Lend liabilities wages overdraft standing orders salary withdraw

Commercial banks are businesses that trade in money. They receive and hold 1)…, pay money according to 2) … instructions,3) …money, etc.

There are still many people in Britain who do not have bank 4) …. Traditionally, factory workers were paid 5) … in cash on Fridays. Non-manual workers, however, usually receive a monthly 6) … in the form of a cheque or a transfer paid directly into their bank account.

A 7)… (US: checking account) usually pays little or no interest, but allows the holder 8) … his or her cash with no restrictions. Deposit accounts (in the US also called time or notice accounts) pay interest. They do not usually provide 9) … (US: check) facilities, and notice is often required to withdraw money. 10) … and direct debits are ways of paying regular bills at regular intervals.

Banks offer both loans and overdrafts. A 11) … is a fixed sum of money, lent for a fixed period, on which interest is paid; banks usually require some form of security or guarantee before lending. An 12)… is an arrangement by which a customer can overdraw an account, i.e. run up a debt to an agreed limit; interest on the debt is calculated daily.

Banks make a profit from the spread or differential between the interest rates they pay on deposits and those they charge on loans. They are also able to lend more money than they receive in deposits because 13) … rarely withdraw all their money at the same time. In order to optimize the return on their assets (loans), bankers have to find a balance between yield and risk, and liquidity and different maturities, and to match these with their 14) …(deposits). The maturity of a loan is how long it will last; the yield of a loan is its annual 15) … - how much money it pays - expressed as a percentage.

Answer the following questions:

1. What banks are called commercial?

2. What is the difference between wages and salaries?

3. What account do people use to receive some interest on the money thy save?

4. When do people use standing orders?

5. When interest in paid daily on a loan or a an overdraft?

6. How do the commercial banks make a profit?