Unit 8 Who Has Messed up My Personal Account

1. Review (1). What ’ s foreign currency exchange rate? Give some examples. The price of any one country ’ s currency stated in terms of another country ’ s currency e.g. the exchange rate nowadays between the U.S. dollar and CNY is around “ 6.5 CNY per USD ” (2). Which agency is responsible for foreign exchange administration in China? The State Administration of Foreign Exchange (SAFE) (3). Which bank is the principal foreign exchange bank? Bank of China

2. Lead in Which bank does each logo stand for? Bank of China Industrial and Commercial Bank of China Agriculture Bank of China China Construction Bank Bank of Communications

Q: (1) Which bank do you usually dealt with? Q: (2) What ’ s the services and roles the bank plays in our daily life?

Useful expressions: Bank ’ s services Retail: to provide comprehensive, integrated financial services to individuals, families and small and medium enterprises 商业贷款 business loan 支票帐户 cheque account 信用卡 credit card 借记卡 debit card 保险 / 投资顾问 insurance/investment advisor 基金 fund 个人贷款 personal loan 储蓄帐户 savings account 定期存款 time deposits 活期存款 demand deposits Wholesale: 募集资金（股票 / 债券） capital raising (Equity / Debt) 项目融资 project finance 风险管理（外汇，利率，衍生产品） risk management (FX, interest rates, derivatives)

Are you familiar with this logo? PBC Q: (1) How much do you know about the People ’ s Bank of China? The People's Bank of China is the central bank of China, one of the component departments of the State Council. (2)What ’ s the difference between PBC and other commercial banks? Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. The earlier-mentioned banks such as ICBC are state- controlled commercial banks.

Q: What ’ s the differences between these banks and those mentioned earlier, such as ICBC? State-controlled commercial banks ( 国有控股 商业银行 ): ICBC, ABC, BC,CCB,etc. National joint-stock commercial bank ( 全国性 股份制商业银行 ) : Guangdong Development Bank, Shanghai Pudong Development Bank:

3. What is banking? Banking is generally a highly regulated industry. Government restrictions on financial activities by banks have varied over time and location. In some countries such as Germany, banks have historically owned major stocks in industrial corporations while in other countries such as the United States banks are prohibited from owning non- financial companies. In Japan, banks are usually the links of cross-share holding entities. In Iceland banks had very light regulation prior to the 2008 collapse. Online banking is a term used for performing transactions, payments etc. over the internet.

Standard activities of banking Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS (electronic funds transfer at the point of sale), and ATM (Automatic Teller Machine). Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies (e.g. Alipay, PayPal) are not normally considered an adequate substitute for having a bank account. Banks borrow most funds from households and non- financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders, such as money market funds, cash management trusts and other non-bank financial institutions, provide a significant and in many cases adequate substitute for bank loans.

4. What is a bank? A bank is a financial institution and appears in several basic forms: Central bank issues money on behalf of a government, and regulates the money supply. Commercial bank accepts deposits and channels those deposits into lending activities, either directly or through capital markets. Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.

Economic functions of banks include: 1.Issue of money – in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable or repayable on demand. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash. 2.Settlement of payments – banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and to pay as payment instruments. 3.Credit intermediation – banks borrow and then lend on their own account as middle men.

4.Credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but they themselves are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. 5.Maturity transformation – banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising funding as needed from various sources (e.g. securities markets).

4. Discussion (1) What ’ s the role of banks in our daily life? (2) Are you using any kind of bank card? Is it a credit card or debit card? What ’ s the difference? credit 贷方 记入贷方 赊帐 creditor 债权人 债主 debit 借方 记入借方 debtor 债务人 债户 5. Presentation

6. Summary Different types of banks in China (1) Central bank: PBC (2) State-controlled commercial banks: ICBC, ABC, BC, CCB, etc. (3) National Joint-stock commercial bank: Guangdong Development Bank, Shanghai Pudong Development Bank, etc. (4) Foreign bank: Citibank

Main functions of commercial banks: (1) to deposit and withdraw money (2) to make payments and purchase goods and services: check, L/C, EFTPOS (3) to provide loans for individual, families and enterprises (4) to mange risk: FX, monetary management, 7. Assignment How do you understand that banks play an important role in international business? Try to offer some examples to prove your ideas.

Thank you!