Banking and taxation - Types of banks

Banking and taxation

Vocabulary

Match up these terms with the definitions below.

Cash card  cash dispenser credit card home banking

Loan mortgage overdraft standing order

Current account (GB) or checking account (US)

Deposit account (GB) or time or notice account (US)

1 an arrangement by which a customer can withdraw more from a bank account than has been deposited in it, up to an agreed limit; interest on the debt is calculated daily

2 a card which guarantees payment for goods and services purchased by the cardholder, who pays back the bank or finance company at a later date

3 a computerized machine that allows bank customers to withdraw money, check their balance, and so on

4 a fixed sum of money on which interest is paid, lent for a fixed period, and usually for a specific purpose

5 an instruction to a bank to pay fixed sums of money to certain people or organizations at stated times

6 a loan, usually to buy property, which serves as a security for the loan

7 a plastic card issued to bank customers for use in cash dispensers

8 doing banking transactions by telephone or from ones own personal computer, linked to the bank via a network

9 one that generally pays little or no interest, but allows the holder to withdraw his or her cash without any restrictions

10 one that pays interest, but usually cannot be used for paying cheques (GB) or checks (US), and on which notice is often required to withdraw money

Types of banks

Read the text below and write short headings (one or two words) for each paragraph

Commercial or retail banks are businesses that trade in money. They receive and hold deposits, pay money according to customers instructions, lend money, offer investment advice, exchange foreign currencies, and so on. They make a profit from the difference (known as a spread or a margin) between the interest rates they pay to lenders or depositors and those they charge to borrowers. Banks also create credit, because the money they lend, from their deposits, is generally spent (either on goods or services, or to settle debts), and in this way transferred to another bank account often by way of a bank transfer or a cheque (check) rather than the use of notes or coins from where it can be lent to another borrower, and so on. When lending money, bankers have to find a balance between yield and risk, and between liquidity and different maturities.

Merchant bank in Britain raise funds for industry on the various financial markets, finance international trade, issue and underwrite securities, deal with takeovers and mergers, and issue government bonds. They also generally offer stockbroking and portfolio management services to rich corporate and individual clients. Investment banks in the USA are similar, but they can only act as intermediaries offering advisory services, and do not offer loans themselves. Investment banks make their profits from the fees and commissions they charge for their services.

In the USA, the Glass-Steagall Act of 1934 enforced a strict separation between commercial banks and investment banks or stockbroking firms. Yet, the distinction between commercial and investment banking has become less clear in recent years. Deregulation in the USA and Britain is leading to the creation of financial supermarkets: conglomerates combining the services previously offered by banks, stockbrokers, insurance companies, and so on. In some European countries (notably Germany, Austria and Switzerland) there have always been universal banks combining deposit and loan banking with share and bond dealing and investment services.

A countrys minimum interest rate is usually fixed by the central bank. This is the discount rate, at which the central bank makes secured loans to commercial banks. Banks lend to blue chip borrowers (very safe large companies) at the base rate or the prime rate; all other borrowers pay more, depending on their credit standing (or credit rating, or creditworthiness): the lenders estimation of their present and future solvency. Borrowers can usually get a lower interest rate if the loan is secured or guaranteed by some kind of asset, known as collateral.

In most financial centres, there are also branches of lots of foreign banks, largely doing Eurocurrency business. A Eurocurrency is any currency held outside its country of origin. The first significant Eurocurrency market was for US dollars in Europe, but the name is now used for foreign currencies held anywhere in the world (e.g. yen in the US, DM in Japan). Since the US$ is the worlds most important trading currency and because the US has for many years had a huge trade deficit there is a market of many billions of Eurodollars, including the oil-exporting countries petrodollars. Although a central bank can determine the minimum lending rate for its national currency it has no control over foreign currencies. Furthermore, banks are not obliged to deposit any of their Eurocurrency assets at 0% interest with the central bank, which means that they can usually offer better rates to borrowers and depositors than in the home country.

Commercial / retail bank banca comerciale / banca de depozit

Merchant bank / Investment bank banca comerciala / de investitii

Vocabulary

a.      Find the words or expressions in the text which mean the following.

1 to place money in a bank; or money placed in a bank

2 the money used in countries other than ones own

3 how much money a loan pays, expressed as percentage

4 available cash, and how easily other assets can be turned into cash

5 the date when a loan becomes repayable

6 to guarantee to buy all the new shares that a company issues, if they cannot be sold to the public

7 when a company buys or acquires another one

8 when a company combines with another one

9 buying and selling stocks or shares for clients

10 taking care of all a clients investments

11 the ending or relaxing of legal restrictions

12 a group of companies, operating in different fields, that have joined together

13 a company considered to be without risk

14 ability to pay liabilities when they become due

15 anything that acts as a security or a guarantee for a loan

b.The text contains a number of common verb-noun partnerships (e.g. to lend money, to finance international trade). Match up the verbs and nouns below to make common collocations.

Charge  advice

Do bonds

Exchange business

Issue  currencies

Make deposits

Offer funds

Pay  interest

Raise  loans

Receive  profits

Underwrite security issues

32. Opening an account and means of payment

At the Bank Opening an account

Mr. X I would like to open an account with you.

Bank Clerk Very well, sir. Here is a form youll have to fill in.

Mr. X There may be a problem. You see, Im a foreign resident.

Bank Clerk This is quite all right, sir. Quite a large number of our clients are foreigners. Do you want to open a current account or a deposit account?

Mr. X Well, Im going to stay and work here for a while, and Id like my salary to be paid into my account. But I dont want to have to give notice before I can withdraw money.

Bank Clerk Its obviously a current account you need.

Mr. X How long will take to open an account?

Bank Clerk Doesnt take long, sir. Let me see Today is Thursday, if you can complete this form today, your cheque-book will be ready for you on Tuesday.

Mr. X Fine. So, my salary could be paid in at the end of the month.

Bank Clerk No doubt, sir.

Mr. X There are two questions Id like to ask. Will this be the only place where I can cash a cheque?

Bank Clerk Oh, no, sir. You can have them cashed at any of our branches.

Mr. X Good. And what about statements of account? How frequently does one get them?

Bank Clerk Normally, once a month. But we shall send one out after each transaction if you want us to.

General Information:

When do/are you open?

How late do you stay open?

When do you close?

What are your opening hours?

In the US: Does this bank have an ATM (Automatic Teller Machine bancomat)

In the UK: Do you have a cash point/dispenser?

The ATM ate/kept my card.

The cash dispenser wont give me my card back.

If you want to use bank services you may have to queue (UK) or stand in line (US) and wait for the next available teller (US) or clerk (UK): When their desk is free, a light will come on:

Next, please.

Please step down (US).

Im open over/down here.

Queue / stand in line = a sta la coada

Teller / clerk = functionar la ghiseu

You can then tell him or her what you want:

I want/need/would like to cash a check.

Id like to cash these travelers checks, please.

Can you change a ten-pound note, please?

Id like ten dollars worth of quarters, please.

I need a roll of quarters.

If you have an account there:

Id like to make a deposit.

Id like to withdraw some money from my account.

Id like to make a withdrawal.

If you want to withdraw some money from abroad:

Id like to transfer some money from an overseas bank account.

Before the clerk gives you any money, she/he will ask:

How would you like that?

Any preference?

Large or small bills (US) notes (UK)?

Your reply:

It doesnt matter (which denomination)

All twenties, please.

Just tens and twenties, please.

Five, tens and three fives, please.

No small bills/notes, please.

If you want to transfer some money, the clerk will say:

Are you a customer here?

First of all, I need some ID, please.

May I see some identification?

Do you have a bank card with you?

Id like the name and address of your bank, your account number and your sorting code, please.

Please fill in this form.

Im afraid youll have to go to the enquiries desk (biroul de informatii).

Or, if youre cashing a check:

Could you endorse this (sign it on the back), please.

Perhaps youre withdrawing money with a credit card:

Enter your PIN number, please (PIN: Personal Identification Number).

If you have foreign currency:

Do you handle foreign exchange here?

Is there a foreign exchange desk?

Id like to change/buy some foreign currency.

Whats the current exchange rate, please?

How many marks to the dollar, please?

And the reply:

The exchange rate is 1,5 marks to the dollar.

Im afraid the rate has gone up today.

You might want to know:

Do I have to pay bank charges (comision) on top of that?

Is that inclusive of commission?

Are there any additional expenses?

What commission do you charge?

Maybe youre staying in an Anglophone country for more than a year and you want to open a bank account there:

Id like to open a deposit/checking/ savings account, please.

Id like to apply for a loan.

Id like to get a safety deposit box (safe de depuneri).

Whats the interest rate on this account?

Could you explain the service charges on this account?

Could I have a new checkbook, please?

Id like to apply for a bank/cheque/credit/cash card, please.

Means of payment.

Id just had a phone call from the bank. They couldnt cash in Ds cheque. They were told there were insufficient funds on his account.

Im surprised. That would be the first time. Can you remind me of the amount?

Its not a large sum: only 135 pounds.

This is all the more surprising. He is not the kind of person to overdraw his account. What sort of a cheque did he make out?

Im looking into his file Now It was a giro cheque. Usually he pays us by bank cheque for small amounts, and by draft for large sums.

It makes more sense. Just give him a ring, will you? Im sure hell settle immediately.

Ill do that. Something else. Ive had very bad information about B, you know, the reseller (vanzator) who wanted immediate delivery.

I see who you mean. Its his first order with us?

Thats it. Hes already had a current account cancelled and has a reputation for being a slow payer.

If so, insist on payment with the order (plata la comanda). Delivery is out of the question until the sum has been paid into our account.

Well, I think thats all. Oh yes! One more thing, the drafts to be discounted

Means of payment. Key sentences.

His account is overdrawn (in the red).

Cecul sau este descoperit.

The settlement is long overdue.

Plata ar fi trebuit sa fie facuta demult.

Whats his current account number?

Care este numarul contului sau curent?

Charge it to my account.

Scoateti suma din contul meu.

Settle the amount by money order if you find it more convenient.

Platiti suma prin mandat postal daca considerati ca este mai practic.

The cheque was made out to his order.

Cecul era facut la ordinul sau.

He intends to open a deposit account at one of our branches.

El are intentia sa deschida un cont pentru depuneri la una din sucursalele noastre.

I think I remember it was a bearer cheque.

Cred ca imi amintesc, era un cec la purtator

Normally, that payment-in ought to have been recorded on my last statement of account.

Normal, acea plata (varsamant) ar trebuie sa figureze pe ultimul meu extras de cont.

For sight withdrawals, you simply have to go to counter no.3

Pentru retragerile la vedere, ajunge sa mergeti la ghiseul nr.3

She will pay us by instalments over six months.

Ea ne va plati in rate esalonate pe sase luni.

I have kept the stub (counterfoil) of the cheque which I issued on March 6^th.

Am pastrat talonul cecului pe care l-am emis pe 6 martie.

The holder of the credit card must inform our nearest office in case of loss or theft.

Titularul cartii de credit trebuie sa informeze imediat biroul nostru cel mai apropiat in caz de pierdere sau de furt.

Thanks to your credit card, you may rent a car without leaving a deposit.

Datorita cartii dumneavoastra de credit veti putea inchiria o masina fara sa lasati o garantie.

How is it that this cheque has not been endorsed?

Cum se face ca acest cec nu a fost andosat?

I suppose youd rather be paid in cash?

Presupun ca preferati sa fiti platiti cu bani gheata.

The draft will fall due at the end of the month.

Trata ajunge la scadenta la sfarsitul lunii.

Why havent you presented this draft for acceptance yet?

De ce nu ati prezentat inca aceasta trata la acceptare?

How long will it take to have the sum transferred to my account?

Cat dureaza sa virati suma in contul meu?

It has been rejected for non-conformity of the signature (because the signature was not true).

El a fost refuzat din cauza nepotrivirii semnaturii (din cauza ca semnatura nu era cea adevarata).

This is not the first time he has issued bad cheques (dud checks; cheques that bounce).

Nu este prima data cand el emite cecuri fara acoperire.

33. Banking Key words and sentences

The banks have played a prominent role in the development of modern economy since the very beginning of commercial activities. Their branches have become a familiar sight on many city streets, but also in villages, as more and more people now bank with any one of the national or local banks.

Banks offer their services both to private individuals and to businesses. One can open a current account or a deposit account with them. The former will enable a person to use a cheque for payment instead of hard cash, whereas the latter will bring a small interest. People can ask their bank to pay recurring expenses for them, such as subscription, rents, telephone, gas or electrical bills. Valuables or deeds can be left in custody in a bank safe on payment of certain charge. The bank will obtain foreign currencies, issue travellers cheques and letter of credit payable at their branches or at correspondent banks.

Besides, banks will operate transactions on the stock exchange for you and give advice on investments. They also lend money, generally on a short term basis: thus they can allow overdraft facilities or personal loans; if your credit rating is good and if you can offer some sort of security, they may consider longer term credit. Most of this applies to business discounting of their bills Bills of Exchange (drafts), or even Promissory Notes. In the field of foreign trade, the banks can help by financing or advising their clients. They can be referred to by either party for status enquiries in business transactions.

Recurring expenses = cheltuieli recurente

Valuables / deeds = acte, valori

Overdraft = cont debitor, descoperire de cont

Be referred to = a fi indrumat

Definition

A cheque is signed by the payer and payable to the payee or to his order. A draft (or bill of exchange) is drawn by the creditor on the debtor and payable to the drawer or to a third party after acceptance by the drawee.

Un cec este semnat de platitor si se plateste beneficiarului sau la ordinul sau. O trata este trasa de creditor asupra debitorului si se plateste tragatorului sau unei terte parti dupa acceptare de catre tras.

Bank. Key sentences.

An interest is charged on all banks services.

Se percepe dobanda pentru toate serviciile bancare.

You had better ask for an overdraft before your account is overdrawn (in red).

Ar fi bine sa cereti un descoperit inainte de a vi se epuiza contul.

I always deposit my valuables and my wifes jewels in a bank safe before leaving for a long holiday.

Depun intotdeauna obiectele mele de valoare si bijuteriile sotiei la o banca inainte de a pleca intr-o vacanta de lunga durata.

Where can I cash this cheque (check U.S.)?

Unde pot incasa acest cec?

Remember to record all withdrawals on counterfoils (U.S. stubs) in your cheque-book.

Nu uitati sa inregistrati toate retragerile pe talonul carnetului dumneavoastra de cecuri.

They offered me to refund a 2,000 personal loan over a 30-month period.

Ei mi-au propus sa rambursez un imprumut personal de 2.000 de lire in treizeci de rate lunare.

When writing out or endorsing a cheque, one must be careful to avoid any erasure.

Cand se redacteaza sau se andoseaza un cec, trebuie sa se evite orice stersatura.

She made out so many dud (bad) cheques that no bank will trust her with a cheque-book.

Ea a intocmit atatea cecuri fara acoperire, incat nici o banca nu-I va mai incredinta un carnet de cecuri.

Dont forget to have these bills discounted by the end of this month.

Nu uitati sa scontati aceste efecte la sfarsitul lunii.

Recently a trader sued his banker after he could no longer have his bills discounted.

Recent, un comerciant a intentat un proces bancii sale dupa ce n-a mai avut posibilitatea sa-si sconteze efectele de comert.

The clearing-house will centralize all the operations dealing with the exchange of bills and cheques between banks.

Camera de decontari/oficiul de cliring va centraliza toate operatiunile care se refera la schimbul interbancar de efecte de comert si cecuri.

The U.S. investment banks have just raised their prime rate by point to 6,75%.

Bancile de investitii americane tocmai au crescut rata de baza (a dobanzii) la 6,75% marind-o cu un sfert de punct.

The increase in the price of short-term money has been confirmed whereas longer term rates remain stable.

S-a confirmat cresterea pretului pentru imprumuturile pe termen scurt, in timp ce ratele (dobanzii) pe termen lung raman stabile.

The Prime Rate (fine rate, blue-chip rate, [B.E.] base rate) is the rate granted by U.S. banks to their clients with the highest rating.

Rata de baza reprezinta rata acordata de bancile americane clientilor care prezinta cel mai mic risc.

The spell of monetary stability has lasted since the begining of the year.

Aceasta perioada de stabilitate monetara dureaza de la inceputul anului.

The policy of expensive money is meant to fight inflation.

Politica dirijata impotriva cresterii preturilor este destinata combaterii inflatiei.

but it has immediate repercussions on corporate income statements.

dar acest lucru are repercursiuni imediate asupra conturilor de venit si pierderi ale intreprinderilor.

The Central Bank acts as banker to the government and to other banks, and as the central note-issuing authority.

Banca centrala functioneaza in calitate de bancher pentru guvern si alte banci si ca autoritate centrala de emisiune monetara.

Banking. Key sentences.

Id like to change French francs into pounds.

As vrea sa schimb franci francezi in lire.

Your account is in the red (overdrawn).

Contul Dumneavoastra este epuizat.

Should I (must I) endorse the cheque?

Trebuie sa andosez cecul?

He has opened a giro account.

El a deschis un cont-cec postal.

My salary is paid into my account every month.

Salariul meu este varsat in contul meu in fiecare luna.

The holders of such deposit accounts must give seven days notice before withdrawal.

Detinatorii de astfel de conturi de depuneri trebuie sa instiinteze (banca) cu sapte zile inainte pentru a-si retrage banii.

Savings accounts earn an interest.

Conturile de economii aduc o dobanda.

The last withdrawal dates back to the 27^th of last month.

Ultima retragere este din 27 luna trecuta.

He wanted me to make out a blank cheque.

El voia sa faca un cec in alb.

Im not sure I kept the stub.

Nu sunt sigur ca am pastrat talonul.

Why not endorse the cheque to his (her) name?

De ce sa nu andosez cecul pe numele lui (ei)?

My bank will lend me part of the sum.

Banca mea o sa-mi dea cu imprumut o parte din suma.

He will find it hard to repay his loan.

Ii va fi greu sa ramburseze imprumutul.

Why has his (her) overdraft been discontinued ?

De ce nu i s-a mai dat descoperitul?

He should not have borrowed so much.

Nu ar fi trebuit ca el sa imprumute atat.

This is the 5^th bad cheque (dud cheque) weve had this month.

Este al cincilea cec fara acoperire care mi se da luna aceasta.

Please go to counter 6.

Va rog sa mergeti la ghiseul 6.

Please give me the rest in 5-pounds notes.

Dati-mi restul in hartii (bancnote) de 5 lire.

The statement has still not reached me.

Extrasul (de cont) nu a ajuns inca la mine. (nu mi-a parvenit inca)

I have to (I must) replenish my account.

Trebuie sa-mi reaprovizionez contul.

She hasnt drawn on her account for 3 weeks.

Ea nu a mai scos din contul sau de trei saptamani.

34. Taxation and how to avoid it

Vocabulary

Which terms do the following sentences define?

The tax people pay on their wages and salaries is called

Capital transfer tax income tax wealth tax

A tax on wages and salaries or on company profits is a/an

Direct tax indirect tax value-added tax

A tax levied at a higher rate on higher incomes is called a

Progressive tax regressive tax wealth tax

A tax paid on property, sales transactions, imports, and so on is a/an

Direct tax indirect tax value-added tax

A tax collected at each stage of production, excluding the already-taxed costs from previous stages, is called a/an

Added-value tax sales tax value-added tax

Profits made by selling assets are generally liable to a

Capital gains tax capital transfer tax wealth tax

Gifts and inheritances over a certain value are often liable to a

Capital gains tax capital transfer tax wealth tax

The annual tax imposed on peoples fortunes (in some countries) is a/an

Added-value tax capital gains tax wealth tax

Making false declarations to the tax authorities is called

Fiscal policy tax avoidance tax evasion

Reducing the amount of tax you pay to a legal minimum is called

Creative accounting tax avoidance tax evasion

Income tax impozit pe venit

Wealth tax impozit pe avere

Direct tax impozit direct

Indirect tax impozit indirect

Progressive tax impozit progresiv

Regressive tax impozit regresiv

Value-added tax TVA

Sales tax impozit pe vanzari

Capital gains tax impozit pe plusul de capital

Capital transfer tax impozit pe transferul de capital

Fiscal policy politica fiscala

Tax avoidance evitare fiscala

Tax evasion evaziune fiscala

Tax taxa, impozit

Taxation impozit, impozitare

Tax shelter protectie fiscala

Tax haven paradis fiscal

Tax-deductible deductibil fiscal

Excise duties accize, impozit de fabricare

Reading

Read the following text and decide which paragraphs could be given the following headings.

Advantages and disadvantages of different tax systems

Avoiding tax on profits

Avoiding tax on salaries

Tax evasion

The functions of taxation

Taxation (and how to avoid it!)

The primary function of taxation is, of course, to raise revenue to finance government expenditure, but taxes can also have other purposes. Indirect excise duties, for example, can be designed to dissuade (a preveni, a schimba parerea) people from smoking, drinking alcohol, and so on. Governments can also encourage capital investment by permitting various methods of accelerated depreciation accounting that allow companies to deduct more of the cost of investments from their profits, and consequently reduce their tax bills.

There is always a lot of debate as to the fairness of tax systems. Business profits for example, are generally taxed twice: companies pay tax on their profits (corporation tax in Britain, income tax in the USA), and shareholders pay income tax on dividends. Income taxes in most countries are progressive, and are one of the ways in which governments can redistribute wealth. The problem with progressive taxes is that the marginal rate the tax people pay on any additional income is always high, which is generally a disincentive to both working and investing. On the other hand, most sales taxes are slightly regressive, because poorer people need to spend a larger proportion of their income on consumption than the rich.

The higher the tax rates, the more people are tempted to cheat, but there is a substantial black or underground economy nearly everywhere. In Italy, for example, self-employed people whose income is more difficult to control than that of company employees account for more than half of national income. Lots of people also have undeclared, part-time evening jobs (some people call this moonlighting) with small and medium-sized family firms, on which no one pays any tax or national insurance. At the end of the 1986, the Director of the Italian National Institute of Statistics calculated the size of the underground economy, and added 16.7% to Italys gross national product (GNP) figure, and then claimed that Italy had overtaken Britain to become the worlds fifth largest economy.

To reduce income tax liability, some employers give highly-paid employees lots of perks (short for perquisites) instead of taxable money, such as company cars, free health insurance, and subsidized lunches. Legal ways of avoiding tax, such as these, are known as loopholes in tax lows. Life insurance policies, pension plans and other investments by which individuals can postpone the payment of tax, are known as tax shelters. Donations to charities that can be subtracted from the income on which tax is calculated are described as tax-deductible.

Companies have a variety of ways of avoiding tax on profits. They can bring forward capital expenditure (on new factories, machines, and so on) so that at the end of the year all the profits have been used up; this is known as making a tax loss. Multinational companies often set up their head offices in countries such as Liechtenstein, Monaco, the Cayman Islands, and the Bahamas, where taxes are low; such countries are known as tax havens. Criminal organizations, meanwhile, tend to pass money through a series of companies in very complicated transactionsin order to disguise its origin from tax inspectors and the police; this is known as laundering money.

Comprehension

According to the text, are the following statements True or False?

1. Taxes can be designed both to discourage and to encourage spending.

2. The same amount of money can be taxed more than once.

3. Progressive taxes may discourage people from working extra hours.

4. Sales taxes are unfair because poor people spend more than the rich do.

5. The Italian government knows that about one seventh of national income escapes taxation.

6.Loopholes are a common form of tax evasion.

7.If you pay a lot of your income into a pension fund or a life insurance policy you never have to pay tax on it.

8. A company that makes an unusually large profit during a tax year might quickly decide to spend it, for example, on a new factory or equipment.

Vocabulary

Find words in the text that mean the following.

1. reducing the value of a fixed asset, by charging it against profits

2. something which discourages an action

3. an adjective describing a tax that is proportionally higher for people with less money

4. spending money to buy things, rather than saving it

5. working for yourself, being your own boss

6. a tax on incomes that pays for sickness benefit, unemployment benefit, and old-age pensions

7. non-financial benefits or advantages of a job

8. a way to delay the payment of tax to a later time

9. an adjective describing expenditure that can be taken away from taxable income or profits

10. a country offering very low tax rates to foreign businesses