below:

account payable accounting principles cash flow excise duty fiscal year gross income income tax indirect tax inheritance tax inland revenue intangible assets ledger clerk management accountant national insurance personal allowance tax allowance tax inspector tax return trade creditor 1. 2. 3. 4. A. is a person who decides how much tax an individual should pay. A. is a person who advises companies on how to make a profit. A. is a person who writes accounts in the ledger. A. is a person who has supplied goods or services and is owed money for them.

5. . is the amount of money received before taxes are paid. 6. is paid to the government on goods and services and can be reclaimed by retailers. 7. . is the amount of money moving in and out of a company at a particular point in time. 8. An. is a sum of money owed by a company such as an invoice received but not paid. 9. . can be turned into money only with difficulty such as copyright, trademark etc. 10. . is raised on products such as tobacco and alcoholic drinks. 11. A. is a period of twelve month arbitrarily chosen for tax purposes. 12. .. are a dozen or so concepts, conventions or doctrines generally observed in accounting. 13. In a. you give information about what you earn every year. 14. Your. is the total amount of income on which you do not have to pay tax. 15. A. is an amount of money that you can earn before you are taxed. 16. In Britain. is a system in which the money collected is given to people who are too old or ill to work. 17. In Britain and New Zealand, the . is the government office which collects the main taxes. 18. . is paid from money you have received from someone who has died. 19. .. is charged on goods and services rather than on the money that people earn. 20. .. is paid in relation to how much you earn.

V.

Provide one word for each gap: 1. 2. 3. Under means it has too little money to be able to develop. The rate is used to decide how much to charge for lending money. The income is the money which you can spend as you want and not on basic needs.
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4. 5. 6.

The assets of a business are things of value such as buildings. The extra money paid to someone because their job is dangerous is called money. Factory prices are the prices which a factory sells its goods for.

7. 8. 9.

A robbery is charging an unreasonably high price for something. A loan is what a bank lends to you until you can get the money from somewhere else. A bank exchanges cheques with other banks.

10. A building is a business that lends you money if you want to buy a house.