1. What’s this? A place where they lend you an umbrella in fair weather and ask for it back when it begins to rain. Mark Twain

2. Can you guess now? A place where they lend you an umbrella in fair weather and ask for it back when it begins to rain. Mark Twain A place that will “help” you if you can prove that you don't need “help”. Bob Hope

3. A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain. Mark Twain A bank is a place that will lend you money if you can prove that you don't need it. Bob Hope If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem. John Paul Getty Do you agree?

4. BANKING MK, U 14 RB, pp.26-28

5. Match definitions with terms in MK, p 73 & discuss 1one that pays interest, but usually cannot be used for paying cheques (GB) or checks (US), and on which notice is often required to withdraw money 2a plastic card which is used instead of money to pay for goods and services. The cost is taken directly from the users bank account. 3a computerized machine that allows bank customers to withdraw money, check their balance and so on 4a fixed sum of money on which interest is paid, lent for a fixed period, and usually for a specific purpose 5one that generally pays little or no interest, but allows the holder to withdraw his or her cash without any restrictions 6a card which guarantees payment for goods and services purchased by the carholder, who pays back the bank or finance company at a later date 7an instruction to a bank to pay fixed sums of money to certain people or organizations at state times

6. 1one that pays interest, but cannot be used for paying cheques (GB) or checks (US), and on which notice is often required to withdraw money – savings / deposit account 2a plastic card which is used instead of money to pay for goods and services. The cost is taken directly from the users bank account. – debit card 3a computerized machine that allows bank customers to withdraw money, check their balance and so on - ATM 4a fixed sum of money on which interest is paid, lent for a fixed period, and usually for a specific purpose – a loan 5one that generally pays little or no interest, but allows the holder to withdraw his or her cash without any restrictions – current account (GB) – checking account (US) 6a card which guarantees payment for goods and services purchased by the carholder, who pays back the bank or finance company at a later date – credit card 7an instruction to a bank to pay fixed sums of money to certain people or organizations at stated times – standing order→ Handout: borrowing & lending

7. Verb + account = o_ _ n an account o_ _ _ d _ _ _ an account c_ _ s _ an account c_ _ _ g _ sth. to an account w_ _ _ d _ _ _ money from an account d _ p _ _ _ t money in an account d _ _ _ t money from an account (take money from) c _ _ d _ t money to an account (add money to) a current account p_ y _ a small interest s _ tt _ _ an account h _ _ d an account (with ZABA)

8. Verb + account = open an accountoverdraw (..) account close an account charge sth. to an account withdraw money from an account deposit money in an account /dı ’pozıt/ debit money from (...) account (take money from) credit money to an account (add money to) a current account pays a small interest settle an account hold an account (with ZABA) READER P 27, task IIIHW, R pp 26 & 27 Commercial banking -handout

9. MK, p 73 Banks and financial institutions Read and fill in Vocabulary

10. MICROFINANCE - providing financial services to low-income clients Is that a good idea in your opinion? Have you heard of some specific examples? → MK, p 76 Listening

11. Listening cont. Listen for terms defined below: Assets promised by a borrower to a lender if the borrower cannot repay the loan. The managing of investments in ways that produce as much profit as possible while limiting the danger of losses. Reducing risk by investing in a variety of assets / lending money to large number of people.

12. Listening cont. Listen for terms defined below: Assets promised by a borrower to a lender if the borrower cannot repay the loan - collateral The managing of investments in ways that produce as much profit as possible while limiting the danger of losses – risk management (tool) Reducing risk by investing in a variety of assets / lending money to a large number of people – risk diversification → Questions, p 76

13. COLLATERAL Assets promised by a borrower to a lender if the borrower cannot repay the loan – collateral Eg. The firm went bankrupt, and because he had used his two homes as collateral when he borrowed money for the company, he lost almost everything he owned. Synonym: security Eg. Mortgage is a loan, usually to buy property, which serves as a security for the loan. secured credit vs. unsecured credit In the majority of bankruptcies, secured credit is repaid before unsecured credit.

14. → Role play, p 76 -get in teams of 5! -(5 roles): pp 145,148,150,152,153 -pick a role for each team member -study your role -ask for help if you have problems understanding -follow the chairperson’s cue and discuss the following proposal: The bank should enter the microfinance market in developing countries.

15. HW RB, pp 26 & 27 MK, p 73 Vocabulary 2

16. Liquidity vs. solvency The state of having enough money to pay one’s debts. ____________ The state of having enough assets that are easily turned into cash. ___________ HINT: Remember: Governments help banks cope with cash shortages! Which term refers to the opposite of cash shortage?

17. Liquidity vs. solvency The state of having enough money to pay one’s debts. solvency The state of having enough assets that are easily turned into cash. liquidity

18. Liquidity vs. solvency The state of having enough money to pay one’s debts. solvency The state of having enough assets that are easily turned into cash. liquidity liquidationsolvency insolvent liquidity liquid 1.He is technically _________. He can’t pay his debts. 2.It’s important that banks are ______ so that people can withdraw money any time they want. 3.An immediate __________ could produce huge losses for shareholders. 4.A typical _________ crisi is when a business does not have enough cash to pay short-term expenses. 5.__________ is important to avoid bankruptcy.

19. Liquidity vs. solvency The state of having enough money to pay one’s debts. SOLVENCY The state of having enough assets that are easily turned into cash. LIQUIDITY 1.He is technically INSOLVENT. He can’t pay his debts. 2.It’s important that banks are LIQUID so that people can withdraw money any time they want. 3.An immediate LIQUIDATION could produce huge losses for shareholders. 4.A typical LIQUIDITY crisis is when a business does not have enough cash to pay short-term expenses. 5.SOLVENCY is important to avoid bankruptcy.

20. Vocabulary focus 1 subprime borrowers A failure to repay a loan 2 credit ratingB investment fund that combines safe & risky investments 3 default C clients who may not be able to repay their loans 4 hedge fund D assets you promise to give if you cannot repay a loan 5 security E estimates of people’s ability to fulfill their financial commitments 6 forecloseF to take possession of one’s property because they failed to continue paying a loan

21. Vocabulary focus 1 subprime borrowers C clients who may not be able to repay their loans 2 credit rating E estimates of people’s credit standing ability to fulfill their credit worthinessfinancial commitments 3 default A failure to repay a loan 4 hedge fund B investment fund that combines safe & risky investments 5 security D assets you promise to give to the lender if you cannot repay a loan 6 foreclose F to take possession of one’s property because they failed to continue paying a loan

22. MK, p 75 – Reading: The subprime crisis and the credit crunch INTRO: meltdown...? meltdown - Severe overheating of a nuclear reactor core, resulting in melting of the core and escape of radiation. - a disaster comparable to a nuclear meltdown; "there is little likelihood of a meltdown comparable to the American banking collapse in March 1933"

23. MK, p 75 – Reading: The subprime crisis and the credit crunch INTRO: Subprime meltdown...?... a financial crisis that arose... 1 Where? 2 When? 3 What happened? A numerous institutional lenders and hedge funds collapsed B the mortgage market C after a sharp increase in mortgage foreclosures (mainly subprime) - Write your own definition!

24. Subprime meltdown is a financial crisis that arose in... the mortgage market after a sharp increase in.... mortgage foreclosures (mainly subprime) collapsed... numerous mortgage lenders and hedge funds.

25. Credit crunch credit crunch = credit squeeze = credit crisis: - ________ in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. increase reduction Causes: -often caused by a sustained period of ________ and inappropriate lending which results in losses for lending institutions and investors in debt when the loans turn sour and the full extent of bad debts becomes known.debtbad debts careless careful Investor in debt?Loan turns sour?

26. Credit crunch credit crunch = credit squeeze = credit crisis: - ________ in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks. increase reduction Causes: -often caused by a sustained period of ________ and inappropriate lending which results in losses for lending institutions and investors in debt when the loans turn sour and the full extent of bad debts becomes known.debtbad debts careless careful Investor in debt?Loan turns sour?

27. How did the subprime crisis lead to the credit crunch/crisis/squeeze? Read: MK, p 75 Put the sentences below in the right order 31 5 24 6 → Vocabulary: 1B2C3E 4D 5A

28. Who is to blame? The sharp increase in foreclosures and the problems in the mortgage market were largely blamed on: – loose ________ practices – ______ interest rates –a ________ bubble –excessive _____ taking by lenders and investors

29. Who is to blame? The sharp increase in foreclosures and the problems in the mortgage market were largely blamed on: – loose lending practices –low interest rates –a housing bubble –excessive risk taking by lenders and investors. – BREAK

30. Central banking

31. Central banking functions Listening: Reader, p 29

32. 1a Listening The functions of a central bank: 1) Implementing monetary policy 1a) setting interest rate ceilings and floors 1b) printing money or destroying it 1c) open-market operations 2) Exchange rate supervision 3) Commercial banking supervision 4) Act as a lender of last resort → RB, EXERCISE

33. HW: Watch: Crisis of Credit and answer the questions http://vodpod.com/watch/1373851-the-crisis-of-credit-visualized-on- http://vodpod.com/watch/1373851-the-crisis-of-credit-visualized-on- vimeo Following the tech bubble and the events of September 11, the Federal Reserve stimulated a struggling economy …HOW?... by ________________________________________ WHAT WAS THE RESULT ON THE HOUSING MARKET? _____________________________________________ WHAT WAS THE CONSEQUENCE FOR BORROWERS? ______________________________________________ This left mortgage lenders with property that was worth … HOW MUCH? ______________________________________ WHAT HAPPENED TO SEVERAL LENDERS ______________________________________________ In the wake of the meltdown, …WHAT DID CENTRAL BANKS DO?