147 UNIT TWELVE In this Unit you will review some of the things you have learned about financial services. You will also learn something new about a special field of financial services, i.e. private banking. You will have to write, among other things, a summary and a translation. Section A is a short review of banking, security markets and insurance; Section B is about private banking; Section C is a translation from Hungarian into English; and also contains a collection of questions to check your progress. Section A I. BASIC FUNCTIONS OF BANKS You will remember that the principal business of banks is to collect money in the form of deposits and to make loans to private and corporate customers. Apart from these functions, banks provide a wide range of services from cashing cheques to giving investment advice to factoring. 1. You will find two very simple sentences below. Write the questions. (The answers have been provided.) You may need the following words: lend, know, creditor, debtor, rate of interest Jane borrowed $50 from Anne. She repaid the total amount of $55 after six months. 1.....debt? It was 50 dollars. 2..debt? Jane did. 3...money? Anne did. 4..? Anne was. 5..? Jane was. 6..? It was 20%. 7......? $5. 8..? Jane did. 9..? Six months. 10.....? Yes, she did.
148 2. Let s see whether you remember some basic banking vocabulary. Match the terms with the definitions Terms Definitions (1) charge A. instruction to your bank to pay a fixed sum regularly to your creditor (2) in the red B. increase by regular or continual additions (3) direct debit C. ask as a price (4) standing order D. loan for buying property with the property being the security (5) current account E. unconditional order to pay a sum of money (6) accumulate F. cheque for a fixed amount, sold by a bank (7) mortgage G. removing money from an account (8) retail bank H. collateral; instrument evidencing debt or ownership interest (9) bill of exchange I. income from all sources (10) traveller s cheques J. having taken out more money than there was in the account (11) security K. cash dispenser (12) earnings L. put money into a bank to earn interest (13) withdrawal M. money in a bank on which the customer does not receive interest in the UK (14) deposit N. commercial bank (15) ATM O. ease of convertibility (16) liquidity P. permission for your bank to pay a bill directly from your account 3. Now here is another list of terms, this time in Hungarian. Translate them into English, then try to give short definitions to match them (in English, of course) Hungarian English Definition 1. kamat... 2. ügyfél... 3. számlahitel... 4. díj... 5. nyugdíj... 6. haszonbérlő... 7. váltó... 8. leszámítol... 9. fizetőképesség... 10. kedvezményezett... 11. intézvényezni... 12. esedékesség...
149 4. You will find the definition of a special financial service below. Can you fill in the gaps? (A).. is an arrangement between a supplier and a special financial institution called a (B).., by which the supplier sells to the (B) the right to collect amounts payable to the supplier by approved customers at some future date. The seller receives payment immediately when he supplies the goods, and the (B) takes responsibility for collecting the accounts and bearing all losses from bad debts. The (B) s charges consist of a fee, which may be based on the rate of discount for bills of exchange, and an added percentage for collecting the accounts. 5. Translate the definition in exercise 4 into Hungarian II. BASIC INFORMATION ON SECURITIES 1. Do you remember what you read about securities in Unit 5? Here is a little test to refresh your memory. Choose the best answer 1. Businesses must have enough from the start. A) long-term funds B) retained earnings C) liabilities D) loans 2. Profits that are are called dividends. A) withheld B) ploughed back C) divided D) distributed 3. Stock certificates usually indicate a value, which may be different from the stock s value. A) real // actual B) face // par C) nominal // market D) legal // arbitrary 4. With financing, the company is obliged to pay and interest to holders. A) equity // dividends // policy B) debt // principal // bond C) short-term // capital // share D) lease // fees // stock 5. shareholders receive their dividend payments before shareholders are paid. A) Ordinary // common B) Preference // ordinary C) Common // preference D) Ordinary // preference 6. A option is an option to securities. A) short // sell B) long // sell C) put // buy D) call // buy
150 7. When a non-resident buys a share in Hungary, it must be converted into a share within a year. A) bearer // registered B) registered // bearer C) common // bearer D) registered // common 8. A gilt-edged security. A) is a fixed interest security issued by the British Government B) has gold cover C) is usually issued by a blue chip company and pays a variable rate D) is a high risk security often called a junk bond 2. Read the following passage from the Financial Times, then go on to exercise 3 Deflation is the new investment bogeyman: overheating is yesterday s story. It seems a strange time, then, for France to be dipping its toe in the water as the first euro-zone issuer of inflation-linked bonds. After all, governments have traditionally resorted to these when inflation was a pressing concern. However, Europe s ageing population and the associated growth in the pensions industry may encourage more inflation-linked issuance. Pension funds need to match real liabilities with real assets. Investors would also be right to worry that countries with large unfunded pension liabilities might be tempted to succumb to inflation. For these reasons, inflation-linked bonds should not suffer for want of demand, and other EU issuers will surely follow France s example. 3. Decide whether the following statements are true or false. When you are ready, check your answers in the KEY (1) Deflation is a synonym for inflation. (2) Bogeyman is something frightening. (3) Overheating refers to economic conditions which may lead to deflation. (4) Dipping your toe in the water means cautiously trying out something. (5) Resort to here means use. (6) Pressing concern is a media empire. (7) Worry is a synonym for concern. (8) Associated growth is expansion that goes together with it (9) Unfunded liabilities are a good thing. (10) Succumb to inflation means let inflation win.
151 4. Now that you have checked your answers, translate the excerpt in exercise 2 into Hungarian without using a dictionary 5. You will find some terms below to add to your securities vocabulary. Three of them have at least two meanings. Can you match them with the definitions? Terms: 1. Bid 2. Coupon 3. Premium 4. Eurobond 5. Flotation 6. Rights Issue Definitions: A. This is the difference between the market price of a new security and its issue price, if the former is higher than the latter. (The difference is called discount if the market price is lower than the issue price.) More generally, it is also used to refer to differences in share prices. B. On bearer stocks, it is the detachable part of the certificate, exchangeable for dividends. C. It denotes the rate of interest on a fixed interest security. D. It is the price at which the market will buy shares. E. It is the cost of purchasing an option. F. It is an approach made by one company wishing to buy the entire share capital of another. G. It is an invitation to existing shareholders to buy additional shares in the company. H. It is when a company s shares are offered on the market for the first time. I. It is a long-term loan issued in a currency other than that of the market in which it is issued. 6. You will need the new words in exercise 5 to understand the following sentences. To make things more difficult, you will have to provide the missing new words (1) The recent WH bond issue pays a of 105/8, or 475 basis points more than the 10-year UK gilt. (2) SB, the US group, yesterday moved to become the world leader in process automation, making a $500m agreed for ET, the UK based manufacturing group. (3) Since its flotation last year, NHM has repaid its short-term debt by increasing its long-term by 100bn.
152 (4) British Regional Airlines is expected to raise about 25m of new money at to expand its 46-strong fleet. (5) The board of ACC, India s biggest cement group, will vote today on proposals which would enable the Tata family to sharply increase its stake in the business. The package of motions submitted to the Bombay Stock Exchange include plans for a to the founding shareholders. This is widely understood to refer to the Tatas. (6) The offer represents a of almost 12.5 per cent on PC s closing share price of $20.75 on Friday. III. BASIC INSURANCE TERMS 1. Can you remember these insurance terms? We will provide some definitions; you will only have to match them with the terms. Terms Definitions 1. claim A. the insured 2. compensation B. buy insurance 3. premium C. money the insurer pays in the case of damage 4.policyholder D. money you pay for being insured 5.take out cover E. demand for payment under an insurance contract 2. Write the questions the answers have been given for you (1) What do. an insured? Insurance policy. (2) What s the difference..? In all other cases of insurance, there is uncertainty whether an accident will take place or not, but in the case of life assurance there is no doubt as to whether an individual will die. (3).... cover for? It provides cover for damage claims made by the public against a firm. (4) How are insurance companies? On the basis of claims experience and claims analyses. (5) Is Lloyd s...? No, it s rather an insurance market.
153 Section B PRIVATE BANKING 1. The following text is adapted from the Financial Times. Before you read it, make sure you understand the words below. Match them with their definitions Words Definitions (1) preservation of capital A. makes sg appear as a picture in the mind (2) conjures up B. unexpectedly (3) paramount C. great disturbance (4) inherited wealth D. starting (5) budding E. place of safety (6) haven F. very important (7) turmoil G. place to which one can escape (8) bolthole H. state of being uninterrupted (9) high net worth individuals I. fortune received as a result of the death of the previous owner (10) out of the blue J. being very similar to (11) continuity K. being available (12) being on call L. treat with too much kindness (13) pamper M. state firmly as a requirement (14) verging on N. be asked (15) be called upon O. rich people (16) stipulate P. maintaining the value of money 2. Now read the text carefully To the Swiss, and to an increasing number of other Europeans, private banking means providing a personal banking service, where preservation of capital is of paramount importance. To the English, it conjures up the image of generations of inherited wealth. In the US, it is frequently associated with budding entrepreneurs who need to borrow from their bank to build up their business. For others Arab sheiks, for example private banks provide safe havens at times of political turmoil. To a third world dictator, a private bank may mean a secret bolthole, somewhere to keep money safe in case the need arises to leave the country quickly by helicopter. Private bankers earn their living from the fees generated by managing their customers assets. These customers are high net worth individuals who want the individual financial attention which private banks set out to provide. That individual service means paying close attention to details: remembering the names of the clients, recognising their voice when they ring out of the blue,
154 making sure that they deal with the same banker to give them a sense of continuity of service; it means being on call even at weekends. Those banks that want to pamper their customers may send them flowers at their hotel when they arrive in town, and offer advice on matters ranging from where best to educate their children to whether they should buy a house in the south of France subjects on which, in their role as personal banker verging on friend, they may be called upon to answer. Personal touches aside, the emphasis in private banking is very much on asset and financial management, for example, investing in a balanced portfolio of bonds and equities, and lending against the value of the assets if the customer wants to buy a business or a new yacht. In the US, nearly 6m people are clients of some type of special banking unit set up to provide a higher level of services than the standard retail banking organisation. About 800,000 people have $300,000 $600,000 under management, but the real private banking customer must have even more than that. There are banks which stipulate a minimum of $1m for clients who want a tailor-made service. 3. Now choose the best answer to see how much you have understood (1) Preservation of capital is of paramount importance means that. A) it s good business to deal with money B) paramount imports preserves C) investments should not be allowed to lose their value D) private banks should own a lot of capital (2) In case the need arises means. A) never B) sometimes C) when things turn nasty D) if they have a case (3) Financial attention which private banks set out to provide means. A) private banks will provide financial attention B) financial attention is provided to private banks C) banks set out, provided clients get financial attention D) special services provided by private banks (4) When they ring out of the blue means. A) customers call them rather unexpectedly B) customers telephone from an airplane C) they leave the sea D) the client is sad and telephones to make a complaint (5) Standard retail banking organisation means bank. A) an ordinary small B) a commercial C) a savings D) an investment
155 (6) $600,000 under management means. A) the management of the private bank has $600,000 B) $600,000 less than expected C) the management of the bank was paid $600,000 D) $600,000 given to private banks to manage (7) Personal touches aside means. A) private banks put personal touches aside B) personnel touch customers for money C) talking about other things than personal touches D) customers want personal touches on the side (8) A balanced portfolio of bonds and equities means. A) debt capital portfolio in the equity in the balance sheet B) bonds and shares are equally important in the portfolio C) that bonds are in the portfolio but equities are not D) that the balance consists of a portfolio of bonds and shares 4. On the basis of the following questions, write a short summary of the text above (Do not write more than eighty words) (1) What services do private banks offer? (2) What kind of customers use the services of private banks? (3) How do private banks make a profit? Section C TRANSLATION AND SUMMARY 1. You will find an advertisement below. Try and translate it. You have probably never done anything like this before, but you will find it easier than it looks OTP LOMBARD HITEL Ön vajon milyen megoldást választana, ha azonnal szüksége volna egy nagyobb összegre? Készpénzzé tenné vagyona egy részét? Szívességet kérne ismerőseitől? Kezesek segítségével kölcsönt venne fel? Esetleg felbontaná lekötött devizabetétjét? Bizonyára egyetért velünk: ezek bonyolult, időigényes és esetenként veszteséges megoldások. Ezért ajánlunk egy jóval előnyösebb hitelkonstrukciót: az OTP Lombard Hitelt. Az OTP Lombard Hitel segítségével akár már ma hozzájuthat egy nagyobb összeghez! Hogy mekkorához? Az csakis az Ön megtakarításain múlik.
156 Ugyanis az OTP Banknál letétbe helyezett devizabetétje jelenti a kölcsön fedezetét. Milyen előnyöket nyújt a Lombard Hitel? Egyszerű: nincs szükség adóstársakra vagy készfizető kezesekre. Gyors: a legtöbb OTP fiókban azonnal igénybe vehető. Rugalmas: a futamidő egészen 24 hónapig terjedhet. Sőt, a tőkét és a kamatokat havi vagy negyedéves részletekben, de akár egy összegben is törlesztheti. Praktikus: már 100.000 forinttól igénybe vehető. Korlátlan: a felvehető kölcsön összege csak az Ön megtakarításának mértékétől függ. Kedvező: a kamata például 1 millió forint feletti összegnél, havi törlesztés mellett mindössze évi 23%. Alkalmazkodó: nemcsak devizaszámla, hanem az OTP Bank által elfogadott takarékbetétkönyv, értékpapír vagy egyéb likvid pénzeszköz is alkalmas hitelfedezet céljára. 2. Answer these questions (1) How would you define a bank? (2) Why do banks collect deposits and give loans? (3) What banking services do you need? Can you get those services in Hungary? (4) What special services do banks provide to commercial businesses? (Unit 4 and 10 may help you answer this question.) (5) What basic types of securities do you know of? Do you happen to possess any of those? (6) When is it a good idea to invest in fixed-interest securities? (7) Why do governments sell bonds on international markets? (8) What is private banking? Why is it a special area of financial services? (9) Are there private banks in Hungary? Who do you think are their customers? (10) If you had about HUF500m to invest, would you turn to a private bank for help? WORD LIST accumulate arbitrary asset management bad debt be on call bearer share bid bill of exchange blue chip felhalmoz önkényes vagyonkezelés behajthatatlan követelés elérhető bemutatóra szóló részvény 1. vételi árajánlat; 2. legmagasabb kínált vételár részvényért (tőzsdén) (idegen) váltó elsőrangú részvény
157 bogeyman bolthole budding call option call, -ed upon cash, -ed a cheque charge claim collect, -ed common stock (US) compensation conjure, -d up continuity convertibility corporate customer coupon deflation deposit dip, -ped, ~ one s toe direct debit distribute, -d divide, -d dividend earnings emphasis equity face value factoring fleet flotation gilt-edged haven high net worth individual inherit, -ed insurance junk bond lease life assurance (UK) liquidity long-term funds mortgage motion nominal value non-resident ordinary share (UK) out of the blue pamper, -ed par value mumus búvóhely zsenge; (itt) kezdő vételi opció felkér csekket bevált díjként felszámol kárigény beszed törzsrészvény kártérítés felidéz folyamatosság átválthatóság vállalati ügyfél kamat; kamatszelvény pénzszűke, defláció betét lábujját bemártja közvetlen terhelés kioszt feloszt osztalék 1. jövedelem, 2. nyereség hangsúly 1. saját tőke; 2. törzsrészvény névérték bizományosi pénzbeszedés, faktorálás (légi) flotta első részvénykibocsátás állami vagy első osztályú értékpapírok (UK) (biztos) kikötő, menedék igen gazdag ember örököl biztosítás nagy kockázatú ( bóvli ) kötvény haszonbérlet életbiztosítás könnyen folyósítható; készpénzzé alakítható hosszúlejáratú pénzeszközök jelzálog, jelzálog hitel indítvány, javaslat névérték devizakülföldi törzsrészvény váratlanul elkényeztet névérték
158 paramount plough, -ed back policy preference share (UK) preferred stock (US) premium preservation of capital pressing concern principal process automation put option rate of discount recognise, -d registered share resort, -ed to retail bank retained earnings rights issue security stake standing order stipulate stock stock certificate submit, -ted succumb, -ed to supplier tailor-made take out cover/a policy turmoil variable rate verge, -d on sg withdrawal withhold, -held, ~ rendkívül fontos visszaforgat kötvény elsőbbségi részvény elsőbbségi részvény 1. biztosítási díj; 2. felár, ázsió; 3. opciós díj tőke (értékállóságának) megőrzése nyomasztó aggodalom/gond 1. tőke; 2. megbízó gyártás automatizálás eladási opció leszámítolási kamatláb felismer névre szóló részvény vmivez folyamodik lakossági bank fel nem osztott eredmény zártkörű részvénykibocsátás meglévő tulajdonosoknak 1. biztosíték; 2. értékpapír részesedés fizetési meghagyás kiköt; szabályoz 1. részvény; 2. készlet részvényigazolás benyújt vminek kiteszi magát szállító, gyártó testre szabott biztosítást köt kavarodás, felfordulás változó kamatláb vmivel határos kivét visszatart