Jim Corbett

Cambridge University Press

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ENGLISH FOR INTERNATIONAL BANKING AND FINANCE
ENGLISH
FOR INTERNATIONAL
BANKING AND FINANCE

Jim Corbett

Cambridge University Press

Cambridge
New York Port Chester
Melbourne Sydney
Published by the Press Syndicate of the University of Cambridge
The Pitt Building, Trumpington Street, Cambridge CB2 1RP
40 West 20th Street, New York, NY 10011, USA
10 Stamford Road, Oakleigh, Melbourne 3166, Australia

© Cambridge University Press 1990

First published 1990

Printed in Great Britain by

Scotprint Ltd, Musselburgh, Scotland

ISBN 0 521 31999 4 Student’s Book

ISBN 0 521 32000 3 Guide for Teachers
ISBN 0 521 26677 7 Cassette

Copyright
The law allows a reader to make a single copy of part of a book for purposes of private
study. It does not allow the copying of entire books or the making of multiple copies of
extracts. Written permission for any such copying must always be obtained from the
publisher in advance.
To the user

Who the book is for

This book is for people who need English for their day-to-day work in
international banking, as well as for students of international banking and
professional people whose work brings them into contact with international
banking and finance.

How you can use this book

The book can be used in class, in one-to-one teaching and for self-study. If
you are using the book on your own, you will need a copy of the Guide for
Teachers. This contains background information on the banking and finance
topics, an answer key and the tapescripts for the listening material on the
cassette. Please note that if you are working on your own then you will not
be able to do some of the communication activities, that is unless you can
find a friend to do them with!

How the book is organized

There are nine thematically linked units. Unit 3, for example, has Foreign
Exchange as its topic. These units are self-contained so they can be used on
their own or grouped together to form modules according to individual
needs.
The units are each divided into four sections. The first three sections in a unit
are based on listening materials. The fourth section in a unit mainly contains
reading texts. A unit provides between three and five hours work. They
follow a consistent format so the book is easy to use. At the back of the
book there is a list of abbreviations used in banking and finance.

How the cassette fits in

The listening material provides the main input for the first three sections of a
unit. The great majority of the recordings are based on transcriptions of
authentic recordings made on location in financial institutions.
Contents

Unit 1 Bank organization

A The organization of a large American bank
B The organization of a London merchant bank
C The organization of a Scandinavian savings bank
D A description from an annual report

Unit 2 Bank performance

A The performance of a large American bank
B The income of a London merchant bank
C The costs of a London merchant bank
D The financial statements of a British bank

Unit 3 Foreign exchange

A The basic principles of Forex dealing
B A currency deal with a corporate customer
C An interbank currency deal
D Currency movements

Unit 4 Meetings
A Negotiating terms
B Discussing an interest rate
C Discussing a service fee
D An overdraft facility

Unit 5 A Presentation
A Introducing the topic
B Describing the advantages of a banking facility
C More advantages of a banking facility
D A follow-up letter offering services
Unit 6 Trade finance 58
A The trade-related services of a London clearing bank
B Problems with payments under documentary letters of credit
C Closing a discussion
D A documentary credit

Unit 7 Financial news 70

A Trading in the currency markets
B Company and stock market news
C News on the commodity markets
D A bank in difficulties

Unit 8 Projects 82
A A package deal
B Raising long-term funds
C Early contact about financing a project
D A telex offer about a syndicated loan

Unit 9 Trends 95
A Debt-related problems of the developing countries
B Debt-related problems facing international banking
C Changes in the financial services industry
D Electronic banking

Role play instructions 107

List of abbreviations 109

vill

Thanks

In preparing this book, I have received generous help and advice from a large
number of people and organizations: my sincere thanks to all of them.

Special thanks are due to: Steffan Alvolln, Wilhelm Bergman, Ingemar
Bergqvist, Michael Burmester, Janice Cowell, Bill Davis, Patrick Hanks, John
Heywood, Alan Jones, Terry Laidlaw, Mickey Lowe, Jan Sundgren and Paul
Tucker, all of whom helped with source materials; also to Hambros Bank,
National Westminster Bank, Nordic Bank, PK Christiania Bank (UK) and
Rank Xerox.

My thanks are also due to the following people and organizations tor piloting
and commenting on my draft manuscript:

Sue Fortescue; Vivienne Ward; Doreen Lee at the Harven School of English in
Woking, Surrey; Bill Horncastle at the Cambridge Centre for Languages;
Eric Freedman at IFG Langues in Paris;
Vicky Mabbs and Jane Lawton at the Regent School in Rome;
Joe Wiersma at International House Executive Courses in London; Don Byron
at Esade Idiomas in Barcelona; Saul Ray at Excellence Corporation in Tokyo;
H Zak at Ecole Cadres in Courbevoie; Elizabeth Sim and Michael Sneyd at
Eurocentre, Cambridge; G Marcy Bergqvist at KEY English Language Services
in Stockholm; Jane Ferentzi-Sheppard at the VHS Language Centre in
Nuremburg; Herbert Chang at Target in Sao Paulo;
Jan Janssen at Interlingua Talenpraktikum in Holland;
Anne Larsen at STE in Eindhoven; Vivienne Ward at Ebury Executive School;
Hong Kong Polytechnic; Let’s in Sao Paulo

Last but by no means least, my thanks are due to the publishing team
at Cambridge University Press, Peter Donovan, Desmond O'Sullivan,
Lindsay White and Will Capel.
Unit 1 Bank organization

This unit is about bank organizational structures and how to describe them.
We will hear three bankers describing the structure of organizations they
work for: banks of different types and sizes in different countries.

Section A At
Look through the following short report concerning the reorganization of a
bank.

The Allied Bank is reorganizing its operations into three business sectors:
corporate banking and international banking operations will be headed by
Bernard Rogers, who is currently Director of International Banking Operations
and Deputy General Manager; the finance operations sector, including foreign
exchange operations, short-term money market operations and accounting,
will be headed by Lucy John, while David Lacey has been named Deputy
General Manager with responsibility for the branch network and retail banking
sector.

1 In the boxes below each name, fill in the division for which each person
will be responsible. Beneath the boxes add any details which are given
about the responsibilities of the divisions.

oe)
David Lacey
2 Unit 1

2 Now look at the words in the left-hand column, which are taken from the
text. Match them with words from the right-hand columns.

1 operations A reports G led

2 sectors B at present H offices
3 headed C activities I areas
4 currently D sales
5 including E covering
6 named F appointed

A2
You are going to hear Ed Walker, an Assistant Vice-President of a large
American bank, talking about the structure of his bank to Francoise Caie,
a French banker. Before you listen to the conversation, look at these
questions which you will answer after you have listened for the first time.
1 Is Ed:
a) explaining the bank’s organizational structure?
b) discussing the bank’s organizational structure?
2 Does Ed:
a) give a basic outline of the bank’s organizational structure?
b) give a detailed analysis of the bank’s organizational structure?
Now listen to Ed’s conversation with Frangoise.

A3 &
Listen again to what Ed says about the structure of his bank. As you do so,
complete the following organization chart. Firstly, write in the boxes the
names of the divisions. Then under the boxes add details of the
responsibilities of each of the divisions.

Chairman of the Board

Executive Committee

BawKni0G
Dwisiow

Gaovel | | fi| { oa ve t LL fA rh Le Op
The Americas | i ; . ruil ’ W j

Gaove 2 | Oe MAL yt
Korps i
| L Wwwn™Yy
+ Dhue,ay : Us
Gaove3
ta, ASIA,

wide Fost
Bank organization 3

Aa
Look at the words in the box, all of which are from this section. Check any
words that you do not know with a partner. Then, working together, match
the words with the correct definition from the list below.

credit policy bullion consumers

annual report line divisions strategic planning
premises personnel commercial paper
domestic reorganized municipal bonds
comptroller’s department
investment portfolio management

_ A report presented each year, giving details of the company’s activities

and financial performance during the previous financial year.
2 Formed or structured in a new way.
3 Sections of a company which deal with different products or services
from each other.
People who buy goods or services.
In your own country, not abroad.
Management of a client’s collected investments.
Short-term documents usually sold by big US corporations, promising to
SIAN

pay a specified sum of money on a particular date. They may be sold

again by the buyer.
8 Documents issued by a local government authority, promising to repay
loans at a certain time.
9 Bars of gold or silver.
10 Employees, staff.
11 Buildings and surrounding land.
12 A department which controls the internal finances of a company.
13 Deciding the main aims of an organization.
14 Plans for the lending of money.
 4 Unit 1

Section B- B1
You are going to hear Clive Regis, the Director of a London merchant bank,
being interviewed about his bank’s organization. As you listen, look at these
headings. Which ones does he talk about and in which order?
@ Structure of the parent company
@ Brief history of the bank
@ Range of services provided
@ Recent changes

B2 =
Listen again to what Clive says about the organization of the bank. As you
do so, write in the boxes below the names of the six divisions to which he
refers and list their main areas of responsibility.

Administration
4 Y : /
NYTUT aL
Mewagueue a
Division
v7 fA ue

oe | J
WILY AA.

Iu k>
AL é
WAL

B3
Look at the terms in the left-hand column. Match each one with its correct
definition in the right-hand column.
1 merchant bank A The selling-off of interests.
2 clearing bank BA very large loan for one borrower, arranged by
several banks.
3. wholly-owned subsidiary C. Money overdrawn on bank accounts to agreed limits.
4 accounting and audit | D Documents promising to pay sums of money at
specified times.
S syndicated loan - E Money placed in countries with very low taxes.
6 overdraft ‘F The joining of two or more companies into one.
7 documentary credit GA bank which is a member of a central organization
through which cheques are presented for payment.
8 correspondent banking ~H_ Activities where one bank acts as an agent for
another bank.
/f
9 currency option I A contract where the buyer has the right to demand
purchase or sale of a specified currency, but no
obligation to do so.
 Bank organization n)

6
10 bonds A bank mainly concerned with the financing of international
trade.
11 floating rate note K An organization which collects and pools money from many
small investors and invests it in securities for them.
12 Eurodollar CD A company entirely owned by another company.
13 financial futures A limited company formed to invest in securities.
14 merger A method of financing international trade where the bank
accepts a bill of exchange from the exporter for the invoice
amount, in return for receipt of the invoice and certain shipping
documents.
15 takeover O O The buying of a majority of the shares of companies.
16 divestment Contracts to buy or sell currencies, bonds and bills, etc. at a
stated price at some future time.
1/7 USM flotation Note on which interest rates are fixed periodically, and which
can be traded on the market.
18 investment trust + Document given for a deposit repayable on a fixed date, the
currency being dollars which are deposited outside the USA.
19 unit trust
tf
The keeping of financial records and their periodic examination.
20 offshore funds ° The starting of a new limited company, where the shares are
not included in the official list on the Stock Exchange.

B4
Imagine that you are organizing a dinner party for 12 bank officials,
including yourself. The other 11 people each work in different areas of
banking, which are as follows:
Financial control Syndicated loans
Investment management Correspondent banking
Documentary credits Foreign exchange
Planning Corporate finance
Overdratts Accounting and audit
Project finance

Draw up a seating plan for the guests and yourself, placing everyone at the
table below. When you have finished, compare your plan with that of a
partner. Discuss any similarities and differences, and explain the reasons
behind your plan.

aa B
(| B®
SEE
6 Unit 1

Section C C1
So far we have heard about and looked at the structure of a large American
bank and a British merchant bank. Now we are going to look at the work of
a savings bank. Look at the following list of banking services. Put a tick (“)
next to those that are traditionally associated with savings banks.

Currency options
Personal loans

Safe-deposit services
Takeovers
Deposit accounts
Bullion
Payment of standing orders
Cheque paying services

Leasing packages

C2 &
Now listen to Kai Larsen describing the organization of the Scandinavian
savings bank he works for and fill in the organization chart below. Listen
twice if necessary.

BOARD oF DIRECTORS

DEPUTY MANAGING DIRECTOR r SM. DR

Bank organization 7

C3 =
Look at the following extracts from Kai’s description of the savings bank.
Work with a partner and note down what you think the speaker says instead
of the words in italics. Then listen to the section again and compare your
answers with the words Kai actually uses.
1 ... to understand just what we are and that is a 000. ;
(bank set up to accept deposits from members of the public)
2. Cpe”... 2 in 1878 ... (set up, established)
a « 1980 we ...</414.24 Dba Mvsvens ik the two largest regional savings
banks ... (joined together)
4 ... and effectively this now gives us ati. ito serve the
private customer ... (system of local offices over the whole country)
5 There’s a Board of Directors, which is elected by the Board of
LMA lvtiwiiewe se (people responsible for administering money or
property re the benefit of others)
6 ... to gain access to the «MMe ee “© 2.. (markets in which there are
good profits)
7 ... markets dominated by the w.0000 44 . (banks which offer a
wide range of services to the public, to companies and to other
organizations) ,
SF ha fees: |! 1970 ... (before)
9... couldn’t accept deposits ih. Mics. the equivalent of ... (more
than)
10 ... granted an international ...0..000004.4 (uke. Of 45 million dollars ...
(loan of money at a fixed rate of interest, involving a certificate of the
debt)
11... and which had a wt, erate tece ‘. 50 per cent of which .
entire collection of loans ) ,
12 ... and expanding worldwide (.c0/0f clipesoe (arrangements with
banks who act for each other)
13 ... major investments in terms Of wjl6ccccSiceee one (people who work
here)
14 ... necessary for us to be able to wu. elds « (increase the range
or extent of our operations)

C4
You are going to make a short presentation of your bank or company. Look
through the list of points below and decide in which order you will use them
in your presentation. Then compare your order with that of a partner and
discuss any differences.
@ Specialized products
@ Range of services
6 @ Geographical representation
@ Financial performance
@ Structure
 Unit 1

Now make a short presentation of the structure of your bank or company.

Use any visual aids, such as diagrams, that will help you.

Section D D1
Quickly read the text below, which is taken from an annual report of one of
the world’s largest banks. Then choose the best heading from this list.

The year in brief

Financial review
Global banking resources
Notes to the accounts
Foreign locations

To service the needs of different client groups effectively, the Bank is organized
into three broad groups: the Domestic Banking Group, the Corporate Banking
Group and the International Banking Group.

The basis of the Bank's strength continues to be its domestic banking operations.
The Domestic Banking Group's network of 295 branches provides a full range of
banking services nationwide and is the largest network in the country.

The Corporate Banking Group is responsible for servicing the complex needs of
over 200 of the nation’s largest corporations. Of the Bank's total domestic deposits
and domestic loans outstanding, the Corporate Banking Group accounts for 25 per
cent and 40 per cent respectively.

The Bank continues to develop and expand its international operations, and in
fiscal 1991 foreign earnings surpassed those of the country’s other leading banks
for the fourth consecutive year. Since January 1 1990, the Bank has opened six
new representative offices and has upgraded the Rome representative office into a
full service branch. Our strong international presence is currently maintained
through 12 branches, 18 representative offices, two agencies and 10 subsidiaries
and affiliates.

The International Banking Group includes regional departments which assume

responsibility as follows: the Americas; Africa, Middle East and Europe; Asia and
Oceania. The Group includes both the Correspondent Banking Department, which
is responsible for the Bank's correspondent banking network of some 1,500
institutions, and the Merchant Banking Department.

Also within this Group, the International Treasury Department specializes in foreign
exchange and funding operations, while the International Planning Department is
responsible for strategic planning. The International Business Supervision
Department is responsible for the assessment of country risk and corporate
credits, as well as for systems development and for ensuring compliance with
regulations regarding international business.
a Bank organization
ee ee ee ee oe ney apenas9

The Bank continues to respond well to market dynamics both at home and abroad.
Part of the Bank’s strength lies in the wide spread of its representation and in its
ability to develop sophisticated new services to meet the changing patterns in
banking opportunities. The Bank's aim is to ensure the continued prosperity of the
group by means of its dedication to service and by expanding the scope of its
activities, both geographically and functionally. We believe that we have the right
organization to do this in the period ahead.

D2
Using the information in the text you have just read, complete this
organization chart.

| | » ASE

r |

D3
Based on the information in the text, say whether the following statements
are true or false.
1 The Corporate Banking Group services the needs of 1,500 of the nation’s
largest institutions.
to The Corporate Banking Group plays an important part in terms of the
bank’s domestic deposits and domestic lending.
w 1991 was the fourth year in a row in which the bank earned more money
abroad than any other bank in the country.
+ The bank has 30 branches and representative offices abroad.
wi The bank plans to increase its international operations.
10 Unit 1

D4
Read through the following information.

A commercial bank, a merchant bank, a savings bank and a clearing bank all have
head offices on the same street in London.

The commercial bank and the clearing bank both have six business sectors.

The commercial bank, the savings bank and the clearing bank are all independent
banks.

The bank with four line divisions was founded in 1920.

The bank which is a wholly-owned subsidiary is split into five line divisions.

The commercial bank was founded in 1928 and has a larger number of
correspondent relationships than the other three banks.

The bank with the smallest number of personnel was established in 1896 and is
no longer independent.

Given these facts, work out the following:

1 Which bank has four line divisions?
2 Which bank was formed by a merger in 1946?

D5
To end this unit, interview a partner about the organization of the bank he
or she works for. Then write a description of the organization of this bank
and give it to your partner to look through and comment on. If you all work
for the same bank, then describe a bank you have worked for in the past or
know well. You may need to do a little research!
Unit 2 Bank performance

In this unit we hear three different bankers presenting facts and figures
concerning the recent financial performance of their banks.

Section A A1
First read the following short newspaper reports. Then from this list choose an
appropriate headline for each report.

Profits forecast Mixed profits

Fall in profits Growing debts
Loss reported Profits growth

Harborne Investment Bank has Hogg and Lacey's Bank has

reported a loss equivalent to announced an income of USD
USD 295,000 for the first six 58 million for the first half of
months of 1991, a figure in line the year, an increase of 45 per
with the lower first-half cent over the corresponding
earnings reported by the period last year. The bank has
country’s other leading banks. increased its interim dividend
The bank posted a USD 2.86 from USD 1.50 to USD 1.80a
million profit for fiscal 1990. share.

Northland’s FA Bank group ZB Bank expects net profits in

increased operating results by the region of CHF 33 million for
20 per cent to USD 108 million the current financial year,
in the first six months of this according to Dr Fritz Ullmann,
year. Westsund Bank, in a rise of some 12 per cent. At
contrast, reported a drop to the end of June the bank's
USD 80.5 million, while balance sheet total was CHF
Quintorp Bank reported steady 4.42 billion, compared with
earnings of USD 195 million, CHF 4.13 billion at the
but a 15 per cent fall in the beginning of the year.
parent bank figure to USD 178
million.
Unit 2

A2 &
What main information about financial performance would you expect a
representative of a bank to present to a company in order to try to sell the
bank’s services? Make a brief list. Then listen to Ed Walker give an informal
presentation of his bank to a prospective client. Tick (“) any points of yours
which he makes.

A3 &
Listen again to Ed talking about his bank’s performance for the previous
financial year. As you do so, fill in the spaces in the extract from the annual
report below.

Highlights

$ In millions, except per share data

For the Year 1990 1989

MBLINCOTIO 0 re” hector
Net Interest Income Leb bih 1,600

Per Share
Nerincome "> $F). wi») ese 4.80

At Year-End
Asseis= ~ - |. .4- » Miss 59,000
Denosis ~~ —<‘<i<‘“‘“‘;CSO?;C<C«‘ 34,700
Investment Securities sens 1,900
Employees hea tte 13,650
Number of Offices ates tyiloU

A4
Look at the following list. Work with a partner and note down what you think
Ed says instead of the words in italics. Then listen to his presentation again
and compare your answers with the words that Ed actually uses.

1 Ihave here a copy of our last report presented each year, giving details of
the company’s activities and financial performance during the previous
financial year.
But I can give you right now a very short general description...
mW
w ... based on money received from the sale of the parts into which the
capital of a company ts divided ...
+ . and sixth largest based on the sums of money left with the bank.
 Bank performance 13

5... financial services to a large eaehae of eran types of customer .

6 ... which includes company customers. cakes CUt f
7... and banks in other countries with whom we have an agency
Slane. CU ft ACG tt Vite
8 In 1990 we achieved our highest ever ofc ae transfers to reserves ...
HW) 9 ... our tenth year in a row of profit growth... dibi4e Oo A
a 10 The annual income oFthe group of companies afterthe ened of costs
was 500. AMLLLL ULL A UnCo wey
11 2wat the end of 1990 the value of all the things we own Ue AGIA
12 ... in the financial year 1990 ... 4% fe Ca
13... billion dollars worth of placement of money, for example in shares, so
as to produce profit. (Udy k OCCY/UMO

A5
Say the following numbers. There may be alternative ways of saying some
of them.
1 1,200
2 $60,000,000
3 §,000,000,000
4 37,600,000
5 1,500,672
6 1,500,000

Section B. B1
Look at the following expressions. Put a tick (W) by the ones you might expect
to hear in a presentation relating to financial performance and a cross (X) by
those you would not expect to hear. Then compare your answers with those of
a partner and discuss any differences.
This diagram gives a very brief summary of some of the key figures.»
Highlights from the audited financial statements as at 31 December 1990. ;
If we begin with income, then, you will see that the total group income
wnDwme

amounted to ...
4 ... but what is especially significant is the increase in non-interest income.
5 We’ve seen the income; let’s now look at the outgoings. “
6 The accompanying audited financial statements were prepared in
conformity with generally accepted accounting principles.
This increase is larger than in previous years, and is partly due to ..
All this adds up to total group outgoings of .
CO
Oo I think I'll stop there and answer any questions.
14 Unit 2

B2 =&
You are going to hear Claire Seal, a merchant banker, giving some information
about her bank to a small group of professional visitors from abroad. Before
you listen to her presentation, look at these questions. Then listen and answer
the questions.
| In this section is Claire talking about income, costs, or both?
2 Is Claire giving figures with or without comment?
3 Was 1990 a good year or a bad year for the bank?

B3 &
Look at the diagram below which is a copy of the one which Claire refers to.
Listen to her presentation again and fill in the blanks under the heading Source
of income.

(Note: The blanks under Use of income will be filled in in Section C.)

Source of income Use of income

1989 1990 1990 1989

£554m Interest received £

£465m Interest paid £ Staff costs £ tits.

| £89m Netinterest earnings £.

Bo a Doubtful debt provision £ 5m

LS Depreciation £ 16m

Sy 5i x Other costs aoe ae

ems Total costs E AMY.

Other income re — 90/0 TA 16%, — Qi Tax oar

4° eae Dividends eae

Son Gees £ 10m

£135 Total group income £22. ail A Total group outgoings £135m
Bank performance 15

B4 &
Listen to the first part of the presentation again. Fill in the spaces in the
sentences below with the words actually used.

This diagram gives a very al EE esas

8idge of some of the
aa Bo eeeteees veer ethddWé2....... relating to our performance in 1990. We'll be
MAAS... these figures again later in GEREN sis CAE sath re : but it
may be 44.7-4-4K—....... at... LAG?.... Parainotaen ie <a... to present them and to
AMC a number of .. UE EWa... HE...

Ifwe . A COL 2k eee income, .....4.680..5%...., YOU

bail Mt Cee ORE that the total group income WORT teoxwvncnuvacanie WO
MMOLE... ee 1 oe of £150 million, an 6280 “0S... of
(MAKE 15 per cent on the “A.K8h. Shoe. year, & AAR a
Ree eeiear eens increase .[...707.0.: aReos above that of recent years

B5
Choose the one best answer.

1 A brief summary is:

a) a small amount of something; b) several numbers added together to make
a total; c) a short report of the main points; d) a full report with details.
2 Key figures are:
a) figures that are easy to understand; b) the most important figures; c)
figures that give an answer to a problem; d) figures that are well-known.
3 Trends are:
4)movements or directions; b) goals that you try to reach; c) events that are
‘tikely to happen; d) events that happen often.
4 A record level of income is:
a) an amount that will never be reached again; b) an amount that is written
down so that it will not be lost or forgotten; c) an amount that stays the
same and does not go up or downs d) a higher amount than ever before.-
S Net interest income IS:
~a) the amount by which the total interest received is higher than the total
interest paid during the period; b) the amount by which the total interest
received is lower than the total interest paid during the period; c) the total
interest received by the lender; d) the amount earned on an investment after
paying for its capital cost.
6 Something which is especially significant is:
a) the only one of its kind; b) the very best of its kind; c) important and
worth noting; d) widely-known and accepted.
16 Unit 2
a

Fee and commission earning activities are:

a) the buying and selling of currencies for profit; b) plans to lend money for
profit; c) services that are sold by an agent; d) Services for which charges
can be made.
8 A contribution to total income ts:
a) a fixed amount of money paid at regular intervals; b) money that is
owed or payable; c) an amount of money that is taken away from the total;
d) an amount given or supplied.
9 The economic environment ts:
a) an area of the economy; b) the future of the economy; ¢) the economic
situation; d) financial laws and regulations.
10 The sensitivity of interest rates is:
a) the way in which interest rates affect each other;.b)/the way in which
interest rates are easily influenced or affected; c) the changes in interest
rates; d) the way in which interest rates are worked out.

N e 2) tionC C1
You have heard Claire Seal talk about how much her bank earned last year.
Now you are going to hear her talk about how much the bank spent. As you
listen to the continuation of the presentation, number the items below in the
order in which Claire mentions them.
mie! © Re hy Ct pases
@ Provisions for doubtful debts ean.
@ Otherexpenses i onsets icin
@ Staff costs me eens
@ Dividends Re 2 pe

C2 &
Look again at the chart in B3 on page 14. Listen again to the continuation of
the presentation and fill in the blanks under Use of income.

C3 =
Look at the following extracts from this part of the presentation. Work with a
partner and note down what you think Claire says instead of the words in
italics. Then listen to the presentation again and compare your answers with
the words that she actually uses.
1... let's now look at the wns GAEL IAG wn . (amount of money spent)
2 The largest of these is 1A. Adee. C0 2h eee (money involved in paying
employees) : )
3... to handle the expansion of the bank’s {....... tld MAS... (Services
for which charges can be made) y '
Bank performance 17

4 NWO 10 GLYL hee to eight million pounds... (*oney put aside

— to cover romani credit Sia
AY Cn kik
SMYTH O® Gthe decline in value of property which is hired) and
age cscceccrese
WMbewennsesssssenees

ON 1... ALIAMA.FED?sossesee and equipment ... (buildings and the land on which

6 Other .... CAC 26O-......... increased by ... (*oney spent on the running of
the bank) ,
7 ... the smallest .Ao2/ U4 Ch—........ increase ... (yearly)
8 ...0A
Ahi 2 remained unchanged ... (the part of the company’s
profits which is paid to shareholders) ;
9 ... as the major part of the year’s profit was <ch.4.66.280.4 CAME
(kept by the company and not paid to shareholders) (0 #000 (Cage
10 Our balance sheet........... AOUMGS, . (totals)
11 After ... A&C AW €«......... of the dividends ... (setting aside money for)
12 ... there remained a net 440.04. 2626..04040.&. ... (amount of money kept by
ne company and not paid to shareholders) . |
13 ... nine million pounds, which was .......... (db. gE... (moved over to
diets put aside to cover unexpected events)

C4 :
What factors are important for the financial success of a bank operating
internationally? Look through the list of factors below and when you have
decided on their relative order of importance, write the number of your choice
in column A. Number 1 should show the factor which you consider most
important and number 10 the least. You will be told how to fill in column B.

Use of advanced technology

Strong national economy

Skilled and efficient staff

Wide range of high quality products

Broad network of correspondent banks

Good management

Wide geographical spread of local representation

Good market reputation

Established and diverse customer base

Other (specify)
18 Unit 2

C5
Make a presentation of the recent financial performance of your bank or
company to the group or to a partner. Use any visual aids, such as diagrams
and charts, to help you. If you do not have these figures, make them up.

Section D D1
Read the following financial statement from an annual report and then answer
the questions which follow.

Wallers Bank ple

Consolidated Profit and Loss Account

31st December 1990

1990 1989
£000 £000
Profit before tax, after provisions for doubtful debts 24 541 23 863

Tax On group profits 14 395 13 389

Profit after tax 10 146 10 474

Dividends paid 3 250 3 250

Retained earnings 6 896 7 224

Earnings per share 13p 15p

| What term tells you that this is a statement of income?

2 Do the figures relate only to one bank or to one bank and its subsidiaries?
3 What was the increase in taxable profits from 1989 to 1990?
4 How much more tax did the bank pay in 1990 than in 1989?
5 What is the difference between the 1990 and 1989 figures in terms of the
profits which the bank has kept?
6 Are these figures before or after money put aside for possible credit losses?

D2
Look at these questions and answer them when you have read the accounts on
the opposite page. -
| Which two specific items on the balance sheet showed the main growth?
2 What was the percentage increase in total assets from 1989 to 1990?
Bank performance 19

Wallers Bank plc

Consolidated Balance Sheet

31st December 1990

1990 1989
£000 £000

Assets

Cash and due from banks 254 095 235 809

Loans to banks and public bodies 1 159 082 998 129

Investment securities 598 820 572 218

Advances to subsidiaries 4795 3 856

Leased assets 15 867 15 024

Acceptances for customers 530 723 409 820

Premises and equipment 95 415 89 845

2 658 797 2 324 701

Liabilities

Current, deposit and other accounts 1 869 952 1 667 153

Deferred taxation 18 052 15 088

Proposed dividends 1 983 1071

Acceptances for customers 530 723 409 820

Capital Resources

Share capital 40 000 40 000

Reserves 135 658 128 489

Minority interests 6 687 4 709

Loan capital 55 742 58 371

2 658 797 2 324 701

20 Unit 2

D3
Look at the balance sheet again and answer these questions.
l What term tells you that these figures show the total financial position of
the bank at the end of 1990?
What is the value of all things owned by the bank which could be used, if
necessary, to pay debts?
Which sum includes the £5 million which the bank has lent to the City of
Birmingham Local Authority?
What is the total value of the things such as shares and treasury bills which
the bank has bought with the intention of making a profit?
What was the increase from 1989 to 1990 in the amount of money which
the bank lent to companies which it owns?
What is the value of all the property such as buildings, land, motor cars,
computers and so on which the bank owns?
What is the value of the property which the bank lends to its customers for
payment?
What is the total value of the debts owed by the bank?
Which is greater, and by how much, the taxes which the bank paid in
1990, or the money put aside in 1990 which the bank calculates will soon
be needed to pay taxes?
If all of the issued shares are paid up and there are 20 million shares at £1
each, how much each did the remaining five million shares cost?
How much more money was put aside in 1990 than in 1989 to cover
unexpected events?
Which term relates to those shares which Wallers do not themselves hold in
their own subsidiaries?

D4
Read through the following information.

Three banks, A, B and C, all issued their financial statements for the 1990 financial
year at the same time. In each case, the sum of the retained earnings and dividends
adds up to the profit after taxation.

Bank B reported a profit after taxation of £16 million. Half of this sum was paid as
dividends.

The bank with total assets of £1.5 billion paid dividends amounting to £5 million.

One of the banks paid dividends which were £1 million higher than those of Bank B.
The same bank had total assets which were twice as large as those of Bank A.

Half of Bank A's profit after taxation was kept as retained earnings.

Bank C posted a profit after taxation which was double that reported by Bank A.
Bank performance

Given this information, work out the following:

1 Which bank had total assets of £2 billion?

)
2 Which bank showed retained earnings of £11 million?

D5
Most of the words in the crossword puzzle are used in Units 1 and 2.

account, to an agreed limit

(9)
35 Hiring something to a user,
instead of selling it. (7)
36 The total obtained from
adding up a column of
figures. (7)

Down
| Something which you own,
which can be used to pay a
debt. (5)
3A method of financing
international trade. (11,6)
Short-term documents
norma y sold by big US
corporations, (10,5)
6 Certificate of deposit. (2)
& US dollar. (3)
9 The buying of a majority of
shares in a company. (8)
0 ‘Earnings ... share.” (3)
| Money spent On TUNNINg a

Company (S)

+ Customer. (6)
6 The whole amount, added
Across 21 Report detailing a up (5)
2 Company in which another company’s activities in the 8 Several companies joined
company owns more than past financial year. (6,6) together, owned by one
half the shares. (10) 22
,’7
Interest (levels). (S company. (5)
5 Opposite of profit. (4) 24 Not private. (6 19 Charge made for service. (3)
Periodic examination ot 27 After costs and other 23 Money put aside in case
financial records, (5) ( Jeductions. (3) anything unexpected
12 The joining of two or more 28 Payment as an agreed happens. (8)
companies into one (0) percentage of price. (10) 25 Sum of money left with a
14 Not the Source of Income, 29 Very important (hgures
but the of Income. (3) &fc.). (3)
» Document promising to pas
15 A sum of money owed. (4) 31 Movement or development asumofmoney ataspecihed
17 Buildings and the land on (5)
me. (+
which they stand. (8) 32 Profits after 30 Differences
between income
2)
Money paid to the reserves. (S)
and outgoings. (0)
government on income. ( 3) 34 Money overdrawn ona bank
te i)

D6
Look at the items listed in the Highlights shown in A3. Then draw up a similar
summary for your own bank or company, based on your most recent profit
and loss account and balance sheet. Discuss your summary briefly with
another member of the group.
Unit 3 Foreign exchange

Foreign exchange dealing plays an important part in the activities of many

banks. In this unit we hear Alan King, the Chief Dealer in a London
merchant bank, explain some of the basic principles of foreign exchange
dealing. Then we hear him at work on the telephone making two deals.

Section A At
Look through the following list of currency codes. Then write the
appropriate currency code next to the country to which it relates in the
grid below.
SEK DEM CHF BEF CAD USD GBP ITL
NLG NOK DKK FRF JPY AUD ESP

Currency code Country Currency code Country

| Holland | Norway

| Belgium Sweden

Great Britain Denmark

| Australia Switzerland

Italy Germany

United States of America France

Canada Spain

Japan
Unit 3

A2 &
Listen to Alan King explain some of the basic principles of foreign exchange
dealing and tick (“) those items which he talks about.
l Currency codes.
2 Some terms used in foreign exchange dealing.
3 Some basic principles of foreign exchange dealing.
4 A big deal he did last week.

A3 &
Listen to the conversation again. As you do so, note down whether the
following statements are true or false.

I Most of Alan’s dealings are based on sterling. ~

2 The previous day, dollar rates had risen by betweeni§ th to/* th of
a per cent.
Ww A tom/next means from tomorrow to next week.
When someone asks ‘What is your spot dollar mark outright tomorrow?’
Alan quotes them a spot rate.
A swap involves borrowing one currency and lending another.
a An outright is connected to a corresponding spot transaction.
This conversation took place in the month of October.

A4
Listen to Alan again and write down the words that he actually uses in place
of the words printed in italics.

| We're accounted in British pounds ...

2 So, for instance, your prices for funds which will be exchanged two
working days later are dollar Deutschmark ..
I mean, for instance, yesterday the dollar rates increased slightly.
So people buy dollars because the difference in interest rates between
dollars and Deutschmarks is increasing. be
WwYou're short of Deutschmarks that day and you have to buy, borrow
those for one day ...
That is the basis of making a result where the income is higher than the
costs.
Well, to make totals equal, to balance the account for that day.
. and find that on the 17th that I am in a position where I have sold
more Deutschmarks than I have bought, and bought more dollars than I
have sold.
Then you have spot a week, a period of|two weeks beginning two
working days from now. L
10 We also have deals where someone buys one currency and sells another
on any particular day.
 Foreign exchange 25
ae

11 It’s just that you’re stating the price that you will charge for a spot rate

12 ... depending what the price is for the tom/next exchange of one currency
for another, for a certain period of time.
13 ... so that the relationship between the two currencies fixes, decides the
forward pricing.
14 ... so they cover their foreign exchange risk or possibility of loss by
buying Deutschmarks ...

AS &
It is sometimes difficult to hear words which are unstressed in spoken
English. Look through the text below, which is taken from the first part of
the conversation, and say what you think the missing unstressed words are.
Then listen again to this part of the conversation. As you do so, write in the
missing words. Then compare your answers with those of a partner.

pa A c..... accounted ........5....... sterling, but generally all dealings .........05....

OSU Sis Sas the dollar. So, ....4..6...6. INStANCE, ...8N.K0. spot prices

dt Slee dollar Deutschmark, OK? ............... the big market really, dollar
Deutschmark. And ......5.......... the movement in .......5.46.... dollar which is really
moving .....20Mu.... market. | mean, ../.4..0....... instance, yesterday, the dollar rates

firmed up oh (ln ots little. They went up about .........0....... sixteenth to ........
eighth of ........\...... per cent. So people buy dollars .......0......... the interest

differential between dollars ...........: .... Deutschmarks is widening. So ..............+.

mean, if you buy dollars, OK, you, yOu ......0.4.... lend them GUS conse next

Rg phere teres say eleven and .......: Pree half per cent. ..Wn0nnas short

Re at WO Deutschmarks that day, and you have ................. purchase, borrow

ind one day, and that’s about five .......4..:. .. half per cent. So
ThOSG: f.ciceen
4K Bh Me talking about six per cent difference. The basic idea Rel ee spot

dealing is to buy dollars low ............06.. sell high. That's the basis .................
ITUBRUIAG «cxscasevcherensss profit

Section B B1
Before you listen to a telephone call, look at the expressions on the next
page. Put a tick (%) by the ones you might expect to hear in a telephone
conversation concerning a foreign exchange deal and a cross (X) by those that
Unit 3

you would not expect to hear. Then compare your answers with those of a
partner and discuss any differences.
1 In order to confirm the arrangements we made by telephone today, here
are the terms and dates on which we agreed.
I’m fine thanks. How are you?
WwW OK.
bh Just let me get the two week price for you.
Hold on for a moment.
I can give you two dollars outright.
Please advise if 11.00 a.m. on the above date is convenient.
SI Why the dollar will rise again.
An

Nice to hear from you.

CO
Oo Just a second.
10 I sold you two million dollars against D marks.
11 Further to our recent telephone conversation, I am enclosing a copy of
our tariffs, as requested.
12 Thanks a lot for the deal.

B2 &
Alan King is calling Tove Strutz, the Cash Manager of a large Scandinavian
insurance company. Listen to their conversation and answer these questions.

1 What time of the year does the conversation take place?

2 In this deal does Alan buy Deutschmarks from Tove or sell them to her?

B3 &
Listen to the telephone conversation again. As you do so, fill in the form
below to show Tove’s records of the transaction.

CURRENCY PURCHASE/SALE

_ Bank and dealer

Currency & amount

Rate of exchange

Value date

SEK amount

Date

Notes
Foreign exchange 27

B4 &
Look at the following expressions. Then listen to the telephone conversation
again and write down the words or expressions that are used to mean
the following:
Actually.
Meet each other.
Telephone me.
State our prices.
The price for a currency two working days from now.
NH
W
hh
Nn The price for a currency two working days from now which one bank
charges another bank.
7 An exchange rate of Swedish kronor against dollars.
8 The front surface of a computer or terminal on which information is
shown.
9 Thousandths of a percentage point.
10 Wait a moment.
11 Available in your account on (date).
12 I agree that we have made a deal.
13 Pay the funds into.
14 Pay the corresponding funds into.

BS &
You are going to hear eight sentences which you might hear in a telephone
conversation. Respond to them with one of the sentences shown below.
A OK. Thanks for calling. Bye now.
B Yes, that would be nice.
C Fine thanks. And you?
D Yes, OK. In a couple of weeks, then.
E Let me think. As a matter of fact there is, yes.
F Very well, thanks.
G Yes, that’s fine.
H For how much?
Note that not all of these responses actually occur in the section. Some are
alternatives which could have been used instead of what was said.

B6
The speakers in this unit all use numbers fluently in their everyday work. But
it can sometimes be difficult to know how to say things which we often see
written. How would you say the following?
14% +*
2 VYe%
 3 §
4 600, 541
Dk 000,000 dollars
6 7.3980
7 2.6028 + 0.0037 = 2.5991
8 500,000 x 10.64 = A 5,320,000
9 240 + 24% = 96
10 12% + 21% = 33"

Section C C1
| What, in your opinion, are the essentials for a successful telephone call?
2 What sometimes goes wrong in telephone calls?

C2 &
Now listen to Alan King receiving a call from Jan Ackerman, a dealer in the
Foreign Exchange department of a Dutch bank, and answer these questions.
1 Is this the first time Alan has talked to Jan?
2 Do they deal dollar/Deutschmark, dollar/pound, or dollar/yen?
3 Is it a big deal or a small deal?

C3 &
In quoting rates, note that Alan often specifies only the pips, that is the third
and fourth decimal places of the exchange rate. Also, because he does not
know whether Jan wants to buy or to sell dollars, he quotes a spread of
rates, that is both the rates at which his bank will buy and sell dollars. Now
listen carefully to the telephone conversation again and write in below each
of the four rates which are quoted.

Spot rate: Buy $ Sell $

Two weeks’ Bid rate Offer rate

swap rate: (the bank’s lending rate) (the bank's borrowing rate)
Foreign exchange 29

C4 =
Listen to the telephone conversation again. As you do so, fill in Jan’s
settlement form.

VAN ZEAHALM BANK

1007 AK Amsterdam

November 2} | I<€y Commercial

DATE:

WE CONFIRM HAVING BOUGHT FROM YOU:

CURRENCY: PURCHASE AMOUNT:

FOR PAYMENT TO OUR RECEIVING AGENTS:

WE CONFIRM HAVING SOLD TO YOU:

CURRENCY: SALE AMOUNT:

FOR PAYMENT TO YOUR RECEIVING AGENTS:

EXCHANGE RATE: VALUE DATE:

C5 &
Look at the following extracts. Listen to the telephone conversation again
and write down in the spaces provided the words that Alan and Jan actually
use, instead of the words in italics.
PGoed, whats oc A ke. , please? (the exchange rate for dollars
against Deutschmarks)
ht I have probably a small interest in two Weeks, ........cccceseecesseseseeeeeees
(lending one currency and borrowing another for a fixed period of time)
5 gh | -Gigetak imemeers SPE A Crn ar Lae (wait a moment). For two weeks
SRE EA ee CERES ? (beginning two working days from now)
WS We =11s een eae a a ee ? (mullion dollars)
© Cali VOU CVO 106 clcdncemnairemmnnenn ? (the exchange rate that will
actually be used for funds exchanged two working days from now)
eG) SN Ye ah ee . (sell you half a million dollars in
exchange for Deutschmarks)
30 Unit 3

So two fifty-nine ninety-one is the outright. ..0.....ccseeseeseeeeeeeeeene will be

the ... (the date on which our money is available in your account and your
money is available in our account)
SB) Fret a second, F've Wet WY. ciiccsccccesansedcssicreniccress . (chart or table showing
days, months and dates)
Sy Beas cnig ciashebacnbaaieiaies . Thank you very much, Jan. (We have agreed on the
sale and purchase of halfa million dollars.)

C6
A dealer at Bank B telephones the Cash Manager at Company C to check on
the company’s currency needs. Work in pairs, one person being the dealer
and the other the Cash Manager. See if you can reach a deal. Dealers look on
page 107 for your instructions. Cash Managers look on page 108.

Section D D1
Read the following report about currency rates and then look at the graphs
below which show the movement of the four currencies during the week in
question. Which graph shows which currency?

ee
Foreign exchange

In a quiet week, the US dollar continued the beginning of the week it fell against
its upward course, again trading at the dollar and other major currencies,
nearly three Deutschmarks. The dollar as North Sea oil prices eased on the
was supported by commercial demand, European spot market. Friday saw a
as normal interbank trading declined slight recovery, however, due to the
and the market’s major operators began covering of short positions, and at close
squaring their positions for the year- of trading the pound stood at USD
end. The forecast of lower US interest 1.3016.
rates and of a cut in the Federal Reserve Falls in oil prices have opposite
discount rate did not lead to any effects on the pound and the yen, as
downturn in the US currency and the Japan needs to import nearly all its
dollar closed at DM 2.9925, considerable energy requirements.
The Deutschmark Was hardly This has meant that the yen has
changed, moving in a narrow range in continued its steady climb, levelling
lack-lustre trading in Frankfurt. There slightly towards the end of the week.
was no central bank intervention to Against the dollar it has remained little
weaken the dollar against the mark. changed since mid-January, but the yen
Trading volumes were low as the has outperformed European currencies
markets decline towards the end of the for most of the year. Sterling started the
year. year at around JPY 325, touching a
Sterling has been volatile lately, due peak of JPY 344 on May 14. It closed
to its status as a petrocurrency, and at on Friday at JPY 337.

D2
Now read the report again and then complete the information below to show
the latest currency rates mentioned.
WS Jad[Paige ean

On this basis, work out the following cross rates:

SS 0).Oa | ee eee
GBP 1) DM sceneries.
32 Unit 3

D3
On the basis of the information in the report above, say whether the
following statements are true or false.
l The report was written in mid-January.
t The dollar firmed up against the Deutschmark during the week.
3 Big banks were more interested in balancing their currency positions than
in normal trading.
> Possible changes in the US interest rates and the discount rate did not
affect the dollar rates.
The Deutschmark was traded in large amounts in Frankfurt.
The exchange rates of the British pound have changed quickly recently.
Banks were dealing in sterling on Friday in order to square their currency
SIAN

positions.
Falls in oil prices mean that the yen rates go up.
The yen rate against the dollar has been roughly the same for eleven
months.
10 It is possible to buy more yen with Swiss francs now than it was earlier in
the year.

D4
Look at the figures on the next page which show the US dollar currency
position of a bank at the close of business on April 14th. On the basis of this
information, say whether the bank’s total position in US dollars is long or
short and if so by how much, or whether the bank has squared its total
position.
Foreign exchange w o's
|

Accounts in US dollars

A: Position at close of business, April 14th.

Nostro accounts Vostro accounts

(money placed with foreign banks) (deposits received from foreign banks)

USD 50 million USD 40 million

Loans to customers Deposits from customers

USD 5 million USD 10 million

USD 55 million USD 50 million

B: Forward position in USD.

Forward purchases Forward sales

Value 21st April Value 21st April

USD 30 million USD 40 million

Value 29th April Value 29th April

USD 35 million USD 35 million

USD 65 million USD 75 million

C: Total position.
Unit 4 Meetings

In this unit we will hear extracts from two separate meetings. The first
meeting is between a company treasurer and the area representative of an
American bank. In the second meeting we will hear the same company
treasurer, this time negotiating with a banker from the United Kingdom.

Section A Al
Before you listen to the extract from the first meeting, look at the following
expressions. Put a tick (“) by the ones you might expect to hear in a business
meeting and a cross (X) by those you would not expect to hear. Then
compare your answers with those of a partner and discuss any differences.
Where would you expect to see or hear those you marked with a cross?
One of the points you mentioned in your letter was ...
I’m sure we can help you there.
wa Notice
w— is hereby given that the rate of interest for the next interest period
has been fixed at nine per cent per annum.
4 Could we take up the question of ...?
5 Perhaps you could consider reducing that?
Meetings we w

Senior financial managers consult Wallers Bank. Shouldn’t you?

What kind of reduction did you have in mind?
SIO

8 I enclose a copy for your information of the minutes of the meeting held
on 23 May 1991.
9 I take your point.
10 OK, I’ve made a note of it.
11 Applications must be made on the form attached hereto.
12 We'll get back to you within a couple of weeks or so.

A2 &
You are going to hear Diane Francis, who is an Assistant Vice-President at
the London branch of an American bank, in conversation with Ulf Edberg,
the treasurer of Denavian International Insurance. After the meeting, Diane
wrote a report on it for her boss. Here, however, the report is not complete.
Listen to the conversation and fill in the gaps.
36 Unit 4

A3 &
Listen to the conversation again and write down in the spaces provided the
words that Ulf and Diane actually use instead of the words printed in italics.
D. Onne: iE the) DOUG FO Ssiescensntnenccsoroncrncgenh (referred to or specified) in your
NOTRE. WAS CT cscscsvcsecrnescanscccnscsteacth letter of credit facility ... (present)
2 .cadueite ithe: change ints. ccminuccdecese . (the law of the United States)
3 ... Ljust wonder if we Could xiscscciccsssscconiincnssintess (look into) alternatives to
“1 ROR a ACT Tora eT . (flexible agreement to provide funds to a third
party)
4 ... at least 0.75.-0f a Per COMt PET ANNU ....crccsssincrscnsarecmmatsnncas
ses (fixed,
without variation)
OE Pert an etie ghee eescsaca hs of letters of credit? (total amount that is
owed)
6c. eehat do vou Call 16P oie. Kapri aeencnss with our own securities ... (am
arrangement by which money and other assets are controlled for our
advantage)
FRE 11) SEC POE WEED seciieiwinsapetedpeetivensinn the volume of letters of credit ...
(reduce and make smaller)
8 ... trust funds are something in which we can Offer yOU ......cceeeeeeeeeeteteeeee
(a lot of experience, skill and know-how)
9 I'll go away, give the matter a lot of thought, and give you our
isilebciahanenannndsatenbsecees next month. (preliminary main suggestions)

Ad
Each of these phrases from the conversation fulfils a particular purpose.
Match the items with the definitions.

One of the points you mentioned in A Agreeing that something is correct.

your letter was .
t But I’m worried by the increase in B Referring to something stated in writing.
your commissions ...
As we discussed last time ... C Saying that a course of action is certain.
I just wonder if we could explore D Trying to find the right words.
alternatives to .
wn I guess we have ... E Saying that you think what you are going
to say is correct.
oN Right. F Expressing concern about charges.
. a— what do you call it? G Suggesting that something is acceptable.
I think that could be an acceptable H Agreeing that something is acceptable.
alternative ... :
But I’m sure we will decrease the I Referring to a previous discussion.
volume ...
10 So you'd prefer a trust fund ... J Suggesting an alternative.
11 Fine. K Checking that you have understood.
 Meetings 37

A5
Work in pairs. One person takes the role of Diane, representing the bank and
the other takes the role of Ulf, representing the company. Briefly discuss the
letter of credit facility offered by the bank to the company. Try to reproduce
roughly what Ulf and Diane said.

Section B- B1
Read this letter which concerns the meeting that you will hear in Sections B
and C. Here the last paragraph has been left out. Decide which of the
alternatives on the next page is the most suitable last paragraph for the letter.
Then compare your answer with that of a partner.

14 Churchgate, London EC2A 2YU

Wallers Bank plc Telephone: 071 586 2314
————— Facsimile 071 586 2333 Telex: 338539
Mr U Edberg
Denavian Insurance Company
Kungsgatan 24
id 35 Stockholm
Sweden

Dear UI1f,

I understand
see you at 9.0
offices. We very much appreciate
look forward to the meeting.
I thought it would be a good
the topics which we see
which we would like
Principally, these are the
- Our current multi-currenc
company’s
Cash management
capabilities in
- Long-term funding requirements.
- UK and North American subsidiaries’
- Country risk study.
(Last paragraph missin )
Yours sincerely,

Mt Bor
Clive Bond
Director
38 Unit 4
nrc UE EEEEEEESEESEEEEEEEEED

Choices for the last paragraph:

further points
you have any
assistance, please do

there are
particularly desire
perhaps you would

approval. I plan
part of September
you again to discuss
convenient for you.

B2 &
Listen to the first part of the meeting betwen Ulf Edberg and Clive Bond.
Then answer these questions.
1 What banking service do Ulf and Clive discuss?
2 What is Ulf’s opinion of the charge made for this service?
3 What does Clive promise to do?

B3 =
Here are Clive’s incomplete notes of his meeting with UIf. Listen to the
conversation again and complete the notes.
Sart
Client raised the question Of the ....c.ccccccccesssesessseesesesees Says that 1% over
pentlandite is too expensive.

Wants us to reduce Our Margitt tO ...csscsccscssseseseresssesenesees . Stated that with

Key Commercial, Denavian pays Only ...c.cccccecssereseersseeeees . Client pointed
out that in a recent credit rating Denavian was rated ...ccccssecesssserssserereeeres for
SOrb-termh Gt QA: cocsicnicsinssavasciseoseienenide CATE THEE. Srctecahbvamealousan

1 OMAN TOE acninwesascintnptthaicunseais I feel that if we do not reduce our

margin, it ts very unlikely that ......c.ccccecesesecssesseeeeees
Meetings 39

B4
Look at the words in the box, all of which are from this section. Check any
words that you do not know with a partner. Then, working together, match
the words with the correct definition from the list below.

confirm overdraft facility mark-up

credit rating review margin
overnight rate LIBOR quite frankly
credit committee

— A banking service providing for borrowing on current account up to an

agreed maximum limit.
The rate of interest charged for a loan at call from one day to another.
The gross profit margin or an increase in price.
Honestly and directly, without wishing to hide anything.
nA London Inter-Bank Offered Rate, the rate of interest between London
bPwhry
banks on some deposits.
6 The relation between profit and selling price.
7 A group of bank staff who control the lending of the bank.
8 A formal and detailed examination of the financial strength of a
company.
9 To look at or examine again.
10 To give agreement.

B5 &
You are going to hear seven sentences taken from the meeting you have just
listened to. Say something appropriate in reply to each of them, choosing
from the list below.
A I see.
B Yes, do that.
C Yes, certainly.
D OK, I’ve made a note of that.
E Yes, we feel that’s about right.
F It’s our basic lending rate, which is 12 per cent just now.
G Well, say 0.25 per cent above your base rate.

Note that not all these replies actually occur in the section. Some are
alternatives which could have been said instead.

B6
Work in pairs. One person takes the part of Ulf, the other of Clive. Discuss
the interest rate charged on the overdraft facility. Try to reproduce roughly
what they said.
40 Unit 4

Section C C1 =&
Listen to the second part of the meeting between Ulf and Clive.
1 What does Ulf want?
2 What does Clive agree to do?
3 What is Ulf’s view of his company’s relationship with the bank?

C2 &
Listen to the discussion again. As you do so, make brief notes for Clive as a
basis for the report which he wrote later. Then compare your notes with
those of a partner and discuss any differences. Finally, with your partner
write a short report based on your joint notes.

C3 &
Listen to the discussion again and write down in the spaces provided the
words that Ulf and Clive actually use instead of the words in italics.
iT see that WeVe B00 ccd aneciunateien (the bank’s services for the
safe keeping of Our securities) OM the .......cccccseccseesesessseseseseeeseees . (list of
business to be discussed)
2 ... we’ve checked up on the charges for this, and really it comes to
eeisak atiodich peckeeicmiae . (a very large sum)
3 SO DOW We Have: Started (0 cass: coccsconcesscasnevessestidvveseencres with the different
banks ... (discuss and try to come to an agreement)
4y.5.we pay £200 per fixed Tate cc cccccccecttessesccm teats . (business deal
involving investments such as stocks, shares and bonds)
Re FE 1 ee (ordinary shares deal), plus a
Ra le Rasa ceceeeecara,Accadta . (fixed sum for services)
pee EARL: WCC CORE: OS: CEN ios craeidcooncdy eeeriotennas of one million Swedish
kronor ... (same amount as)
PF SOy TO TUE COREE VERN isis ercececcecscassisecce
coven seem out of line ... (charges
for certain services)
8 Yes, not all of that eight billion is with us of course, but I
rere ALT She BF LDS . (see what you mean)
yap aE stRIAA Rea Em aD AE , | was interested in ... (in general)
10 ... everything ‘can usually De hi aiidsicihseeneeiane over the phone.
(discussed and put right)
Al It's only that 6: COUDIE OF Jone thes should be made ...
(changes to make things more suitable)
AZ ‘QE WINES 15 Watedicte chansons . (negative statements expressing
dissatisfaction)
 Meetings 41

Which of the qualities listed below do you think are most important for
someone to be successful in negotiations? Put them in order of importance, 1
to 8 and then compare your ideas with those of a partner.
Flexibility
Calmness and self-control
Friendliness
Ability to analyse situations
Reliability
Well prepared with information
Ability to communicate
Other (Please specify.)

C5
Read the following information.

Bank B provides services for Company C. Principally, these are as follows:

1 Standby letter of credit. The charge is %4% on the outstanding volume. The
average outstanding volume last year was £400,000.

2 Overdraft facility, with a limit of £2 million. The charge is Bank B's base
rate (10%) plus 94%. The average overdrawn amount last year was
£500,000.

3 Custodian services. Company C pays £50 per equity transaction. Last year
there were 550 such transactions.

Work in pairs, one person representing Bank B and the other representing
Company C. If you represent Bank B, look on page 107 for your
instructions. If you represent Company C, look on page 108. Negotiate terms
in accordance with your instructions.

Section D D1
On the next page is the follow-up letter Clive sent to Ulf soon after their
meeting. The last paragraph has been left out. Decide which of the
alternatives on page 43 is the most suitable last paragraph for this letter.
Then compare your answer with that of a partner. Discuss your choices, if
they are different.
42 Unit 4

14 Churchgate, London EC2A 2YU

Wallers Bank plc Telephone: 071 586 2314
—————— Facsimile 071 586 2333 Telex: 338539

Edberg
International Insurance Company Ltd

2 October 1991

Although Mark Grey is currently on a business trip to

the Middle East, he certainly joins me in thanking you
and Carola for what was not only a most enjoyable but
also a very informative and useful meeting during our
recent visit to Stockholm. Thank you also for the
excellent dinner which you provided. It is always a
pleasure visiting Stockholm and I hope that when you are
next in London you will allow us to return your
hospitality.

(Last paragraph missing)

With best wishes,

Yours sincerely,
 Meetings 43

Choices for last paragraph:

1

In addition o the material enclosed, we

shortly information on trust funds, with a
costs between trust funds and standby letters

We hope that our meeting will serve to strengthen our

relationship with Denavian. We are giving serious
thought to all the issues you raised and can assure you
that the needs of Denavian will be well attended to.

We are following up on the several matters discussed

which require action and I will be writing to you more
fully in due course. Meanwhile, thank you once again for
your generous time and the very enjoyable dinner.

D2
Look at the document on the next two pages which refers to the overdraft
facility discussed by Ulf and Clive in Section B. Then answer these questions.
1 Place a tick (/)next to those currencies which are available under the
terms of this facility.
a) Japanese yen
b)) Swiss franc
c) British pound
d) Deutschmark
e) Polish zloty
2 When and for what periods will Denavian pay any interest charges due
under this facility?
3. How will Denavian pay any such interest charges?
4 What must Denavian obtain in order to be able to use this facility?
5 What legal system applies to the agreement?
6 For how long is the facility available?
7 Who has to sign the agreement on behalf of Denavian?
44 Unit 4

14 Churchgate, London EC2A 2YU

Wallers Bank plc Telephone: 01 586 2314
————— Facsimile 071 586 2333 Telex: 338539

Our ref: AC/MB/LB

14 May 1991
Denavian International Insurance Company Ltd
111 35 Stockholm
Sweden

For
attention
the of Mr Ulf Edberg

Dear Sirs,

USD
10,000,000,00
Further to your letter of 20 April 1991, we are pleased
to advise you that we are willing to place the above-
mentioned facility at your disposal on the following
terms and conditions:

Limit: Up to USD 10,000,000.00 (say ten million United States

Dollars) or equivalent outstanding at any one time.

Purpose: To provide working capital.

Availability: Drawings may be made in major currencies (subject

to availability), except sterling.

Charges: Interest will be charged at the rate of 1% over

Wallers’ Base Rate. Such interest will be calculated
on a day to day basis and debited to your account
quarterly in arrears at the end of March, June,
September and December.

Exchange Control: This facility is granted subject to the approval

of the Central Bank of Sweden.

Jurisdiction clause: This facility letter shall be governed and

interpreted in all respects in accordance with English
law and you accordingly submit to the jurisdiction of
the High Court of Justice, London. It shall be open to
us to enforce repayment in the Courts of any competent
jurisdiction.

Validity: This facility is available until further notice, but

is subject to review by us not later than 14 October
1991.

Please signify your acceptance of these terms and

conditions at your earliest convenience, by signing the
attached copy of this letter in accordance with your
 Meetings 45

Authorised Signature list and returning it to u

enclose the relevant approval from the Central
Sweden.

Youns fazrthtud
Ly,
For and on behalf of Wallers Bank Limited

We accept the terms and conditions specified above.

For and on behalf of Denavian International InSurance

Company Limited,

D3
Look through the following information.

Three banks, A, B and C, all provide services for the same big company.

Only one bank provides a trust fund instead of a standby letter of credit facility.
Bank A charges 42% on the outstanding volume of letters of credit.

Each bank provides only one overdraft facility and only one of these facilities is
multi-currency. The other two are sterling. There is a £2 million limit on the
overdraft facility provided by Bank C.

Bank A holds securities worth £4 million in a custodian account for the company,
which is twice the value of securities held in the company’s custodian account by
Bank C. The bank which provides a trust fund does not provide the company with
custodian services. The same bank does, however, provide the company with an
overdraft facility with a limit of £5 million.

Given this information, work out the following:

1 Which bank charges the company 4% on the outstanding volume of
standby letters of credit?
2 Which bank has a limit of $10 million on the company’s overdraft facility?
Unit 4

D4
Most of the words in the crossword puzzle are used in Units 3 and 4

28 Same value. (7,5)

29 Dutch guilder. (3)
32 Thousandths of a percentage
point. (4)
33 Price for funds which can be
exchanged two working days
later. (4,5)
34 Conditions of an agreement.
(5)
Down
2 ‘Il agree we have just made a
deal.’ (4)
3. Charge made fora service. (3)
4 Chart or table showing days,
months and dates. (8)
5 Japanese currency unit. (3)
6 Sum. (6)
8 Look at or examine again. (6)
11 Difference between income
and outgoings. (6)
12 Achange, to make something
more suitable. (10)
15 Happening every three
months. (9)
16 Swiss franc. (3)
Across Exchange one currency 18 Suggestion. (8)
| A service for borrowing for another for an agreed 19 Exchange ... are the values of
on current account up to period. (4) currencies in relation to each,
an agreed limit. (9,8) Deal where you buy one (5)
Relation between profit currency and _= sell 21 List of business to be
and selling price. (6) another. (8) discussed, (6)
Q Laws (11) Fourteen days. (9) 25 Name given to the British
10 Give agreement. (7 French franc. (3) pound. (8)
11 Public limited company Charges as an agreed 27 Charged and deducted. (7)
percentage of price or 30 Italian lire. (3)
13 Buy. (8) volume (11) 31 Nought. (4)
14 US dollar. (3 26 Belgian franc. (3) 33, Swedish krona. (3)

D5
Write a letter to Mary Choyto who works for a bank in Hong Kong. You
have spoken to her on the phone once, but have never met her. Suggest a
meeting with her during your four-day visit to Hong Kong next month and
mention two alternative times. Specify the items that you would like to talk
about.
Unit 5 A Presentation

In this unit we will hear three parts of a presentation about currency options
by John Morley. He is Executive Director of the foreign exchange division of
a London merchant bank and is making his presentation to a group of cash
managers and treasurers from different corporate clients.

Section A Al
Here are the steps which John uses in planning his presentation strategy.
Choose the five steps which you think are the most important for the making
of a successful presentation in their order of importance and then discuss
your choices with a partner.
Set the objective of the presentation.
Research the topic.
Analyze the needs of the audience.
Formulate a clear introduction.
Ww
eS
&
bw
Wm Select information which the audience needs on the topic and which
makes the advantages clear.
6 Review the advantages and finish with a clear closing statement.
Provide time for audience questions.
8 Include language techniques to help direct the attention of the audience.
9 Prepare visual aids.
10 Practise the entire presentation.
48 Unit 5§

A2
Before you listen to the first part of the presentation, look at the following
expressions. Put a tick (/) by the ones you might expect to hear in a
presentation concerning currency options and a cross (X) by those you would
not expect to hear. Where would you expect to hear or read those marked
with a cross? Compare your answers with those of a partner and discuss
any differences.
— I would like to say first of all thank you for coming.
Mm Claims as aforesaid must be received not later than 30 days after the
expiry of the guarantee.
Perhaps we could begin by outlining ...
First of all, what is a currency option anyway?
Ww
be
nA We now have to look at why the option has a particular place for the
commercial user.
6 Wallers Bank announces that, with effect from 30 October 1991, its base
rate is decreased from 12% to 11.5% per annum.
So here are a number of situations described so far where you actually
have something that is providing some unique advantages.
8 I attach a proposed agenda for this year’s conference.
9 If we get down to something a little bit more practical ...
10 What can I get you?
11 I'd like now to draw the main threads together.

A3 &
Listen to the beginning of John Morley’s presentation. As you do so, make
brief notes on what John says. Some headings are given here to help you.

Custer en on GPTIMKs ienhale:

Cordacd contracks:
THR OS UY) Servicer -

Leaderstip postu -
Medium - sizeTo large compances:
 A Presentation 49

A4
Listen to this part of the presentation again and say if these statements are
true or false.
1 John begins by introducing himself and by thanking his listeners for
coming.
John says that currency options are quite complicated.
There will be opportunities later for discussion with subject experts.
N John expects currency options to become as important as forward
WwW

contracts.
5 John’s bank was one of the first to introduce all kinds of new services in
the currency options field.
6 John believes that his bank does as much currency options business as any
other bank in the world.
John expects the retail banks eventually to do larger volumes in currency
“SI

options business than his own bank.

8 John does not expect larger banks to have the same tailor-made element in
currency options services as his own bank will have.

A5
John uses several phrases that are useful when beginning a presentation, some
of which are given in the list below. Look through these phrases and plan the
introduction to a talk about a banking service that you know about. Use as
many of the phrases from the list as you can in any order that you choose.
Then make your presentation.
And the idea ts to ...
One of the areas which ...
Good morning. I’m ...
Perhaps we could begin by ...
I would like to say first of all ...
.. and this is intended to be an opportunity for you to ...
We have got a number of services in ...

Section B B1 &
John Morley continues his presentation. Which of these items does he
talk about?
@ The history of currency options.
@ What a currency option is.
@ Currencies available.
@ Advantages of currency options.
@ Options and treasury services.
Unit §

B2 &
Here are the incomplete notes John used in this part of the presentation.
Listen again and then complete the notes so that they are similar to the slide
he used.
-

Opin buyer has the right fo

Butno obhaation mp dW So.

Option seaeaosthe right %
at Ahe
price demanded.

B3
Complete the currency flow diagrams below by writing the events in the
appropriate boxes. Listen again to this part of the presentation if necessary.
1 Foreign Currency Call Option

Events
Receives base currency.
Delivers specified currency.
Receives specified currency.
Delivers base currency.

Option buyer Option writer

eR hel ne 8
Pyeiens eptes-=] Tee
2 Foreign Currency Put Option

Events
Receives specified currency.
Receives base currency.
Delivers base currency.
Delivers specified currency.
A Presentation 5]

Option buyer Option writer

B4
Below is a slide which John uses to describe the advantages that are offered
by currency options. The list here, however, is out of order. Specify the two
advantages to which John refers in this section in order. Listen again to this
part of the presentation if necessary.

Advantages
Known worst case
Range of strike prices
Cover downside; keep upside
Profit lock
Contingent cash flows

B5
Choose the best answer.

l If you purchase something:

a) you hire it; b) you deliver it; c) you buy it; d) you state how much
it costs.
in) An obligation is:
a) something you must do because there is a legal or moral requirement
to do it; b) a particular thing that you want to do; c) a document
promising to pay a sum of money; d) a sum of money owed by one
person to another.
ww Value spot is:
a) a period of two weeks beginning two working days from now;
b) the price for funds which will be exchanged two working days from
now; c) the price for a currency in terms of the currency of another
country; d) the date two days ahead on which funds are available in the
bank.
Something that is straightforward:
a) happens immediately without delay; b) happens too quickly; c) is
simple and uncomplicated; d) is very serious and important.
5 NM Unit 5
—

wn Anything that is wnique about the option is:

a) to be found only in the option; b) to be found mainly in the option;
c) difficult to understand; d) new and not very well known.
6 A deal is:
a) a business agreement; b) a business relationship; c) a way of saving
money; d) a person who buys and sells things.
A principal advantage is:
a) an advantage that you believe in; b) a general advantage; c) an
advantage in theory but not in practice; d) a main advantage.
8 Downside risk is:
a) the possibility of a fall in value; b) the possibility of a rise in value;
c) the possibility of a fall in quality; d) the possibility of fewer
advantages.
9 If something happens simultaneously, it:
a) happens without being planned; b) happens before something else;
c) happens after something else; d) happens at the same time as something
else.
10 A premium (here) is:
a) a large sum of money; b) a sum of money set aside for a particular
purpose; c) a charge for the use of an option; d) a demand for payment.

B6
Each of these phrases from the presentation fulfils a particular purpose.
Match the items with the definitions.
1 First of all, what is a currency option A Stating a feature of something which
anyway? What are we talking about? makes it better than anything else.
2 Can everyone see that? B Saying that you are going to talk about
something later.
3 Like an ordinary foreign exchange deal. C Saying that something is simple.
4 So that’s the essence of it. D Moving on to the next point.
S It’s a perfectly straightforward initial E Making a comparison.
idea.
6 We now have to look at why the F Emphasizing that an option fulfils a
option has ... function already referred to.
7 What is it that’s unique about the G Introducing a definition or explanation.
option that gives it certain advantages
that make it the best deal?
8 ... and we'll come and discuss some of H Introducing the main feature of something
them in more derail. which makes it better than anything else.
9 A principal advantage is that ... I Checking that everyone can see an
illustration.
10 An option does that. J Saying that you have spoken about the
main features of something.
 A Presentation oo ww

B7
Now plan a short introduction about a product with which you work, or if
you prefer, about currency options. Try to use as many of the phrases in B6é
as you can in any order you choose. Then make your presentation.

Section C C1 &
Look again at the slide shown in B4. Listen to the third part of John
Morley’s presentation and number the remaining advantages to show the
order in which he mentions them in his presentation.

C2 &
Listen to this part of the presentation again. As you do so, make brief notes.
The headings you have numbered 3, 4 and 5 on the slide will help you. Then
compare your notes with those of a partner and discuss any differences.

C3 &
Listen to this part of the presentation again and write down in the spaces
provided the words that John actually uses instead of the words in italics.
BBA OO IB viscadseroosvaninss useful for covering contingent cash flows ...
(especially)
(SEE ee , for instance, where you might get the order ... (written
offers to supply goods or carry out work at a stated price)
Se RONPE Ditasniensaouse ... (exchange rates agreed for a currency option)
Aro Can ts.5..oeo to deal at some other rate. (choose)
5 Most companies reckon they can live with a few cents oo... of an
exchange rate. (m10vement)
igie hk(Fee1 bupek PR eedsek , depending on ... (change the charges that you
pay for the use of an option)
7 ... by which I mean that if you are .............00 , for instance, and the
dollar has been going up and up ... (in a position where you have bought
more dollars than you have sold)
8 You can take out an option to sell the dollars at wo... . (today’s
price)
9 ... if it goes up, you effectively you have locked in that amount of
fet Sees . (financial gain or advantage)
LO Anis cias Cy cas might find this profit lock effect a useful one. (people
responsible for a company’s money)
11... an option and obtain ........ceee which you cannot get any other
way. (an advantage)
 Unit §

C4
A good speaker uses language to help direct the attention of the listeners.
Look at some of the techniques below which a speaker can use to focus the
listener’s attention on important points.

@ Enumerate: The first point is ...

@ Emphasize: A principal advantage is ...
@ Repeat: ... a 15 per cent rise in costs. 15 per cent!
@ Restate: Let’s look at that another way.
@ Focus: Look at these figures.
@ Link: We've seen the advantages; let’s now examine the costs.
@ Explain: Finally, profit lock, by which I mean ...
@ Sum up: So here are a number of situations described so far where ...
Now prepare a short presentation about a service or a product with which
you are involved. Try to include each of the eight techniques above, in any
order, though not necessarily using the same words. Your audience will make
notes while they listen to your presentation.

Section D D1
1 Read the letter from John Morley to one of the guests who was at his
presentation. The letter contains nine paragraphs. Read it quickly and
match the ideas below with the appropriate paragraph number.
A Stating the price of a service.
B Specifying terms and conditions.
C Offering a facility.
D Offering to state the price of a specific service.
E Generally inviting business and offering service.
F Saying who should use a service and when.
G General introduction of a service.
H Explaining how a service works.
I Stating the purpose of writing.
 A Presentation 55

Wallers Bank ple 14 Churchgate, London EC2A 2YU

—— Telephone: 071 586 2314
Facsimile 071 586 2333 Telex: 338539

Wilhelm Haussmann
Corporate Finance Director
GVZ AG
Quai de Vendome
8007 Zurich
Switzerland

para. 18 March 1991

Dear Wilheln,

It was a pleasure to see you at the bank on March 7

and 8. During our Thursday afternoon meeting, we
briefly discussed several points and, as promised, we
are now writing to you concerning the three major
issues raised.

Firstly, we noted your interest in learning more

about our interest arbitrage operation, a service by
means of which we are able to provide very
attractive interest rates in all major currencies.
The way in which these loans are arranged is by the
use of sterling bills of exchange, so-called
‘eligible bills’, which can be discounted in the
London discount market. This market reflects the
short-term (one to six months) domestic interest
rate level in the United Kingdom and often provides
cheaper funding than LIBOR-related instruments.

Companies to whom this form of lending will appeal

are, in particular, those that have a borrowing
requirement in a currency in which they have
receivables available for repayment at the end of
the loan period. According to the regulations of the
Bank of England, the bills must support a commercial
transaction such as export, import or domestic
trade.

We arrive at our interest rate through discounting

sterling bills on behalf of our customer and
converting the net proceeds into the required
currency at the spot rate. Wallers then enters into
a forward contract with the customer for the
purchase of the currency to be repaid at maturity of
the loan and all the rates used for these
56 Unit S

transactions combine to produce the interest rate

quoted to the customer (see Appendix 1 for example).

Secondly, you expressed interest in opening a

Sterling Current Account and I am now pleased to be
able to offer you this facility on the following
terms and conditions.

For your requirements in Sterling we would operate a

current account in your name, transacting all
standard banking items and paying interest on any
cleared credit balances as follows:

- Up to £25,000 - Nil
- £25,000 to £100,000 - Wallers Call Rate less 1% p.a.
- Over £100,000 - Wallers Call Rate (currently 9%
D itis)

I enclose a copy of our standard charges for

standard items, but would operate the account free
of charge for say six months, except for:

- Clearing bank telex charge for same day value payment

to one of their branches
- Special clearance costs
-Daily telex statement charge

After six months, we would review the arrangement in

the light of account activity, balances held and
prevailing interest rates.

We can provide a daily Telex Statement of Account

which would be available to you each morning,
itemizing all the transactions of the previous day
and including the opening and closing balances. Our
fee for this service is £600.00 for each account.

Finally, you mentioned your forthcoming negotiations

for the takeover of a United States company. The
exchange risk that arises for you as a contingent
liability during the negotiations is clearly a
considerable one and one that is best covered, for
reasons already discussed, by the use of a currency
option. We would be particularly pleased to take
this matter further, by advising you as to an
appropriate strike price and by quoting a very
competitive premium.

We thank you for giving us the opportunity to assist

you with your banking requirements and look forward
to setting up an active and growing relationship
with your group of companies. Meanwhile, if you have
any queries, please do not hesitate to contact me.
A Presentation 5

2 What are the three main topics of the letter?

D2
Look at these steps describing the bank’s interest arbitrage system and
number them in the order you think they happen.
@ Bills are discounted in the London discount market.
@ Bank enters into a forward exchange contract with the customer.
@ Bank accepts sterling bills from customer.
@ An overall interest rate is calculated on the basis of all the other rates.
@ The loan matures and the customer repays the agreed currency amount.
@ Net proceeds are exchanged for the currency required at the spot rate.
Now compare your sequence with that in the letter.

D3
Write a letter to a new customer, describing a service offered by your bank
or company.
Unit 6 Trade finance

Banks play an important role in the financing of international trade. In this

unit we will hear about the financing provided by one bank and then we will
listen to two bankers meeting to discuss matters of trade finance between
their two banks.

Section A At1
What are your country’s main exports? What are your country’s main
imports? Who are your main trading partners? Discuss these questions with
a partner. ‘
 Trade finance

A2
Look through the survey below. To which countries do you think a foreign
bank would most be prepared to finance the exports of one of its customers?
List the countries in order of preference for the bank, with number 1 as the
best country to export to and number 5 as the worst. Then compare your
order with that of a partner and discuss any differences.

Payments Survey

Country Usual terms Payment situation General situation

Eastland Normal range of Some delays reported. Steady economic growth

terms. Increasing Amounts under USD should continue. Down-
requests for longer 3,000 processed faster. ward import trend forecast.
credit terms.

Southlasia Documentary credits Strict exchange controls. Rigid import controls:

commonly used. Prior approval of Central licences issued only for
Bank necessary for all priority categories.
import settlements. Politics unsettled.

Northland Normal market terms. Generally satisfactory. Business conditions

Currency normally favourable. General
USD or ECU. election next year.

Newlandia Normal terms apply. Good payment record. Politically stable.

FX easily obtained for Enormous FX reserves,
payments abroad. despite reduced oil
revenues.

Westina Fully secured terms Customer default and Rocketing inflation.

advised. slow payments affecting Tough budget in June.
suppliers. Caution Acute shortage of FX.
required.

A3 &
Roy Meadows and Christine Stannard, who work in the international trade
and banking division of a British clearing bank, are explaining their trade
finance services to a potential customer, Peter Baker. Listen to their
conversation and answer these two questions.
1 Does Roy talk about trade finance in broad terms or does he go into
detail?
2 Does Christine give an example about the past, the present or the future?
60 Unit 6

A4 &
Before he met Roy, Peter listed some of the points he wanted to ask about.
Listen to the conversation again and tick those points that Roy and Christine
cover.

- Laperence tn he pang large Compames ” -Adrice? —- [port Licences?

-Bank’s services covering gur- excharge a fee Ocpourt factoring ?

- Documentary creas 7 ~ Decumentary collections ?
- Banks and agen x3 abroad° es Fomfeding a

A5 &
Listen to the conversation again and write down in the spaces provided the
words that Roy and Christine actually use in place of the words in italics.
I . involved with the very large WA...4.20\0.05NN.. . (British companies)
MN . involved in international trade, the .s..i0.. AM Ms flea, (companies
operating in several countries)
.. these large corporates, plus their ............. alt 400 ae . (the companies in
which more than half the share-capital is owned by one of these
corporates)
von ofan, “.... export order to France. (possible but not yet actual)

. and the .....:. ha 5 cht “a... (legal agreement) was originally drawn in
wl RC,cessesoe. (British pounds) yy
. because they are not permitted to ......... hd
5Bitte bis foleign {
currency in advance so as to protect against leakerin the exchange
rates)
. the necessary sterling to pay the .......4.4 Lita ghee . (invoice, the list of
chaross to be paid)
So we got some a esdrvesadscbareseuttwA . (statements of price)
woe MICU. lateteesyeese back to the customer. (with no right of demand)
10 ... all sorts of .c.% ky Mf.het, . (arrangements between a bank and an
importer by which the bank pays the foreign exporter as soon as certain
conditions have been met) /
£2 vas whether they should be “......... Yarn, . (cannot be cancelled
without the agreement of all parties)
. whether they should be ws..." induc. ... (include an undertaking by
the paying bank that it will pay the amount ie if the issuing bank does
not pay)
... we deal with (MAME lB and so on. (arrangements under which
the importer must first pay before the bank will hand over the documents
that he needs in order to get the goods)
 Trade finance 61

Section B B1
1 Look at the following article and suggest the best headline from this list.
Good news for foreign investors
Fall in profits
Setback for growth
Trade deficit increases

A recent (1) by the country’s foreign exchange

Southlasia Statistics Institute reserves, the government has
predicts that the economy will introduced (6) measures to
(2) by a mere 0.1 per cent curb imports, and has .......... . (7)
this year, in contrast with the two several joint (8)
Der scent estimated by the development contracts.
government. The Institute also Southlasia’s external debts
(3) a continued trade (9) total the equivalent of
(4), higher inflation and three years of the country’s
rising unemployment. exports at 1991
(5) the decline in the

2 Now fill the spaces with suitable words from the box.
stringent deficit postponed
currently halt profit
forecasts grow venture
levels study capital

B2
Look at the following extracts from a business meeting. Put a tick (W) by the
ones you might expect to hear in a business meeting and a (X) cross by those
you would not expect to hear. Where would you expect to see or hear those
you marked with a cross? Compare your answers with those of a partner and
discuss any differences.
1 Accounts maintained by each Bank in connection herewith shall
constitute prima facie evidence of sums owing to such Bank hereunder.
OK, I see.
We were wondering if this sum could be increased.
I’m sorry, I’m afraid we can’t.
nA
hw
Bw These instructions will remain in force until advised otherwise by the
undersigned.
6 We'd be very pleased if you could consider ...
Another point I'd like to bring up Is ...
8 I can’t say offhand.
62 Unit 6

9 It is mutually agreed between the parties hereto as follows ...

10 OK, that about concludes my list of points.
11 Just to sum up the situation ...
12 I think we’ve covered everything now, haven’t we?
13 It was good of you to see me.
14 For the conditions on which credit is to be opened, see overleaf.
15 Thank you for coming in.

B3 &
Kai Larsen, whom we met in Unit 1, is meeting Ken Chiswanda who works
for a Southlasian bank. As you listen to their conversation, decide if the
meeting is to discuss:
1 routine matters
2 specific problems
3 a new proposal

B4 &
Listen to the meeting again. As you do so, make brief notes under the
following headings. Then compare your notes with those of a partner and
discuss any differences. What do you think of the suggested solution(s) and
why? Can you offer a better solution?

en =_ pont .y

Kea’s Tow ©

Chagested solution (s)

B5 &
Listen to the meeting again and write down in the spaces provided the words
that Ken and Kai use in place of the words in italics.
CRI ATNNTINS AWC A ad er for eight years ... (am agency
arrangement with each other)
2 ... and whether you have any questions about the ......c.cccccccscssssssseseseeseeeseeees
... (way in which things work)
Day i WO RRO TINE oboe ececccaasdit
alata cacacsd event d. (topic which is more
important to us than any other)
4 ... even though the credits are payable, in fact, .c.ccccccccscssssssssssessesesseseeseeees ‘
(immediately they are received)
 Trade finance 63

ied of course by paying market-rate interest ...

(make you a suitable payment for loss)
Ri eee saa laid down by our Central Bank. (fixed
ways of working)
7 ... but then to be able to Sab Rais eetbnnas we need the permission
of ... (meet a liability, to pay as we promised)
Pi icrck WARE RETIINSELsvicclsiaitesaietiaicloiacccstaaganoe from the Ministry ... (official
permission in writing)
9 5... the goods have been examined ssciscsscivvesccsmnsnesbarclarccnysd shipment ...
(before)
10 They ended the .......... Saath elle Stren eaibeamanies aks (situation in which only one
company has the right to provide a service)
Bes ATI cartes gecssctaksnss ace
(AS: FOSSIL) CUTIE TE A eto essai
traders stockpiled shipments. (time between two events)
12 ... all arrived in Southlasia at the same time, causing a
re . (lot of work which ts late and still waiting to
be done)
13 But unfortunately we're still left with ..............cscsscesseesesssssssnsess
soe (an
amount which is less than the required amount)
14.32 the-950-000 Swita trance that G0e sicc rete to ee trentetoerecters
os (not yet
paid)
15 Pil then check things upeand try to) sAdnd..
con. cee for you. (make
things go faster)

B6
Match the phrases in the left-hand column with the purpose in the right-hand
column.

I was interested to know how you A Saying that you need to check on information
see the ... before you can give an answer.
Yes, we have one main point of B Stating an observation made on the basis of
concern, certainly ... experience.
Over the last year we’ve noticed C Making a polite request for action.
that ...
... I think it’s fair to say ... D Asking for a person’s point of view.
OK, I see. But unfortunately ... E Indicating that you are not absolutely sure
I believe we ... what you are saying is correct.
fF
NNNI can’t say offhand. F Indicating that what you are saying is
reasonable.
What I'd like to ask you to do, if G Saying that there is a fact or situation which
I may, is to ... worries you.
H Expressing understanding and a regret.
64 Unit 6

B7
Work in pairs, one person representing Bank A, the other Bank B. With your
partner select one of the problems from the list below for discussion.
Representative of Bank A: Raise a problem about your business with Bank B.
Representative of Bank B: Offer explanations and propose a solution.
In your discussion of the problem, try to use as many of the phrases from B6
as you can.
Problems

@ There is an average delay in payment of confirmed documentary credits by

Bank B of 30 days.
@ One documentary credit issued by Bank B for USD 650,000 has not been
paid, even though it is now three months overdue.
@ Documentation sent by Bank B concerning documentary credits is very
often inadequate. There always seems to be something missing.

Section C C1
Look at the terms in the left-hand column and match them with the
definitions in the right-hand column.

line A Payments that are owing and overdue.

utilized B Definite.
concrete C Rules are followed.
beneficiary
hwnNw— D Receipt from the ship’s master for goods received for
shipment.
confirming bank E A person named to receive payment.
prohibit F Pay the money that is owing.
NH
SIA domestic politics G Income from oil rises and falls often.
oil receipts fluctuate H The political situation in a country.
co
\o federal authorities I Document sent by exporter to importer recording sale of
goods.
10 relevant licence J Government organizations.
honour debts K Make impossible and prevent.
delays in L Document stating the country in which goods have been
reimbursement manufactured.
arrears M A sum of money available to draw on.
regulations are N Used.
complied with
commercial invoice O Lateness/slowdown in being paid back money spent as agent.
bill of lading P The bank which guarantees payment if the issuing bank does
not pay under a documentary letter of credit.
certificate of origin Q Necessary official written permission.
Trade finance 65

C2 &
Ken and Kai continue their meeting. How many points do they discuss? Can
you say what the points are?

C3 &
Listen to this part of the meeting again. As you do so, make brief notes
under the headings given here.

Proposals

Response

Concluding points

C4
Read this information.

Bank A has a correspondent relationship with Bank Z, and representatives of

the two banks now have a routine annual meeting. Bank A is in an
industrialized country with strong economic growth. Bank Z is in a politically
unsettled country with falling oil revenues and a shortage of foreign
exchange.

Bank A has established a line of credit for Bank Z for confirmation of credits
of up to $2 million. Bank A at present experiences an average delay of 40
days in the payment of confirmed documentary credits by Bank Z. No interest
is paid. Three credits totalling £95,000 have been outstanding for seven
weeks.

Work in pairs, one person representing Bank A and the other Bank Z. If you
represent Bank A, look on page 108 for your instructions. If you represent
Bank Z, look on page 107. Try to reach broad agreement in accordance with
the instructions you are given.
66 Unit 6

Section D D1
First read this letter which concerns a documentary credit issued by Ken’s
bank in Southlasia.

METROPOLITAN AND PROVINCIAL BANK PLC

100 Corporation Street
Birmingham B1 2PS
Morley Knight Ltd. Our ref: LBS 1504
21 Paradise St
Warrington

1 May 1991

Dear Sirs,

We have been requested by Abbotville Bank, Southlasia, to

advise you of the issue of their irrevocable credit
number DW1924 in your favour for account of Hoglund
Trading Co Ltd., Box 5504, Furness, Southlasia, for GBP
22,629 (say pounds sterling twenty-two thousand six
hundred and twenty-nine) available by your drafts on
Metropolitan and Provincial Bank PLC at 60 days sight
accompanied by the documents specified below:

1. Invoice in quadruplicate, indicating LC no. PWH77YL.

Full set clean on board bills of lading, marked
‘Freight Prepaid’ and ‘Notify Hoglund Trading Co Ltd.,
Box 5504, Furness, Southlasia’.
Packing list in triplicate.
4. Insurance certificate in duplicate.

Covering:
“5 PCS ENGINE MODEL PV-37 AS PER PURCHASE ORDER NO.
322/IP7 DATED 15 APRIL 199” (All of which must be
stated on your invoice.)
Shipment from Warrington to Furness c.i.f. not later
than 30 June 1991.
Partial shipment not permitted.
Transhipment not permitted.

Drafts drawn under this Credit must be presented not

later than 30 June 1991.

We are requested by our principals to add our confirmation

to this Credit. Accordingly, we undertake to honour all
drafts drawn under and in strict conformity with the
terms of the Credit, provided that such drafts bear the
date and number of the credit, and that the credit and
any amendments thereto are attached.
 Trade finance 67

We are instructed to claim our charges in connection

with this credit from your good selves.

Yours faithfully,

CA S Leber

A. Slattery
Manager

Now look through the extract from a blank documentary credit form below.
What information did this part of the form contain when it was received
from Southlasia by the Metropolitan and Provincial Bank? Look through the
above letter again and then write in the relevant information on the form.

NAME OF ISSUING BANK IRREVOCABLE DOCUMENTARY CREDIT

Number:

Date:

APPLICANT BENEFICIARY

ADVISING BANK AMOUNT

Partial shipments
allowed not allowed

Shipment/dispatch from Transhipment

allowed not allowed

For transportation to

Date of expiry

We have issued the documentary credit as detailed below. We request you to

notify the said credit to the beneficiary
without adding adding
your confirmation. your confirmation.

D2
Look at the letter again and then answer the questions on the next page.
68 Unit 6

1 How many copies of each of the following does the bank request from
the exporter?
a) invoices
b) bills of lading
c) packing lists
d) insurance certificates
2 When is the contract sum to be paid to the exporter?
3 Exactly what is Hoglund Trading Company buying from Morley Knight?
4 Who pays for the shipment and insurance costs of the order, and how?
5 How many shipments does the deal involve?
6 Can the shipment be transferred from a British ship to a Southlasian ship
during the journey?
7 How many weeks does the exporter have in which to present drafts for
payment under this credit?
8 What must the drafts include when they are presented for payment?
9 Other than the documents mentioned in Question 1 above, is there
anything else that should be sent with the drafts when they are presented
for payment?
10 Who pays the advising bank’s charges in connection with this credit?

D3
There was a six month delay in reimbursement from the issuing bank to the
Metropolitan and Provincial Bank concerning this credit. Write a short letter
from the Metropolitan and Provincial Bank to the bank in Southlasia, briefly
detailing the situation and claiming for the loss of interest on the credit for
the time period in question. Specify the interest rate you are claiming and the
amount, as well as the dates on which you paid the credit and on which you
received reimbursement. Request immediate settlement of your claim.

D4
Look through this information.

Bank X has a correspondent relationship with three foreign banks, A, B and C.

The Bank experiences a delay of 30 days in the payment of confirmed

documentary credits by Bank A and a delay of 50 days in the case of Bank C.

The Bank provides Bank A with a line for confirmation of credits up to $2

million. It provides the bank which pays confirmed documentary credits at sight
with a line for confirmation of credits up to $3 million.

Bank X also provides one of the banks with a line for confirmation of credits up
to $1 million, and the economy of the latter bank's country depends on exports
of coal. The bank which pays confirmed documentary credits at sight is in a
country where the national economy depends on exports of machinery.
Trade finance 69

Given this information, which of Bank X’s correspondent banks:

| pays confirmed documentary credits at sight?

2 has a line for confirmation of credits up to $1 million?
8s: .
3 is in a country where the economy depends on oil revenues?

Most of the words in the crossword puzzle are used in Units S$ and 6.
Down
1 Per annum. (2)
2 After costs and other
deductions. (3)
-) To meet a claim when due
(0)
Movement, change. (5)
Control, keep within fixed
limits. (4)
Short for number. (2)
Most of us have one of these
with a bank, where we place
our money. (7)
An amount less than the
required amount. (9)
Official permission in

writing. (7)
Cost, insurance, freight. (3)
Very serious. (5)
Sums of money that are
owed. (5)
Difference between income
and outgings. (6)
A bill to be paid, concerning
the sale of goods or services
(7)
Across 28 Operating in several Money owing and overdue
For immediate delivery. (4) countries. (13) (7)
Swiss currency unit. (5) 29 Make impossible, prevent Date on which a note or loan
Remaining to be paid. (11) (8) becomes due for payment
Request something that 1s Department responsible for (8)
due by right. (5) managing a company s A source of energy, an
» A lot of work that is late, stll funds. (8) important export for some
waiting to be done. (7) A matter to be dealt with. (4) countries. (3)
Put together with something Situation in which only one Government plan for future
else. (3) company has the right to national income and
Lateness in something operate. (8) spending. (6)
happening. (5) United Kingdom. (2) Written offer to supply
Letter of credit. (2) Buy. (8) goods or carry out work at a
Payable immediately. (2,5) Message sent by electronic stated price. (6)
Business transaction. (4) machine. (5) European Currency Unit. (3)
State a selling price. (5) British pounds. (3)
Pieces. (3)
A sum of money available
to draw on. (4)
29
Foreign exchange. (2
Unit 7 Financial news

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Every day important financial news is being made somewhere in the world.
This unit contains news items about companies and markets. Each section
deals with a different area of business and relates to a different day.

Section A Al
Look through this short news report and then fill the spaces with words from
the box.

The dollar opened ........ (1) in London yesterday, having ........ (2) back sharply in
the Far East overnight. During the day, however, it ........ (3) its losses against most
leading .......... (4), with the ........ (5) of sterling, which held its ground and closed
almost a cent ....... (6) at 1.4385 (1.4295). Sterling also ....... (7) over one pfennig
to 3.7900 (3.7785) against the Deutschmark.

ahead currencies weaker

firmed exception slipped
fell recovered business
Financial news 71

A2 &
Listen to the beginning of the news report. Say if the dollar had:

@ a bad day
@ a good day
@ a quiet day, neither good nor bad

A3 &
Listen to what the newscaster says about the survey concerning trading on
the world’s foreign exchanges. Then complete the chart below by showing
the amount traded in the leading centre and naming the three leading centres.

| GY
‘ally 7
mre ] : |

A4
Listen to the third part of the news report again and then complete the grid
to show the different dollar rates that are given.
r a ae
London New York Tokyo London
close of business close of business close of business this morning
yesterday yesterday today

AS &
Listen to the final part of the news report concerning the latest currency
prices in London. Then circle the right alternative in the table to show the
actual currency rates given.
oe — 7
yy

GBP USD USD USD USD USD

| USD DEM CHF FRF NLG JPY

| 1.54.5 216.38 2.16.6 8.14 2.79.5 215.85
1.44.5 263.8 2.60.6 8.40 2.97.5 250.58
72 Unit 7

A6
Choose the one best answer.

1 If prices drifted down they:

a) fell heavily; b) fell slightly; c) fell quickly; d) rose then fell.
th A survey is:
a) a report based on inspection; b) a document that describes what is
expected in the future; c) a detailed description of goods; d) an official list
of things or events.
Forex volume is:
a) a sum of money that is borrowed; b) a sum of money that is invested;
c) the volume of money in a country; d) the volume of foreign exchange.
If trading was thin:
a) buying and selling was not very successful; b) there was a lot of buying
and selling; c) there was not much buying or selling; d) there was no
buying or selling at all.
US economic indicators are:
a) the index of retail prices produced by the US government; b) figures
that show the difference between the amount of money flowing into and
out of the USA; c) figures dealing with economic activities in the USA;
d) the total amount of money that other countries owe to the USA.
US consumer prices are:
a) a list of prices to be paid for goods imported into the USA; b) the
index of retail prices produced by the US government; c) the prices
charged for goods exported from the USA; d) the prices charged for US
dollars expressed in the money unit of another country.
Durable goods orders are:
a) orders for goods which are intended to be used over a period of time;
b) orders for goods which are used up soon after they are bought;
c) orders for any type of goods; d) orders for goods to be exported.
If information is released, it:
a) is for sale; b) is kept secret from the public; c) is made known to the
public; d) is written down and recorded.
A gain is:
a) a change in value; b) an increase in value; c) a fall in value; d) a value
that stays the same.
If the dollar slipped back a little, it:
a) fell slightly; b) fell unexpectedly; c) fell quickly; d) rose then fell,
11 The covering of short positions is:
a) banks buying a currency because they had previously sold more than
they had bought; b) banks selling a currency because they had previously
bought more than they had sold; c) banks buying and selling currencies
so as to make a profit; d) banks buying a currency and selling it soon.
If the pound was aided by firmer spot oil prices, it was:
a) helped by higher spot oil prices; b) not helped by higher spot oil prices;
c) helped by lower spot oil prices; d) not helped by lower spot oil prices.
 Financial news 3

A7
What have been the main currency movements recently, and why? Give any
figures that you can.

Section B B1
Read this short financial news report and then replace the words in italics
with suitable words from the box.
r a —s —

Share prices again closed higherin _ somewhat (7) lower, with the
active (1) trading on the Northland | MacOng Corporation easing (8)
Stock Exchange, based on a firm | $1.05. Industrial issues closed
domestic bond market and hopes | broadly (9) higher, with blue-chip
of a drop (2) in interest rates here | issues showing the most volume
and in the USA. Prospects (3) of | and the largest gains.
lower interest rates aided gains (4) In other market news, prices
for banks in general, with Quintorp | closed higher in Tokyo and Sydney,
Bank leading the way with a $1.69 | mixed (10) in London and Milan
rise (5). and lower in Frankfurt, Paris and
Major (6) electrical stocks were | Zurich.

varied slightly
falling increase fall
the possibility range leading
busy generally advances

B2
Listen to the part of the news report relating to companies and stock
markets.
1 How many firms are mentioned in the company headlines?
2 How many stock markets are mentioned?

B3 &
Listen to the part of the report again and say if these statements are true
or false.

1 Lewhill employs around 1,500 people.

2 Welby Engines have obtained a £30 million order from Air Texas.
3 Basterfield’s bid for Garvin has been turned down.
4 London stock market prices yesterday reached record highs.
5 Sheldon have sold their interest in Quinton.
6 The price of leading stocks rose slightly on Wall Street on Tuesday.
Unit

7 On Wall Street on Tuesday more stocks rose than fell in price.

8 Hong Kong shares showed a heavier fall than Tokyo shares.
9 Shares in general fell sharply in Australia.
10 Many shares were sold in Australia.

B4 =
Listen to the part about company news and the London stock market, and
look at the following charts which show the quarterly profits for three
companies mentioned. Complete the grid below to show which chart relates
to which company.

det
WS
>
Company
Hale and Owen

Fisher Hogg

Luxdon

B5 &
Listen to the part of the news report which gives information on yesterday’s
stock market prices in London. Then complete the table below.

Company Price £ + Or -

United Alverson
Key Commerce
Ainscough and Lee
Sheldon
Hale and Owen
Berry Sugar
eee ee ee a ae
Financial news |a ay

B6
Write down the words that the newscaster actually uses in place of the words
in italics. If you need to, listen to the news items again.
1 Lewhilt is to Open aiii..i cinta seteors in Birmingham. (a factory costing
£30 million)
f Welby Engines have’ ...c.......c.cccsssscesconssersssens a £25 million order ...
(succeeded in obtaining)
repeg hh's bix1)SH10 5apenas ett (price offered) for Basterfields by
1) pe a RR ieSS mel (very large Canadian company) Garvin has been
EA Oh A per ED . (decided against)
alah ont Mn ate ces ey , (In the area of news dealing with the outcome of a
company’s trading during only part of the year) Luxdon’s third quarter
prohit. Of £300,000 Came 48-6: nncciccennpactnrnandats (disappointment and
difficulty)
. with a 50 per cent profits rise compared With ......cccseesesseeeeeeeeeseeees
(the last period of three months)
Riis corp sntouicmane remained close to last week’s record highs. (the
parts into which the ownership of a company is divided)
Es Ea eh ed ee te (finance companies and finance organizations which
buy and sell bills of exchange) Were wcrc 0 . (an area of
business activity tending to rise)
... Ainscough and Lee were up. mine at 437 OM) sescsisnsoseaccssssensseansaseen one
(hopes of an offer to buy)
. on their Monday sale of their ..............cs:secsssssenseasssses . (financial interests
in Quinton)
10 Pete aie a tits S400 et oer
ot ae (bide a difficulty), if one
Pi rere SAG cae (does not take into consideration) the
pe Ae ee eee oer (money Obtained) from the .........ssscsesscecsseeeseseeneeee «
(arrangement by which they sold their head offices in Birmingham on
condition that they were then hired back to them at an agreed rent)
WS, 5,| EER GS aie: ehOrs (sencertdinty) AbOut CHE .-c.ccsscsnncssscsisorersnssoverscess :
(price of the raw material)
12 yn Wall Street On VisAY scsccssgecccmncnncioannctnc tans (major shares were
slightly higher in price)
EE See eeetetee eee were strong. (documents promising to pay sums of
money at specified times)
14 PVN TPARIGNTOUTD = aoc cab cnsnsarcastecnecorne (all share prices moved downwards
seccldentiy)- although <siccioasccrsonscesciccessscteonnts . (there was not a lot of buying
and selling)
 6 Unit

Section C C1
Look through this short news report about commodities and fill the spaces
with words from the box.
Commodities trading was quiet yesterday, with ........... (1) low and
SN sadcanesnaas (2) narrow. Copper ........... (3) within a £2 price range,
and ended the day ........... (4). Only tin among ........... (5) showed any
life, gaining £5 a tonne. Lead, aluminium and zinc all ........... (6).
seattaiatel (7) commodities were similarly quiet. Coffee prices were
chad Sechatas (8) unchanged, and cocoa prices dropped back a few pounds.
Sugar traded mixed, ........... (9) fresh developments.

awaiting fell
traded ranges
volumes charges
virtually soft
metals down

C2 &
Work with a partner and write a brief list of commodities that are traded.
Then, as you listen to the commodities news, tick the ones that are
mentioned. Are there any mentioned that you did not list?

C3 &
Listen to the first part of the commodities news again and then fill in the grid
below to show the different prices of gold at the times and places given.

London London New York New York Hong Kong Hong Kong
opening closing opening closing opening closing
yesterday yesterday yesterday yesterday today yesterday

C4 =&
Then listen to what is said about silver prices and fill in the grid below.

London silver prices

Spot price, previous close

Spot price, today’s close

Three months price

Financial news

CS &
Listen again to the information given about base metal prices and fill in the
grid below.

Base metal London settlement

prices yesterday

8,473

Nickel

Aluminium

C6 =
Read the three following summaries and then listen again to the details that
the speaker gives about these commodities. Say which one of the three
summaries is most accurate.
1 Cocoa fell and coffee was strong. Raw sugar fell and sugar futures also fell
late in the day. In New York cotton prices were slightly lower and in
Chicago grain futures were lower, although November wheat was up three
quarters at 225<¢.
ii) Cocoa climbed after its recent fall and coffee prices were high. Raw sugar
and sugar futures both fell. In New York, cotton prices were slightly lower
and in Chicago grain futures too were mainly slightly lower.
3 Cocoa climbed after its recent fall and coffee was strong. Raw sugar fell,
although sugar futures were steady. In New York cotton prices were
unchanged and in Chicago grain futures were mainly slightly lower.

C7
Write down the words that the newscaster actually uses in place of the words
in italics. If you need to, listen to the news items again.
OSG THES FS OFcS Te Re ee ore ae yesterday ... (market dealing with
bars of gold and silver)
2. ear ork Gold. DliCes WOLE vxissensnrsttuaeataesanntnasepatoene up 20 cents ... (very
slightly higher, slowly moving)
Ce At Bee cone pe meee ne Gene at 428 pence ... (the price which is to be
paid for delivery two working days from now)
PPA Ts Ran Ro Ree Hee at 438.5. (the price which is to be paid for
delivery three months from now)
 Tet condi kathtuteious acncncemeneeel were little changed ... (prices in New York for
the delivery of silver on a specific date at an agreed price)
Gh cc ubdad unde winahegpceszatckestanan’ (certain common metals) drifted lower in
PEMCENORL U0). suviucavarsausceccdacenaneerpestantees .. .(the stronger British pound)
ASONS TC ceca tceceineaeneee (non-metal commodities), cocoa
iaSicwssasessdssasadtaboscosertens after its recent fall ... (recovered)
Seer ee icadeesias Mei ehewrrcineasts were steady, but then .. . (contract prices for the
delivery of sugar on a specific date)
9.In New York, Cotton i.e. Siopaseusvexdtuere, . (prices were slightly
lower)
Le Mae 05 | Ue: ae cn na a was up three quarters .. . (the price for
corn to be delivered in December)

C8
What has been in the financial news over the last week or so? Take what you
consider to be the most important two or three events and describe them in
more detail.

Section D D1
Quickly read the following newspaper article and then choose what you
think is the most suitable title from this list:

Bank prices fall

Financial problems for two US corporations
Bad winter for RJC Bank?
Chairman resigns
Latin American debt problem

The international banking At the end of 1988, RJC had

community showed signs of worry $29.9 billion in deposits, making it
last week over rumours that RJC number ten in the US banking
Bank, America’s tenth largest bank, league. Since then, things have
was close to bankruptcy, acqui- gone very badly.
sition or a forced merger, due to a On the New York Stock
severe liquidity crisis. The concern Exchange, RJC shares have fallen
underlines the nervousness of the from a 1989 high of $44.25 to an all-
major international banks with time low of $10, reached last
regard to loans to developing Tuesday. This means that the
countries, especially those in Latin capitalization of the group has
America. In the case of RJC Bank, crashed from $1.8 billion to some
the problem is. added to by bad $420 million over an 18 month
domestic loans, particularly to the period. On Friday, however, when
depressed energy sector. Wall Street stock prices generally
Financial news

eased in thin trading, investors bank's other outstanding loans in

showed some confidence in RJC's the area, must be regarded as
future, whose share price rose questionable. Approximately 56 per
$1.275 to $12.075 by close of cent of the bank’s loan portfolio is
business. outside the United States.
The previous chairman of RJC, But the bank’s latest problems
Lee Dobbs, resigned earlier this year have occurred closer to home. At the
amid rows over the bank's lending, end of last month, the Brown McCoy
and one of the first moves of the new Corporation defaulted on a $9
chairman and chief executive, Jim million repayment on a loan provided
Kent, was to try to improve the by five banks, including RJC. In an
capital base of the bank by selling attempt to prevent the bankruptcy of
certain assets. Its credit card Brown McCoy, its banks are now
business was sold in May to Key planning to lend it a further $80
Commerce for some $1 billion. million.
At the company’s annual general Only this week another RJC
meeting early last month, Kent told borrower, Thomas Ainscough
shareholders that non-performing Corporation, an Austin-based oil
loans, up by $450 million in the first group, filed for reorganization under
half, would cost over $40 million this the US bankruptcy code. The
year if they neither rose nor fell. Over corporation has unsecured loans
half the $450 million rise to $2.1 totalling $210 million, of which $40
billion stemmed from. Latin million is outstanding to RJC.
American credits, notably to In 1990 RJC’s net credit losses
Westina, where the bank advanced rose to $269 million from $140.3
some $210 million in 1989, as a million in 1989. If the pattern
package designed to meet the continues over the second half of
country’s external financing needs. 1991, it could be a cold winter for
The status of this loan, and the RJC.

D2
Look at this list of events which are mentioned in the article. Number them
in the order in which they actually happened. Then compare your answers
with those of a partner and discuss any differences.
Jim Kent appointed chief executive of RJC Bank.
RJC share prices reach a high of $44.25.
Thomas Ainscough Corporation files for reorganization.
Annual General Meeting of RJC Bank.
Lee Dobbs resigns as chairman of RJC Bank.
RJC sells its credit card business for $1 billion.
RJC shares reach their lowest ever rate of $10.
Brown McCoy Corporation defaults on a $9 million repayment.
RJC share prices climb $1.275 to reach $12.075.
8O Unit

D3
On the basis of the information in the article, say whether these statements
are true or false.
| At the end of 1988, there were nine US banks with total deposits of more
than 29.9 million dollars.
RJC Bank has approximately 42 million shares.
WM
wyRJC Bank’s share price when the New York Stock Exchange opened last
Friday was $10.80.
4 Net credit losses will rise by $40 million this year.
5S At the end of 1990, the bank had non-performing loans totalling $1.6
billion.
6 44% of the bank’s lending is to domestic customers.
The article was written in early 1991.
8 The bank’s net credit losses rose by $128.7 million last year.

D4
Look at the article in D1 again and briefly list the main point of each
paragraph. Then read the following three summaries of the article. Say which
summary is best and why.

RJC Bank, the tenth biggest bank in billion, and Latin American loans in
the USA, with deposits of nearly $30 particular could cost the bank a lot
billion, is in serious financial of money. Bad loans in the USA are
difficulty. On Wall Street, the bank's also causing problems for the bank.
share prices have fallen to One corporate customer which owes
approximately one quarter of their the bank $40 million is itself in a
levels a year and a half ago. serious financial situation.
The previous chairman resigned The bank's net credit losses
recently, over the bank's loans. Over nearly doubled last year. If the same
half of the bank's total volume of thing happens this year, the bank
lending is outside the USA. Non- will face very big problems indeed.
performing loans amount to over $2
 Financial news 81

to America’s tenth biggest bank, RJC million to a group of five banks

Bank, is in financial trouble because which includes RJC Bank. The
of its loans to Latin American banks are now planning to lend
countries and to the weak energy the corporation $80 million more,
sector at home. to try to get it out of trouble.
Non-performing loans rose by Another customer owes $210
$450 million last year, and will cost million, without security, and is
the bank $40 million this year. Over filing for reorganization under US
half of these loans are to Latin law.
America and include $210 million The bank's shares have fallen
advanced to Westina in 1989. More sharply over the last eighteen
than half of the bank's outstanding months, and net credit losses have
loans are to Latin America. risen from $140 million in 1989 to
Two big loans in the USA have $269 million in 1990. RJC Bank
also caused problems recently. One could be in for big trouble.
company has failed to repay $9

The financial position of RJC Bank Domestic loans are also causing
has become serious over the last 18 problems, however, as shown by two
months. The bank’s share prices recent cases. The first involves
have fallen heavily during this time, lending, with four other banks, a
and the chairman resigned earlier further $80 million to help save a
this year after angry arguments corporation which has already failed
about the bank's lending. to repay $9 million. The second
Non-performing loans have risen involves a $40 million loan without
by $410 million during the first half security to a company which has
of this year, and over half of this rise $170 million outstanding in other
comes from Latin American credits. loans.
If non-performing loans remain as Net credit losses rose by around
they are, they will cost the bank 90% last year. If this goes on during
around $40 million this year. Some the second half of 1991, then the
56 per cent of the bank's total position of the bank could become
lending is outside the USA. even more serious than now.

D5
Work in small groups to plan and present a particular item of financial news.
Your teacher will give you more information.
Unit 8 Projects

Many projects involve very large sums of money and financing these projects
is often undertaken internationally with co-operation between several banks
and government agencies. This unit is about such financing.
 Projects 83

Section A Al
What large projects are being financed, or have recently been financed, in
your country? Alternatively, what large projects has your bank been
involved in financing in recent years?

A2
1 Look at the newspaper report and choose the best headline for it from
this list.

International co-operation
Mixed credits for Eastland
Consultant gives go-ahead
Nuclear power for Eastland

An Anglo-Swedish The consortium, led by Strutz of

(2) a contract worth about Stockholm, has the (7) of the
$1.5 billion to build a nuclear power Swedish and British governments,
plant in Eastland. The who have both arranged packages
the Eastland State Power Authority, consisting of 60 per cent export
asked all (4) to submit credits and 40 per cent aid. The aid
comprehensive financing is at 3.5 per cent over 25 years and
(5), which were then evaluated by the export credits, at the
the German consultant, Becker- (8) consensus rate of 10.5 per cent,
Bungert. The Anglo-Swedish bid are for ten years.
was the only one to contain a mixed

hte Fill in the spaces with appropriate words from the box.
current proposals package
costs consortium backing
won client bidders

A3 &
Roy Meadows is explaining project-related banking services to Della Tyson, a
trainee at the bank. Listen to their conversation and answer these questions.
1 Is Roy talking about finance offered mainly by a British government
department or mainly by British banks?
2 Does Roy’s illustration refer to a short-term, medium-term or long-term
loan?
84 Unit 8

A4 @
Here is a list of items that Della made to ask Roy about. Listen to the
conversation again and tick those items that Roy mentions.
finance of civil engineering projects
exports of multinational companies
export of capital goods
export of semi-capital goods
buyer credits
syndicated loans
front-end loans
package deals

A5 2
Listen to the conversation again and say whether these statements are true
or false.
l The Export Guarantee Department is run by the Department of Trade.
2 ECGD-supported finance covers major civil engineering projects and large
export contracts.
The bank and the ECGD together cover up to 85 per cent of the contract
value.
The front-end loan to the exporter is for 100 per cent of his export price.
85 per cent of this type of loan is repaid over a period of five years.
Roy gives only one example of a package deal.
The exporter has to pay a premium to the ECGD for this type of
financing.
Roy says that most buyer credits are either in dollars or Deutschmarks.
This type of financing can include cover against any changes that might
occur in exchange rates between the time of tendering and the award of
the contract.

A6
Fill the spaces on the next page with appropriate words or phrases from
the box.
tendering award quote
major civil engineering projects packages credit
exchange rate fluctuations commissions purchase
preferential fixed rate of interest instalments outset
an additional premium front-end loan to enable
capital and semi-capital equipment recourse
progress payments contractors
balance of payments difficulties
Projects 85

RUMI e rat atiiliipncinnnnctids

asi can perhaps lead us to ... (agreements
combining several matters)
rE AG 58 ENT RCH WERE COVETS cota ccre erases caters scxtiaisacecure
eee (very large
construction works)
Poder IN EINE: CR TVORT. OK x) trek nse, ones ee pave Aa (goods that are made to
be used to make other goods)
ee
ee alas eee ee ae and machinery, that sort of thing. (/dustrial
equipment, tools)
IEE OEelcake ce kcal saci ote ndbindes is offered over five years. (the lending
of money)
BGR ETICY LISS NETINS. a ucinnsintseVianagstcaragnnnsacsCanwonrs difficulties and so on.
(difference between the country’s total payments to other countries and
the total revenue received from them)
7 euateedikscaven
sagasveuridetoicen crease the buyer in that country ... (to make it
possible)
Be CN Tis, CS C10 TG aacerdraveaiinartotusnives ronneatesieas . (buying)
Frees: LEO: WTAE: WE COI: 2. sczdeseydasuasusiemetstoninetadarpamaeeas (loan given so that
part payment can be made at the beginning of a contract)
LO ett Ae: BAR AE TRO cs aainsstrumpimecionepetas , upon shipment of the goods
... (beginning)
11 tne Bo OCr CONE Can, DE! DAIG IY i. cscestdersanssennnentontes na ses. (a series of
regular part payments)
CARIES serreccs tira cas Kae spesdisnetats (payments for the completion of certain work)
Ue RIS EN TP ns orsenhnaaseuseicubelen . (companies who are doing the
construction work)
DSi ICN PERO ANY se hao ccvveas sasha bape to the exporter is if ... (right to
make a demand on)
BAe Te VET Te CALCOT see Ncantuessih msncotinpecenien set by ... (rate of interest
which is agreed and which does not change, and which is more
favourable than the general market rate)
Lec AS ORNL AS COT EAIIT tocccccinsenigemunsbees-chasdananys which ... (charges for a service,
often in the form of a percentage of the sum involved)
Bn OUTIRCE. Bs Cad SMIAIR thstnsviccssadeaconveemnenskennttohe’ on a case to case basis. (state
the price that they would charge)
LY abe 00 DAY pee reiahersiessnnsiaes (an extra amount for a service) to cover
RGPaIVIRE PATISSCaceres
steers ceoaeg inlra (continual changes in exchange rates)
Oe ee PE CCES C06 TLE OS lauieismcecsaen
eraser rear (offering to supply goods or
services at a stated price) and the ............cesssssseeseeeseseeseseees of the contract.
(giving)

A7
With a partner, compare the government services which help large export
orders from or imports to your country with the one which you have just
heard about.
86 Unit 8

Section B B1
Look through this survey from a trade magazine and answer these questions.

l How many loans involve import/export and how many involve projects?
2 Which is the smallest loan?
3 Which loan is for the longest period?
4 In how many cases are interest rates specified?
5 How many loans are provided by one bank only?

Syndicated loans survey

Borrower Project Value Terms Bank

Newlandia Buyer credit GBP 25.75m Two tranches: first Sole provider:
Petroleum to finance supply in 2 yrs, bullet Key Commercial
Corporation of drilling equipment. repayment; second
repayable in 28
quarterly
instalments. Rates
not available.

Tokig To finance export JPY 2bn 6 yr maturity. Lead manager:

Industries of capital goods. First yr is Cybulski Corp
drawn down period.
Amounts outstanding
then rolled into a
5 yr term loan.

Cockle Construction of DEM 80.5m 8 yrs at As% Lead managers:

Development hotel/shopping over 6 mth LIBOR. Siddons Int,
Company complex. ZB Bank

Government of Hydro power CHF 150m Swiss bond rate Lead manager
Northland station. plus margin. and agent:
20 yrs. RJC Bank

Newlandia Supply of vehicles USD 10m Eurodollar loan. Sole provider:

Transport to Newlandia. 7 yrs at 10.5% Wallers
Authority fixed rate. 1 yr
3 mths grace.

B2 &
Ken Bailey, the Executive Director of a London merchant bank, is being
interviewed about his work.
| Is Ken explaining how his bank finances projects or discussing a project
financed by his bank?
>
2 How many questions does the interviewer ask?
Projects 87

B3 &
Look at the following stages in the arrangement of a syndicated loan by
Ken’s bank. Put them in the correct order of events. Then listen again to the
interview and check your answers.
A Appointed as lead manager.
B Maintain contacts.
C Decide whether or not to finance it solely themselves.
D Advisory conversations with the customer.
E Send offer document to other banks.
F Compete with other banks.

B4 =
Write down the words that are actually used in place of the words in ftalics.
If you need to, listen to the interview again.
|iy | 3 Ae ct ack Re oe ee See (bank which is mainly concerned with the
financing of international trade) We ....cscscessecssseseseseeseseersserenees for
corporate customers ... (provide services only)
2 aig JOOS Tein fghce Wad 6 ccAua ceeds ? (bank which is a
member of a central organization through which cheques are presented
for payment)
oO ERO SRETE STARURN COE cic soect cvecsnorteiecreteambialiagunin in recent years ...
(arranging loans for long periods of time)
Ry TAT ygah BRE Lys eee a Miia 6 ER ced cba See worldwide ... (organizations
set up for specific purposes)
Tee IY MET MIDIIS Oh Clare cht caecerismasemntcerenaes (sale of bonds in dollars or
some European currencies by a group of banks)
OU. AW ts OLE RELY OF csc cat eecnaetets in that borrowing (take part
in)
Or 50 CANES, WVTIONS CN occas techno cates emntreegpersteere of long-term money ...
(original starting point)
Oe ASAE TNR as lic cis indica adalean istics in a loan ... (an organizer of the
other banks)
Ds IVAIREPEIECTEIC DORIDOIY BOY os ciliceicassuncoseehusmuninsebneeaainees in Africa ...
(arranging the buying of machinery and equipment)
1 ce OR PUILY VOU DE, siscicictpecntmpinerobiesaphetectenscin the lead manager. (given
the job as)
I TAGE fiancee girs appa omine . (enough money)
Te ET Ee gat: een Creen eo ane ees being sold ... (at
present)
ERT Tg Ve Bb vont Wooo) ee een
ee eo . (income
received from an investment)
88 Unit 8

BS &
By stressing different words in a sentence, we can indicate different meanings.
Here are seven short extracts from the conversation between Ken and the
interviewer. Each is followed by two statements that might be understood
from the speaker’s words. Listen carefully to how Ken actually says these
words and decide which meaning is intended.
1 Asa merchant bank we cater solely for corporate customers ...
a) ... and only for corporate customers.
b) ... and other types of bank cater for other customers.
2 The method, the main method for raising long-term funds in recent years

a) ... although there are also other, less important methods.

b) ... although earlier, things were different.
3 So that’s where the source of long-term money has come ...
a) ... and not from anywhere else.
b) ... but short-term money has come from other sources.
4 You would then decide whether you wanted to finance the whole of it
yourself ...
a) ... and not before.
b) ... or just part of it.
5 So the customer probably wouldn’t have a direct contact with those other
banks ...
a) ... but our bank would have direct contact.
b) ... because all his contact is with us.
6 We would have a lot of advisory conversations with the customer ...
a) ... too many conversations, in fact.
b) ... in order to make the situation quite clear for the customer.
7 We would advise our customer to wait ...
a) ... but we cannot stop him if he wants to go ahead.
b) ... and not to do anything just now.
@ Which words would you stress in the sentences above to give them the
alternative meanings? Decide with a partner. Then read each of the
sentences in one of the two ways for your partner to say whether you
mean a) or b) in each case.

Section C C1
Ken Bailey receives a phone call from Paul Black, a civil servant in
Northland. Listen to their conversation and answer these two questions.
1 Is this the first tume that Ken and Paul have discussed the project?
2 Does Ken give a firm answer?
Projects 89

C2 &
Below is a copy of the form which Ken fills in as a record of important
telephone calls. Listen to the phone conversation again and fill in the form
for Ken.

TELEPHONE MEMO

Subject:

Client:
Contact person: ~/2-¢ Stack
Project:

Sum:
Action required:

Signed:

Date: 2 femw"g L 799 /

C3
Check the meaning of the words and phrases in the box with a partner.
Then, working together, match the words with the correct definition from the
list below.

economic indicators treasury department joint venture

senior civil servant quarter trade balance
lead manager GNP terms
civil engineering work documentation established
participants in the black
raising a large sum of money turnkey basis

1 A top person in one of the departments of national government.

2 The government department that controls the finances of a country.
3 Organizing the obtaining of a lot of money.
4 The planning and construction of buildings and roads and suchlike,
usually for a government.
5 A partnership, in this case temporary, of two or more companies to co-
operate on a specific project.
6 A contract arrangement whereby the contractor completes the whole
project and then hands everything over to the client, ready for operation.
Figures dealing with economic activity which give a general idea of
changes in the economic climate.
90 Unit 8

8 The total value of goods and services produced by a country in a

particular year.
9 A fourth of a year.
10 The difference in the value of imports and exports of a country.
11 In credit, without debt.
12 Those who take part in an activity.
13 The principal party co-ordinating a syndicated loan.
14 Made certain of the fact.
15 Rules or conditions.
16 The papers relating to a business deal.

C4
Look through this list of telephone techniques and decide what you think is
their order of importance to the success of business telephone calls. Then
compare your opinions with those of a partner.
Find out the other side’s needs.
Avoid arguments.
Involve the other person in the conversation.
Use the other person’s name in the conversation.
Ask frequent questions.
Check understanding, by summarizing points of agreement.
Plan the call in advance.
Keep a record of important calls.
Give necessary information.
Other (Please specify.)

C5
Government A is raising capital for extension works to a power station. The
country is industrialized and has a very healthy economy. A representative of
the government is now meeting a representative of a foreign merchant bank,
Bank B, for a preliminary discussion concerning the loan.
If you represent Government A, look on page 107 for your instructions. If
you represent Bank B, look on page 108. Try to reach broad agreement on
preliminary terms in accordance with the instructions you are given.

Section D D1
Now read the following telex offer sent out by Ken Bailey to several banks
following the conversation with Paul Black. Then answer these questions.
| Is the loan referred to medium-term or long-term?
2 Who is carrying out the contract in Northland?
3, What is the currency of the loan?
Projects 91

RE: STATE POWER BOARD OF NORTHLAND PLC.

KEY COMMERCIAL BANK HAS BEEN MANDATED BY THE STATE POWER BOARD OF
NORTHLAND TO ARRANGE A MEDIUM-TERM LOAN FACILITY OF AROUND USD TWO
HUNDRED MILLION (200,000,000) AND IS PLEASED TO INVITE YOU TO PARTICIPATE
THEREIN ON THE PRINICIPAL TERMS AND CONDITIONS STATED BELOW.

BACKGROUND:

THE STATE POWER BOARD OF NORTHLAND IS A PUBLIC ELECTRIC POWER

MONOPOLY WHICH SERVES THE WHOLE OF THE COUNTRY.

THE STATE POWER BOARD AND THE JOINT VENTURE STRUTZ-DILSCHMAN,

COMPRISING STRUTZ AB, SWEDEN, AND DILSCHMAN PLC, UK, HAVE AS OF 10
JANUARY 1991 ENTERED INTO A CONTRACT FOR THE SUPPLY OF HIGH VOLTAGE
CONVERTOR STATIONS, POWER LINE CARRIER SYSTEMS AND GROUND
ELECTRODE STATIONS ON A TURNKEY BASIS FOR THE NATIONAL TRANSMISSION
SYSTEM.

THE STATE POWER BOARD AND KEY COMMERCIAL BANK, LONDON, HAVE
ENTERED INTO A LOAN AGREEMENT DATED 10 JANUARY 1991 FOR USD TWO
HUNDRED AND FIFTY (250) MILLION, COVERING EIGHTY-FIVE (85) PER CENT OF
THE CONTRACT VALUE.

THE FACILITY IN WHICH YOU ARE NOW INVITED TO PARTICIPATE FALLS WITHIN
THE FRAMEWORK OF THE FIRM COMMITMENT WHICH KEY COMMERCIAL HAS MADE
PURSUANT TO THE LOAN AGREEMENT OF 10 JANUARY 1991 WITH THE STATE
POWER BOARD OF NORTHLAND.

BORROWER:

THE STATE POWER BOARD OF NORTHLAND

GUARANTOR:

THE FEDERAL REPUBLIC OF NORTHLAND

MANAGER AND AGENT:

KEY COMMERCIAL BANK

AMOUNT:

SUCH AMOUNT AS CAN BE SYNDICATED UP TO USD TWO HUNDRED (200) MILLION.

CURRENCY:

US DOLLARS

TERM:

EIGHT (8) YEARS

AVAILABILITY:

THE LOAN MAY BE DRAWN DOWN DURING A PERIOD COMMENCING FROM THE
DATE OF THE LOAN AGREEMENT AND ENDING ON 20 MARCH 1991.
92 Unit 8

REPAYMENT:

THE AMOUNT OUTSTANDING AT THE END OF THE DRAWNDOWN PERIOD WILL BE

REPAID IN TWELVE (12) ROUGHLY EQUAL SEMI-ANNUAL INSTALMENTS
COMMENCING THIRTY (30) MONTHS FROM THE DATE OF DISBURSEMENT.

INTEREST RATE:

TWO AND ONE SIXTEENTH OF ONE PER CENT PER ANNUM (2' / 1 6 PCT P.A.) OVER THE
AVERAGE SIX-MONTH LIBOR FOR EURODOLLAR DEPOSITS. INTEREST SHALL BE
PAYABLE SEMI-ANNUALLY IN ARREARS AND CALCULATED ON THE BASIS OF A
THREE HUNDRED AND SIXTY (360) DAY YEAR, AND THE ACTUAL NUMBER OF DAYS
ELAPSED.

MANAGEMENT FEE:

ONE AND ONE QUARTER OF ONE PER CENT (1' / 4 PCT) OF THE AGGREGATE
AMOUNT OF THE LOAN COMMITMENT, PAYABLE IN USD.

THE SUBSCRIPTIONS WILL BE MADE IN MULTIPLES OF USD TWO HUNDRED

THOUSAND (200,000). THE MINIMUM SUBSCRIPTION IS USD TWO HUNDRED
THOUSAND (200,000).

THE MANAGER RESERVES THE RIGHT TO ALLOCATE EACH LENDER'S FINAL

PARTICIPATION AT ITS SOLE DISCRETION.

TAXES:

ALL PAYMENTS IN CONNECTION WITH THIS LOAN WILL BE MADE FREE AND CLEAR
OF ALL PRESENT OR FUTURE NORTHLAND TAXES TO THE EXTENT SET FORTH IN
THE LOAN AGREEMENT.

DOCUMENTATION AND GOVERNING LAW:

THE LOAN AGREEMENT AND THE GUARANTEE WILL BE GOVERNED BY AND

CONSTRUED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND CONTAIN THE
NORMAL PROVISIONS FOUND IN CURRENT EUROCREDIT AGREEMENTS.

PUBLICITY:

A TOMBSTONE WILL BE PUBLISHED IF SO DESIRED BY THE PARTICIPATING BANKS.

A DRAFT OF THE LOAN AGREEMENT AND AN INFORMATION MEMORANDUM WILL BE

SENT TO BANKS ON REQUEST.

PLEASE SEND CONFIRMATION OF YOUR COMMITMENT AT YOUR EARLIEST

CONVENIENCE, BUT NOT LATER THAN NOON 19 FEBRUARY 1991 FOR THE
ATTENTION OF MYSELF.

WITH KIND REGARDS

KEN BAILEY

FOR KEY COMMERCIAL BANK PLC, LONDON.

Projects 93

D2
Look at the following stages mentioned in the telex and say when they
happened.

aris The beginning of the period in which the State Power Board may take
up the loan facility.
Seley The State Power Board signed the contract with Strutz/Dilschman.
eiea Banks which want to take part in the syndicated loan must confirm
their commitment to Key Commercial.
ee End of the period in which the State Power Board may take up the loan
facility.
Rr eye The State Power Board signed the loan agreement with Key
Commercial.

D3
Look through the following statements and on the basis of the information in
the telex say whether they are true or false.
1 It is not made clear that Key Commercial has been authorized to act on
behalf of the State Power Board in raising this loan.
i) Key Commercial is itself providing at least USD 50 million of the total
loan.
3 The full contract value is approximately USD 294 million.
4 The loan is without security.
5 The loan will be repaid in full by 20 September 1999 at the latest.
6 The interest rate on the loan may be different at different times.
v4 Interest will be paid every six months, for the six months just gone.

8 A bank participating in the syndicated loan may provide USD 500,000.

9 Key Commercial finally decides how much each bank may provide.
10 A bank may look at the loan agreement before deciding whether to
participate in the loan.

D4
You work for a bank which has received the offer telex from Key
Commercial. Meet with a colleague and discuss the attraction of the telex
offer. Decide on a course of action and then write a telex in reply.
94 Unit 8

D5
Most of the words in this crossword puzzle are used in Units 7 and 8.

Across only part of a financial A series of regular part

+
\ very big company year. (7) payments. (11)
indeed. (5) 32 Prices did not rise. In fact Products, not services. (5)
Period of increasing they went (4) Conditions of contract. (5)
economic activity. (4) 33, Opposite of rise. (4) Agreement combining
‘Neither rose fell.” (3) 34 Document promising to several matters. (7)
Dutch Guilder. (3) pay a sum of money at a French franc. (3)
Industrial equipment and specified time. (4) A loan. (6)
tools. (5) 35 An area of business A financial interest in a
The beginning. (6) activity. (6) company. (5)
Public limited company 38 Years. (3) A metal. (3)
{ 3) 40 Extents of movement, e.g The parts into which the
Month. (3) ‘within a £2 price . .’ (5) ownership of a company
German currency unit. (4) 4] Period of three months. is divided. (6)
Commodities such as (7) An offer to buy, at a stated
sugar, coffee and cocao 43 A disappointment and price. (3)
(5) difficulty. (7) An increase. (4)
Gross National Product 44 a 1990 high of $44.25 Only, entirely. (6)
(3) to an all-time ... of $10. Turn down, say no to. (6)
Take part in. (11) { 4) Majority. (4)
to
ry Offering to supply goods Legal agreement. (8)
yr services at a stated Down Foreign exchange. (5)
price. (9) | Papers relating to a To act, to do business. (4)
Income received from an business deal. (13) Very active. (4)
.
nvestment. (5) Several companies joined Price level paid for the use
Deutsct k together, owned by one of somebody else's
An
company. (5) money. (4)
Rela y results, e.g. for 2
Billion. (2) Angry argument. (3)
Unit 9 Trends

International banking is a dynamic business and the changes are fast and
many. What are some of the main trends? What does the future hold? In this
unit we hear different bankers talking about important trends in some areas
of banking and financing.

Section A A1
With regard to banking in your country:
1 What are the two biggest problems?
2 What have been the two most important developments in recent years?
3 What important changes will take place in the next few years?

A2 &
Working with a partner, make a brief list of debt-related problems
experienced by debtor countries. Then listen to Robert Aguda, who is the
governor of a central bank in Africa, outlining some of the problems facing
developing countries. Tick those items on your list which Robert mentions.

A3 &
Look through the following summaries of Robert’s talk and say how you
think each one finishes. Then listen to him again and check your answers.
1 The enormous economic problems facing developing countries mean that

2 If something is not done about the debt problems of some developing

countries
3 Robert’s country does not like taking loans because .
4 If the external debts of the big Latin American countries were written off

5 In Africa, external debts are much larger ...

6 If the debts of African countries were written off ...
7 What the poorer countries of Africa need is ...
8 There should also be a worldwide dialogue in order to ...
9 A plus for some developing countries is ...
0 High interest rates mean that ...
1 These problems need special attention to .
Unit 9

A4 ®&
Here are seven short sentences from Robert’s talk. Each is followed by two
statements that might be understood from his words. Listen to how Robert
actually says these words and decide which meaning is intended.
1 Indeed recent forecasts by the IMF, the OECD and the World Bank are all
far from encouraging ...
a) ... although previous forecasts were more optimistic.
b) ... and give very little hope for the future.
2 We ourselves are very reluctant to borrow from the markets .
a) ... although other countries are less reluctant.
b) ... and try never to do it.
3 We have only to look at the debt service costs ...
a) ... to imagine the problems which they involve.
b) ... not to mention the total costs of repayment.
4 I believe that over 100 per cent of export earnings are required ...
a) ... although I am not sure about this.
b) ... and this is a very large figure indeed.
wn I think that there should be a global dialogue in order to combat inflation

a) ... instead of just a few countries talking about it.

b) ... instead of adding to it.
6 And this is, if you like, a plus for some developing countries ..
a) ... instead of a disadvantage.
b) ... but not for the industrialized countries.
7 These problems need very special attention ...
a) ... but there are other problems that we can leave till later.
b) ... no other kind of attention will help matters.
@ Which words would you stress in the sentences above to give them the
alternative meanings? Decide with a partner. Then read each of the
sentences in one of the two ways for your partner to say whether you
mean a) or b) in each case.

A5
Look at the following suggestions to overcome the problem of developing
country debt. Number them in what you think is their order of importance
and then compare your answer with that of a partner.
@ Increase concessional aid to poorer countries.
@ Begin global dialogue of economic co-operation.
@ Combat inflation.
@ Reduce interest rates worldwide.
@ Reduce the balance of payments deficits of rich countries.
@ Other. (Please specify.)
 Trends 97

Section B Bl &
Here are five general steps which Ed Walker, whom we met in Units | and 2,
says his bank has taken to meet the debt crisis. As you listen to his
presentation, number the steps in the order that Ed actually mentions them.
eevee Conversion of short-term debt into long-term debt.
wie Placing of some of the largest international loans on non-accrual status.
sii Increase of reserve for credit losses to $650 million.
Sei Restructuring amortizations and maturities of medium- and long-term
debt.
Sites Search for solutions on an individual country basis and for ways of
structuring the debt.

B2 &
What did Ed say? Look at the list of statements below. Some are summaries
of statements actually made by Ed in this section and others are not. Listen
to the presentation again and put a tick (“) against those statements that are
summaries of what Ed did say.
1 The debt-servicing problems of the developing countries are going to be
with us for some time to come.
2 Cybulski Bank is more affected than most other major banks by the debt
crisis,
Banks are having to increase their capital-to-loans ratios.
a The debt crisis is not confined to one country or even to one region.
Ww

5 Two thirds of the bank’s credit losses last year were on international
business loans.
6 Cybulski wants to help debtor countries to service their debt and to take
further loans from the open market.
7 Public sector debt forms two thirds of Cybulski’s outstandings of $950
million to Westina.
8 Interest rates on Westina’s public sector debts to Cybulski are now based
on LIBOR rates instead of Prime rates.
9 There are three countries with liquidity problems where the bank has
outstandings which are larger than one per cent of its assets.
10 Approximately half of the bank’s outstanding loans have maturities
within one year.
11 It is important that an effective solution to the debt crisis is found soon.
98 Unit 9

B3
Write down the words that Ed actually uses in place of the words in #talics.
Listen again to his presentation if you need to.
... is that of the difficulties in repaying money which is owed, together
with the interest charges ...
. our own position of risk is less than ..
.. to increase our reserve for money lost on bad debts ...
.. in 1990 we set aside for this purpose something like 600 ...
.. a lot of money being used to increase the proportion of financial
resources to the amount of money lent ...
. to look for answers on an individual country basis.
.. the economic performance of countries which owe money ...
i including the use of low interest rates given for a special reason ...
. we’ve placed them in a position where they no longer increase because
arthe addition of interest.
The repayments and dates when repayments become due ...
. we have loans which have not yet been repaid of 900 ...
. some O+#rds of which is money owing from government authorities and
state-owned organizations .
. and the remainder of which is to industrial and commercial firms
which obtain loans and which are not state-owned.
We've recently completed business discussions to work out a deal ...
. have been adjusted down from the base rate on corporate loans at big
US commercial banks plus two per cent ...
. to the average interbank offered rate for deposits in the London
market ...
. one of three countries with difficulties in meeting financial
commitments .
. outstandings which are greater than one per cent of our complete
worth,
What the effects of this situation are going to be for the banks which
have given loans ...

B4
Look again at the suggestions listed in A6 and B1. List what you think are
the five most important points for solving international debt problems in
their order of importance. Then compare your answer with that of a partner.
Try to work out a new list on which you both agree.
 Trends 99

Section C C1
1 Look at the newspaper report and choose the best headline for it from
this list.

Northland deregulates financial markets

High interest cheque account offered
Stockbrokers expand
Moves announced

Stockbrokers Nelson and Hurst have received a Central

Bank licence to take (1) . and are thus
adding (2) banking services to their
broker (3). The company plans a high
interest call account for (4) customers, on
which rates will be (5) to overnight
interest rates in the money markets. A high interest
cheque account is to be ............-.20200+ (6) for personal
customers. The (7) is one of several
announced by different companies this week, as
financial institutions (8) for the
deregulation of Northland’s financial markets next
year.

2 Fill the spaces with appropriate words from the box.

prepare deposits loans
linked limited offered
operations move corporate

C2 &
Colin Anderson, the chairman of a British clearing bank, talks about the
changes in the banking system at a seminar.

1 Is Colin talking about changes that have already started or ones that he
believes will begin in the future?
2 Do you think that Colin is positive or negative about the changes he is
talking about?

C3 &
On the next page are the notes that someone present at the seminar took.
Unfortunately not all of them are accurate. Listen again to Colin and find out
what the errors are.
 Likely to bring about a lot of changes. Probably more

than abandonment of exchange control in

Changes so far limited to USA and UK, where there are

1 formation of big financial conglomerates

2 securities houses offering something close to

banking facilities.

Changes in UK likely. UK invisible earnings generally

good, especially banking and insurance. UK facing

competition from newly-industrialized countries. UK oil

and gas limited, but UK neglects financial services as

an important source of income. Must develop them to

replace some manufacturing industries in decline.

C4
Match the words and phrases in the left-hand column with the definitions in
the right-hand column.
topic A Meeting to exchange information and to discuss.
seminar B Main points of interest.
trend C Borders or limits which have existed for a long period
of time
barriers D Income from the export of services.
statutory means E Ways connected with laws.
abandonment F Not to give attention to.
substantial G Financial organization which provides long-term loans
against the security of the borrower’s property.
peculiar to H Very large.
oc
\o financial conglomerate I Amount of income which is higher than the amount of
money spent.
10 retailing group J Activities in the buying and selling of land and
buildings.
 Trends 101

11 securities and commodities K Group of companies which sells goods to the public.
trading house
12 legislation L General development or movement.
13 operations in real estate M Growing weaker.
14 invisible earnings N Things which maintain separation.
15 surplus O Laws.
16 to neglect P Giving up of something.
17 primary concerns Q Subject, thing to be discussed.
18 in decline R Found only in.
19 traditional demarcations S Group of financial companies of very different kinds.
20 building society T Company dealing in investments and raw materials such
as sugar and cotton.

C5
Each of the phrases in italics fulfils a particular purpose. Match the phrases
to the purpose.

1 As my theme for this seminar, I have A Stating a point of view.

chosen ...
2 ... by which I mean the trend towards ... B Explaining a word or an idea.
3 I believe that the consequences of this trend ... C Listing or enumerating.
4 It is, as we will see later, already under D Leading to a logical conclusion.
way ...
5 First, we have seen .. E Indicating that a point will be
developed later.
6 At the same time, securities houses have ... F Changing focus or direction.
7 One of our primary concerns must be to .. G Emphasizing an important topic
or interest.
8 It is for these reasons that changes in ... H Stating something already widely
known.
9 I would like now to turn to events ... I Indicating one event happening
with another.
10 You will of course already know ... J Introducing the topic.

C6
Now plan a short introduction to a seminar on changes taking place in
banking in your country. Try to use as many of the phrases from C4 as
possible in any order you wish. A partner will listen to your introduction and
will tick off the phrases that you do use.
102 Unit 9

Section D D1
What do you use a computer for in your job?

“Dammit, Miss Belknapp, you're right!

There is a goldfish in there!!"’

D2
As preparation for the listening activities which follow, choose the best
definition for the words in italics.
1 Debits are:
a) sums of money owed by one person to another; b) records of money
paid into a bank account; c) records of money taken out of a bank
account.
2 Credits are:
a) plastic cards used instead of money; b) sums of money paid into a
bank account; c) the amount of money in a bank account.
3 The bank’s books are:
a) useful lists of customers’ addresses and phone numbers; b) plans
showing how much money the bank expects to earn and spend; c) a set
of records in which the bank’s accounts are kept.
4 If information is available real time, it is available:
a) on a terminal very soon after being entered into the system; b) at the
same time on a number of terminals linked to a central system; c) at any
time of the day or night.
Trends 103

5 A visual display unit (VDU) is:

a) a small screen that is linked to a telephone and the telephone network;
b) a screen which shows information from a computer; c) a machine
which shows transparencies.
If data is stored on line, it is:
a) ready for immediate use on a central computer; b) kept on equipment
that is not linked to a central computer; c) kept for a short time only.
A database is:
a) the place where a company keeps its main computer; b) a room with a
lot of computers in it; c) a large collection of data stored in a structured
form.
Advices are:
a) statements about what should be done; b) public notices about goods
or services for sale; c) formal notices giving the receiver information
about a business transaction.
An interface is:
a) the connecting link between two computer systems; b) a place where
someone sits to work with a computer; c) a system where two or more
texts can appear on the screen at the same time.
10 Enhancements are:
a) changes; b) improvements; c) decreases in size.
11 To quote prices is:
a) to state what the prices are; b) to decide what the prices are; c) to say
what you think the prices will be.
12 The bank’s exposure is:
a) how much financial risk the bank is open to; b) how much advertising
the bank does; c) how much the bank earns.
13 If A is on a par with B:
a) A is not as good as B; b) A is better than B; c) A is equal to B.
14 Back-up systems are:
a) groups of people who maintain and operate a computer system;
b) systems which control the running of computers; c) systems for
copying computer files in case the originals are damaged.
1S Contingency planning is about:
a) what to do if things go wrong unexpectedly; b) how much money to
earn and spend; c) how much money to put into bank reserves.
16 A network (here) is:
a) a program which instructs a computer what to do; b) a number of
computers in different places; c) a number of computers that are linked
for shared use.
Be Fraud is:
a) the crime of stealing money by breaking into a safe; b) the crime of
gaining money by dishonesty; c) the crime of stealing computers.
18 IC cards are:
a) identification cards; b) intelligent chip cards with built-in memories;
c) cards with holes in them which represent data.
104 Unit 9 EEEERNEEEE!
aE

19 ATM withdrawals are:

a) sums of money transferred to an account electronically; b) sums of
money taken out of a bank account via an automatic telling machine;
c) statements issued by an automatic telling machine.

D3 &
You are going to hear Kate Morley, the manager of the currency banking
unit of a British merchant bank, being interviewed about the importance of
high technology in certain areas of banking. As you listen, choose the best
alternative for these four sentences.
1 Kate talks / does not talk about the history of computerization in her
bank.
Kate describes / does not describe the bank’s computer systems.
Kate talks / does not
why talk about electronic funds transfer.
4 The interviewer asks / does not ask technical questions about the bank’s
computers.

D4
Here is a list of short courses and conferences which Kate has the
opportunity to go on during the year. Based on what she says, tick the boxes
for those courses you think might be of most professional interest to her.
Systems for retailers
Documentation for dealers
Buying and paying from home
Electronic trade payment
Security in electronic funds transfer
ATM on-line systems
Risk management of foreign exchange transactions
Point of sale services around the world
Message transmission: strategic choices
Developments in plastic cards
Measuring information systems performance
 Trends 105

D5
Read the text about electronic banking and then:
1 say whether it is mostly about equipment or about systems.
2 say how many branches are connected to the bank’s network.
3 choose what you consider to be the biggest benefit provided by the
bank’s products.

Quintorp, one of Northland’s leading banks, is including management, clerical and teller
to begin exporting its computerized banking functions and an ATM function. A notable
systems to the USA, Europe and the Far East. application module in the Sylvia system is the
The bank, which is well-known for being at the dealing room package, which aids dealer
forefront of electronic banking, is confident performance by providing currency positions
that there is a worldwide market for its state-of- and other real-time data such as cash flow
the-art solutions to the rapidly changing needs management and automatic confirmation of
of international banking. ‘What we intend to deals.
do,’ says Managing Director John Seddon, ‘is to A portfolio and trust management system is
make available the bank of tomorrow, that is a also available, which includes a securities
one-location bank which can meet all banking facility providing an on-line real-time
needs, business and retail, on the spot, by connection to the Northland stock exchange.
means of banking know-how combined with Purchases can be made via a terminal, and the
advanced computer technology.’ whole operation is paperless.
Quintorp’s rise to electronic market A feature which Quintorp is developing as
leadership began in 1985, when it established a part of its concept of tomorrow’s bank is a
subsidiary company, Quintorp Computer display service whereby corporate customers
Services, for the sole purpose of selecting will be able to interface personal computers
hardware, developing sophisticated software directly with the bank’s network by means of
applications and building a comprehensive on- the telephone line and a modem. The up-to-
line network for the bank. All of the bank’s 260 the-minute information thus available will
domestic branches have been connected to the include direct linking facilities via the modem
network since 1989, shortly after which the key to domestic and foreign stock exchanges.
branches abroad in London, Hong Kong and The bank’s priority investments in electronic
Bermuda went on-line. The bank’s other banking have produced what Seddon
international branches in 21 countries were describes as ‘advanced equipment and
linked to the network in 1990. More than 2,000 systems, which have facilitated increased
AJS/500 terminals have been installed in the administrative control, rationalization of
network, with control and data being clerical duties, and expanded information
concentrated at the host site. gathering capabilities, all of which means
Among the real-time software packages quicker, more reliable, and increased customer
which the bank has designed and operated, services’. Potential purchasers of the bank’s
and which it now intends to market, is the electronic products could do worse than look
Sylvia system. This integrates a dealing at the impressive growth in Quintorp’s
function, global interbank telex and earnings during recent years.
telecommunications systems, a branch system
106 Unit 9

D6
John Seddon speaks about meeting ‘all banking needs, business and retail’.
Now make two separate lists of products and services offered by the bank to
meet these needs, one list about banking for business customers and the other
list about retail banking.

D7
1 What are the general trends in banking and finance in your country?
2 What are the trends in your bank or organization in particular?
 107

Role play instructions

Unit 3 C8
Dealer, Bank B
The US dollar has been steady for a couple of days. The dollar/Deutschmark
interbank rate is 1.9055 (buy) and 1.9060 (sell). You believe, however, that
the dollar will rise during the day, probably by a pfennig or so.

Unit 4 C5

Bank B
You have some news for your customer: your bank’s base rate is being
increased by 4% next week to 104%. Your margins in general are about
right — you could afford to decrease them a little, but not by too much.

Unit 6 C4

Bank Z
Delays in payment are not your fault — your Central Bank makes it tough for
you, because of the country’s lack of foreign exchange. Your position is:
@ You think it would be fair to pay Bank A interest costs on delays in the
payment of confirmed documentary credits, at the LIBOR rate, for half of
the average delay period, i.e. 20 days.
@ You would also like to increase the line that Bank A has established for
you for the confirmation of credits, from USD 2 million to USD 3 million.
@ You want to increase your business in general with Bank A, as your
national economy is beginning to pick up, due to the fact that machinery
is now being exported more and more.

Unit 8 CS
Government A
Bank B is the second bank that you have met this week to discuss this loan,
as you met Bank X yesterday. You need $55 million, and Bank X has
indicated that it can lend you this sum, as the sole provider. They suggest
two tranches: firstly a ten year loan, at a fixed rate of interest of 102% per
annum, with semi-annual repayments, and secondly a bullet repayment of
$15 million after two years. Now see if you can get better terms from
Bank B.
108 Role play instructions

Unit 3 C8
Cash Manager, Company C
You are almost sure that your company will need to buy USD 1 million later
today, spot, with Deutschmarks. The dollar has been steady all this week,
and at present you know the dollar/Deutschmark rate to be around 1.9055.

Unit 4 C5
Company C
Your company is becoming very cost conscious. You have been through Bank
B’s charges with your boss, and he wants you to reduce them overall by at
least 10%. See what you can do.

Unit 6 C4

Bank A
@ With regard to delays in the payment of confirmed documentary credits by
Bank Z, you want interest paid for the first 30 days at the LIBOR rate.
For above 30 days, you suggest LIBOR plus 1%.
@ You want the outstanding £95,000 paid immediately — never mind any
interest.
@ You want to decrease the line that you have established for Bank Z for the
confirmation of credits, from USD 2 million to USD 1 million, unless Bank
Z is fairly helpful on the above points.

Unit 8 C5

Bank B
You can lend up to £30 million as the sole provider. Your suggestion is an
eight year loan, at a fixed rate of interest of 11% per annum, with
quarterly repayments. If the sum is more than £30 million, you will have to
syndicate the loan. In this case, you will have to increase the interest rate.
Find out how you can best help Government A.
 109

List of abbreviations

Here is a list of abbreviations you Assmt. Assessment Cap. Capital, capitalization

are likely to meet in the world of ATM Automatic telling CC Cancellation clause
banking and finance, some of machine, automated teller CCA Current cost accounting
which are included in the units of machine CCE Current cash equivalent
this book. Please note that the list Att. Attached CCY Convertible currency
is not comprehensive and that you Aud. Audit, Auditor CD Certificate of deposit
may meet the abbreviations in a AUD Australian dollar C/d Carried down
slightly different form, for Auth. Authority Cert. Certificate
example A/d meaning After date Av. Average C/f Carried forward
could be written a.d.. Avg. Average C&F Cost and freight
AY Annual yield CF Cash flow
A CFA Cash flow accounting
A/C Account B Cfm. Confirm
Ace. Account or Accept Bal. Balance CFR Cost and freight
ACH Automated clearing house Bd. Board or Bond CGT Capital gains tax
Ack. Acknowledge, B/D Bank draft CHAPS Clearing house
acknowledgement B/d Brought down automated payment system
Ackgt. Acknowledgement B/Dft. Bank draft CHF Swiss franc
Acpt. Accept, acceptance B/E Bill of exchange Chge. Charge
Acrd. Accrued BEF Belgian franc CHIPS Clearing house interbank
Ac. Pay. Accounts payable B/f Brought forward payment system
Ac. Rec. Accounts receivable Bfcy. Beneficiary Chq. Cheque
ACT Advance corporation tax Bgt. Bought CI Cash items or Compound
A/d_ After date Bk. Bank interest
Add. Addition, addendum Bkg. Banking CIF Cost, insurance, freight
Ady. Advance or Advice Bkr. Broker CIP Freight or carriage and
Advsd. Advised Bkrpt. Bankrupt insurance paid
Affil. Affiliate Bks. Books CL Call loan or Capital loss or
AFT Automatic fund transfer B/L_ Bill of lading Current liabilities
Aft. After Bn Billion Cl Clause
Agd. Agreed BP Bills payable or Book profit CLOC Clean letter of credit
AGI Adjusted gross income BR Bills receivable or Bond Cmdty. Commodity
Agt. Agent or Agreement rating or Bank rate Cmm. Commission
Al Accrued interest or Br. Branch Cn. Consolidated
Accumulated interest Brok. Broker, brokerage Cneld. Cancelled
AL Accrued liabilities BS. Balance sheet or Bill of sale Co. Company
A/m Above-mentioned BV Book value COD Cash on delivery
Amt. Amount BW Bid wanted Col. Column
Ann. Annual or Annuity Coll. Collection or Collateral
A/or And/or C Collat. Collateral
Approx. Approximately CA Capital assets or Current Com’! ppr. Commercial paper
APR Annual percentage rate assets COMECON Council of Mutual
Appr. Approximately CAD Canadian dollar or Cash Economic Assistance
AR Accounts receivable or against documents Comm. Commission
Annual report or Annual return Canc. Cancellation Conds. Conditions
110 List of abbreviations

Consgt. Consignment EE Equity earnings FV Face value

COP Current operating profit E&e Each and every F/X Foreign exchange
Corp. Corporation EEC European Economic FY Fiscal year
CP Closing price or Commercial Community FYG For your guidance
paper EFT Electronic funds transfer FYI For your information
CPI Consumer price index EFTA European Free Trade
Cr. Credit, creditor Association G
CT Cash transfer EFTPOS Electronic funds GA_ General average or Gross
Cum. Cumulative transfer point of sale asset
Cur. Currency EFTS Electronic funds transfer GATT General Agreement on
Cy. Currency system Tariffs and Trade
CY Current yield EI Earned income GBP British pound
EMS European Monetary GDP Gross domestic product
D System GE Gross earnings
D/A Documents against E&OE Errors and omissions Gen. Led. General ledger
acceptance accepted GNP Gross national product
DAF Delivered at frontier EOM_ End of month GP Gross profit or Grace period
Db. Debenture EPOS Electronic point of sale Gp. Group
DCP Freight or carriage to EPS Earnings per share GR_ Gross receipts, gross revenue
(named port) Equ. Equity GS Government securities or
DD Due date ES Earned surplus Gross sales
DDA Demand deposit account ESP Spanish peseta GTC Good till cancelled
DDP Delivered duty paid Ex. Exchange Gtd. Guaranteed
Deb. Debenture Exch. Exchange Guar. Guarantee
Def. Deficit Excl. Excluding
Dem. Demand Exp. Expense or Export H
DEM _ Deutschmark EXQ_ Ex quay HC Holding company
Dep. Deposit EXS Ex ship
Dept. Department EXW_ Ex works I
DES Data encryption standard IBELS _ Interest-bearing eligible
Dis. Discount F liabilities
Disb. Disbursement FA Fixed assets or Floating IC Intelligent chip
Div. Division or Dividend assets or Face amount IDB Inter-dealer broker
DKK Danish krone FAS Free alongside ship Lf. In full
Dir. Dealer FB Fidelity bond II Institutional investor
Dly. Daily FC Fixed capital or Fixed IMF International Monetary
DM _Deutschmark charges or Futures contract Fund
DNI Distributable net income FCV Full contract value Imp. Import
DOG Days of grace FE Foreign exchange In. Income
Dol. Dollar FI Foreign investment Inc. Income or Incorporated
DP Data processing or Fin. Finance Incl. Including
Documents against payment FOA FOB airport Inst. Instant or Instalment
DR_ Discount rate FOB Free on board or Freight Inv. Invoice
D/S_ Days after sight on board IS Income statement
DTBA Date to be advised FOR Free on rail IT Income tax
Forex Foreign exchange ITL Italian lire
E FP Fixed price
EBIT Earnings before interest FRC Free carrier (named port)
and taxes FRCD Floating-rate certificate of JPY Japanese yen
EC European Community deposit JV Joint venture
ECGD Export Credit FRF French franc
Guarantees department FRN_ Floating-rate note i:
ECU European currency unit FS Financial statement LA Liquid assets
 List of abbreviations 111

LAFTA Latin American Free NLG Dutch guilder PE Price-earnings ratio

Trade Association No. Number PER Par exchange rate or Price-
LC Loan capital NOK Norwegian Krone earnings ratio
L/C Letter of credit or Line of NP Net position or Net profit Per. Cap. Per capita
credit NPV_ Net present value Pfd. Preferred
LDC Less developed country NRV_ Net realizable value PI Prime interest (rate)
LDT Licensed deposit-taker NS Net surplus PIN Personal identification
Led. Ledger N.S. Not specified or Not number
Li. Liabilities sufficient (funds) P&L Profit and loss
LIBOR London Interbank NW Net worth PLC Public Limited Company
Offered Rate NWC_ Net working capital PN Promissory note
LIFFE London International NY Net yield POS Point of sale
Financial Futures Exchange PP Purchase price or Partial
LL Limited liability O payment or Paper profit or Pages
LME_ London Metal Exchange OB Operating budget or On behalf of (per
LOC Letter of Credit O/b On or before procuration) or Prompt payment
LR_ Loan rate OBU_ Offshore banking unit Pr. Preferred or Principal
LS Listed securities (stocks) OC Operating company or PR Pro rata
Ltd. Limited Organizational chart Prin Principal
OD On demand or Overdraft or PSBR Public sector borrowing
M Overdraw or Overdue requirement
M_ Million OE Operating expense PSL Private sector liquidity
MAC Message authentication OECD Organization for PTE Pretax earnings
code Economic Cooperation and PV Par value or Present value
Marg. Margin Development PY Prior year
Mat. Maturity, matured OF Offshore funds Pymt. Payment
MB Municipal bond or Ofd. Offered
Merchant bank OI Operating income or Q
MD Maturity date Ordinary interest QA Quick assets
Misc. Miscellaneous OL Operating losses QP Quoted price
Mkt. Market OP Operating profit or Offering Qtly. Quarterly
MLR Minimum lending rate price or Opening price Qtr. Quarter
MMC Money market certificate OPEC Organization of Qy. Query
Mtg. Meeting Petroleum Exporting Countries
Mthly. Monthly Opt. Option R
Mths. Months OR Operating reserves RC Recurring charges or
O/S Outstanding Reserve currency or Risk
N OTC Over the counter currency or Replacement costs
N/A_ Not applicable or Not Outstg. Outstanding Red. Received
available or Non-acceptance Rept. Receipt
NA_ Net assets or Nostro y RE Rate of exchange or Real
account PA Paying agent or Power of estate
NAV Net asset value attorney or Per annum Re. Regarding
NC Net capital or Net cost PAC Put and call (option) Recd. Received
NCF Net cash flow PAN Primary account number Redem. Redemption
ND Net debt PAP Pre-arranged payment Ref. Reference or Refunding
NE Net earnings Part. Participation Regd. Registered
N.e. Not exceeding Payt. Payment Regs. Regulations
Negb. Negotiable Pce. Piece Rem. Remittance
NH_ New high Pcs. Pieces or prices REPO Repurchasing agreement
NI Net income or Negotiable Pct. Per cent Res. Reserve
instrument or Net interest Pd. Paid Rev. a/c Revenue account
NL Net loss PD For each day RFP Request for proposal
112 List of abbreviations

RFQ Request for quotation Tot. Total

Rmdr. Remainder TR Tax rate or Trust receipt
ROA Return on assets Tr. Trust
ROCE Return on capital Treas. Treasurer, treasury
employed Trf. Transfer
ROE Rate of exchange or TS Tax shelter or Treasury
Return on equity stock
ROI Return on investment T/T Telegraphic transfer
ROR Rate of return
RPI Retail price index U
RPQ_ Request for price UNI Undistributed net income
quotation Unpd. Unpaid
RR_ Required reserves UOT Unit of trading
Rt. Right UP Unrealized profits
RTBA Rate to be agreed USD US dollar
USM _ Unlisted securities market
S
S/A_ Subject to acceptance Vv
SAN Subsidiary account number Val. Value
SC Stock certificate VAT Value-added tax
SD Sight draft or Stock dividend VC Venture capital
SDR_ Special drawing rights VCF Venture capital funds
SE Stock exchange VD Volume discount
SEK Swedish krona VDU Visual display unit
Shr. Share
SI Simple interest W
Sig. Signature WDV_ Written down value
Sk safekeeping WEF With effect from
S&L Assn. Savings and loan WR Warehouse receipt
association W/W Worldwide
Sld. Sold
SM_ Secondary market Xx
SO Seller’s option or Standing X ch. Exchange
order or Stock option X cl. Excess current liabilities
SOE Short of exchange Xin. Excluding interest
SP Selling price or Spot price or
Stop payment Y
Ster. Sterling Yr. Year or Your
Suby. Subsidiary
Sur. Surplus
T
TA Tangible assets
TBA To be advised or To be
agreed
T bill Treasury bili
T bond Treasury bond
TI Taxable income
TL Time loan
TN Transferable notice
T note Treasury note
TO Treasury obligation
T/O Turnover
Acknowledgements
The author and publishers are grateful to the following copyright owners for
permission to reproduce photographs and cartoons.
page 1: Businesswoman — The Telegraph Colour Library; Businessman — ZEFA;
Businessman — Tony Stone Photo Library
page 3: Dealing Room — Tony Stone Photo Library
page 34: Meeting — The Telegraph Colour Library
page 47: Presentation — Tony Stone Photo Library
page 58: Cargo Plane — The International Stock Exchange Photo Library;
Container ship — ZEFA
page 70: Finance — Art Directors Photo Library
page 82: Dam — The J. Allan Cash Photolibrary; Bridge - Department of the
Environment for Northern Ireland/ Graphic Design Service
page 102: Cartoon — Private Eye

Picture research by Sandie Huskinson-Rolfe, Photoseekers

Book design by Ken Brooks Design Services

114

Notes
English for International Banking and Finance is for professio
people working in financial institutions and related areas oth
The book can be worked through as a course or units«
to suit individual needs. It can be used in class,in one-to
xe -0
and for self-study. The level is intermediate and pig nte;

Each of the nine thematically based units deals vaisteh

and contains listening extracts, speaking activities < d
passages designed to match the needs andiinte rere:
Writing tasks are included where appropriate. T:
include different types of bank organizationn, interna (
dealing, trade finance and financial
ee oe ~ ,
i oF ees
© a PT
i

By :

* acore of specialist vocabularyele cle %

contexts.

English for International Banking and Finance consistsof

of: ce
5
Learner’s Book
cn
Guide for Teachers °
Cassette
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a

3 ISBN 0-521-31999-4

9 6056) 319997