Banking, the Evolving Role of Banks, Business English

Banking and the Evolving Role of Banks

by Sue Gench

key words: bank, financial institution, financial activity, credit, loan, financial bailout, real estate bubble, market collapse

Vocabulary

Related Links

Banks are financial institutions operating under government license. Banks' primary function is to lend credit to consumers for either non-commercial economic activity such as lending a car loan to an individual, or for commercial economic activity such as lending credit to a business entity to help enhance the business's financial strength and activity. In addition, banks facilitate financial transactions of consumers. Consumers pay their creditors using banks by writing checks, online or at banks' physical locations and get paid in the same manner by their borrowers, transfer money between from their bank to the other inside or outside the country.

Over time banks have evolved into more complex financial institutions. Today banks are allowed a wide range of financial activities. For example, banks are today important players of providing brokerage services to consumers for investment in security markets. Besides, banks in Europe (Germany) have owned major stakes in financial corporations and while this is not the case in the United States in Japan, France banks are preeminent shareholders and offer broad range of commercial services from insurance to real estate.

For further readings, please see the links below.

The controversial US government banks bailout

Has the Obama administration dealt effectively with the collapse of the financial industry

What went wrong with banks in the real estate bubble causing the market collapse

Vocabulary:

bank: noun. an establishment for keeping safe the money of the public, private persons or businesses; for issuing loan or exchanging money for the extension of credit and facilitating the transmission of funds

government license: compound noun. A document certifying ownership

financial institution: compound noun. an institution which collects monetary funds from the public, and then place them in financial goods, such as CD's, loans, bonds rather than in a physical property

commercial activity: compound noun. An activity that results in economic gain for the owner of the activity. Example: business activities, selling, buying, lending, borrowing, and etc.

non-commercial activity: compound noun. An activity that does not result in economic gain for the owner of the activity. Example: consumers' activities: buying a car, renting an apartment, buying a property for pleasure

credit: noun. money available for a consumer or business to borrow

creditor: noun. a business or individual who lends money to a consumer or business

financial activity: compound noun. an activity involving financial assets such as lending funds, borrowing funds; buying or selling goods and services for profit or consumption

financial transaction: compound noun. a formalized procedure by a financial institution for for businesses or consumers carry out in order to complete a financial activity. Example, purchasing stocks, depositing funds to a bank

non-commercial activity: compound noun. activity a consumer engages in for consumption. Example: buying clothes for consumption

financial service: compound noun. service provided by a financial institution. Example: Providing loans to a consumer

loan: noun. money lend to a person or business, usually for an interest payment when returned

brokerage service: compound noun. a business, firm, or company who acts as a broker in that provide financial services in return for a commission paid to the broker

security: noun. 1. something in value provided, deposited or promised to make certain the fulfillment of an obligation; 2. an instrument of investment in the form of a document such as CD

stake: noun. a financial gain (in the above context)

financial bailout: compound noun. A bailout is an act of loaning or giving capital to a failing company in order to save it from bankruptcy or insolvency

real estate bubble: has occurred in the last decade in the United States. Overly active market in the real estate industry that has lead to high consumers' demands for real estate property and in turn artificial increases in property loans, and interest hikes to borrowers. As a consequence, the real estate markets has collapsed.

market collapse: compound noun. After an overly active economic activity (a bubble in a market), if demand an supply break lose their control over an expected ratio of balance, markets collapse leading to an economic chaos both for suppliers and consumers. Example: The US financial markets have collapsed recently due to the overheated economic activity by consumers and financial assets suppliers (Wall Street). The 2009 real estate bubble and collapse in the United States.

check: noun. document provided an individual or business by a financial institution to use against their financial assets held by the financial institution

financial corporation: compound noun. Corporations in the business of providing financial assets, such as bonds, CD's stocks, mutual funds, and etc.

CD: compound noun. Acronym for the Certificate of Deposit. A money-market bond of a predetermined value paying fixed interest, and fully payable without penalty only on maturity

bond: noun. 1. the amount of the money guaranteed to the person who lends money for financial gains. 2. an insurance agreement promising safety from financial loss

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