Types of loans made by banks

Bank loans may be divided into seven broad categories of loans, delineated by their purposes.

1. Real estate loans, which are secured by real property – land, buildings, and another structures – and include short-term loans for the construction of buildings and land development and long-term loans to finance the purchase of farmland, family homes, apartments and other multifamily structures, commercial (nonfarm and nonresidential) structures, and foreign properties.

2. Financial institutions loans, which include both long- and short-term credit to banks, insurance companies, finance companies, and other financial institutions to help them meet their obligations to customers and to expand their services and operations.

3. Agricultural loans, extended to farm operations to assist in planting and harvesting crops and to support the feeding and care of livestock.

4. Commercial and industrial loans, granted to businesses to cover such expenses as purchasing inventories, paying taxes, meeting payrolls, and to cover other operating costs.

5. Loans to individuals, which include credit to finance the purchase of automobiles, mobile homes, home appliances, and other retail goods and loans to repair and modernize homes, cover the cost of vacations, medical care, and other personal expenses, either extended directly to individuals or indirectly through the purchase of consumer installment paper from retail dealers.

6. Miscellaneous loans, which include all those loans not classified above, including securities loans made to brokers, dealers, and other investors desiring to purchase stocks, bonds, and other securities.

7. Lease financing receivables, where the bank buys equipment or vehicles and leases them to its customers.

Of the loan categories shown, the largest in dollar volume is real estate loans, accounting for nearly one-third of total bank loans. These loans are made to both individuals and businesses in order to construct and purchase homes, apartments, office buildings, retail shops, and industrial structures. The next largest category is commercial and industrial loans (C&I), also representing close to one-third of the total. These loans include credit to purchase inventories of goods and raw materials, to cover operating expenses, and to finance new equipment. Next in importance are loans to individuals and families for living costs, medical expenses, automobile purchase, home appliances, vacations, education, and so on, accounting for about one-fifth of all loans made by federally insured U.S. commercial banks.

Ex. 12. Translate into English.

1. Займи комерційних банків слугують для підприємців і фермерів джерелом короткотривалого обігового капиталу. 2. Кредитні союзи приймають вклади від своїх «членів» - від груп людей, які працюють в одній компанії. 3. Централізація та контроль є необхідними умовами ефективності банківської системи. 4. Федеральні резервні банки представляють собою «банки банків». 5.Вони виконують для депозитних установ ті ж функції, що й депозитні установи для приватних осіб. 6. За останній час суттєво посилилась інтеграція світових фінансових ринків. 7. Міжнародний валютний фонд сприяє стабілізації курсів іноземних валют.

Test questions:

1. What different kinds of services do banks offer to the public?

2. What are the key areas or functions of banks that are subject to regulation? Do you think all of these facets of banking should be regulated? Defend your answer.

3.What are the goals of international banking regulation?

4.What do you know of the activities of the Central Bank of Ukraine?

5.Comment on the following: “A banker is a man who lends you umbrella when the weather is fair, and takes it away from you when it rains.”

6. Find the information about the development of banking industries in England, Germany, France, your country and prepare a 10-15 minute report.

7. Summarize the information of the unit to be ready to speak on “Banking”. The first step to be done is to write the plan of your future report.

UNIT 8