The services of commercial banks

Commercial banks accept deposits from depositors and make loans to borrowers, conduct deposit and current accounts for customers, keep valuables in custody, pay standing orders for customers. A standing order is a regular payment made on behalf of a customer and deducted from his account on a regular basis, for example, mortgage payments to the building society. Banks give advice on income tax matters and overseas trading, buy and sell shares for customers, issue foreign currency and travellers’cheques, provide firms with change and “make up” cash wage packets for customers, act as executors and trustees for deceased persons, change old bank notes for new .

Banks lend money by a personal loan and by an overdraft loan or arrangement.

If the bank makes a personal loan to a customer of say 1000 pounds and charges him an interest rate of 10% repayable over 11 months, then the customer will have to pay the bank total of 1,100 pounds. The extra 100 pounds is the interest charged by the bank for the loan and is its profit. Therefore the personal loan is charged at a fixed rate of interest repayable over a fixed period of time.

The overdraft as borrowing facility is used mostly by businessmen. The advantage with the overdraft is that interest is repayable only on the amount owed at a particular time and is calculated on a daily basis. The borrower pays a lot of interest when the debt is large, but if he makes a good deposit reducing the size of the overdraft then the interest will be lowered accordingly. Overdraft may be recalled by the bank at very short notice.

Commercial banks issue reliable customers with cheque guarantee cards. However, the cheque is not legal tender. The bank honours it if the card number is written on its back and there are funds in the account.

Vocabulary:

conduct an account - вести счет

current account - текущий счет

deposit account - сберегательный счет

overdrawn account - счет с превышением кредита

valuable - ценность

custody - хранение

standing order - приказ о регулярных платежах

on behalf (of smb)- по поручению (кого-либо)

customer - клиент

building society- строительное общество

currency- валюта

traveller’s cheque  - дорожный чек

change - 1. разменивать, менять деньги; 2.разменная монета

wage packet - фонд заработной платы рабочих и служащих

executor- исполнитель (завещания)

trustee             - доверенное лицо; опекун, попечитель

repay - погасить (ссуду)

overdraft - овердрафт, превышение кредита
Answer the questions:
1. What services do commercial banks offer to their customers? 2. What are the two methods of making loans to borrowers? 3. How is interest calculated with the overdraft? 4. What are cheque guarantee cards?