PART 1: FINANCIAL MARKET

Unit 1: Functions of Financial Market

Introduction: This lesson is focused on financial market’s functions. Financial

market creates essential channels to stimulate the fund flow between individuals,
households, firms and governments that have surplus funds to those that have financial
shortage. Financial markets are not only beneficial for its participants but also increase
the efficiency of the entire economy plus the welfare of everyone in the society. The
study on functions of financial market provide students with the first basic background
on banking and finance issues. In this lesson, students will be given reading passages,
exercises and translations to improve their reading, pronunciation, translation and
writing skills. They are also introduced tonew terms and terminologies related to
financial market and its functions.
1. READING
The Financial Intermediary Function
Financial market performs the essential economic function of channeling funds from
households, firms, and governments that have saved surplus funds by spending less than
their income to those that have a shortage of funds because they wish to spend more
than their income. This function is shown schematically in Figure 1.
Those who have saved and are lending funds, the lender-savers, are at the left, and
those who must borrow funds to finance their spending, the borrower-spenders, are at
the right. The principal lender-savers are households, but business enterprises and the
government (particularly state and local government), as well as foreigners and their
governments, sometimes also find themselves with excess funds and so lend them out.
The most important borrower-spenders are businesses and the government
(particularly the federal government), but households and foreigners also borrow to
finance their purchases of cars, furniture, and houses. The arrows show that funds flow
from lender-savers to borrower-spenders via two routes.
 In direct finance (the route at the bottom of Figure 1), borrowers borrow funds
directly from lenders in financial markets by selling them securities (also called
financial instruments), which are claims on the borrower’s future income or assets.
Securities are assets for the person who buys them but liabilities (IOUs or debts) for the
individual or firm that sells (issues) them.
Why is this channeling of funds from savers to spenders so important to the
economy? The answer is that the people who save are frequently not the same people
who have profitable investment opportunities available to them, the entrepreneurs. In
the absence of financial markets, savers and spenders might never get together. Without
financial markets, it is hard to transfer funds from a person who has no investment
opportunities to one who has them; they would both be stuck with the status quo, and
both of them would be worse off. Financial markets are thus essential to promoting
economic efficiency.
The existence of financial markets is also beneficial even if someone borrows for a
purpose other than increasing production in a business. Say that you are recently
married, have a good job, and want to buy a house. You earn a good salary, but because
you have just started to work, you have not yet saved much. Over time, you would have
no problem saving enough to buy the house of your dreams, but by then you would be
too old to get full enjoyment from it.
 If a financial market were set up so that people who had built up savings could lend
you the funds to buy the house, you would be more than happy to pay them some interest
in order to own a home while you are still young enough to enjoy it. Then, over time,
you would pay back your loan.
Now we can see why financial markets have such an important function in the
economy. They allow funds to move from people who lack productive investment
opportunities to people who have such opportunities. Thus financial markets are critical
for producing an efficient allocation of capital, which contributes to higher production
and efficiency for the overall economy.
Well-functioning financial markets also directly improve the well-being of
consumers by allowing them to time their purchases better. They provide funds to young
people to buy what they need and can eventually afford without forcing them to wait
until they have saved up the entire purchase price. Financial markets that are operating
efficiently improve the economic welfare of everyone in the society.
(Source: Federic S. Mishkin (2006), The Economics of Money, Banking and
Financial Markets, Seventh Edition Update, Addison-Wesley, Longman)
QUESTIONS
1.1. What is the main function of financial market?
1.2. Who are the participants in financial markets?
1.3. In what ways do funds flow in the economy?
1.4. How does direct finance work?
1.5. How can financial markets benefit individuals with consuming purposes?
1.6. Why is financial market so essential to the economy?
2. EXERCISES
2.1. Read the paragraph below and find the right word or phrase from the box
to fill each of the gaps

shortage purchases efficiency excess improves

indirect finance direct finance channel intermediary securities

The basic function of financial markets is to (1)_____________ funds from savers

who have an (2)____________ of funds to spenders who have a (3)_____________of
funds. Financial markets can do this either through (4)_____________, in which
borrowers borrow funds directly from lenders by selling them (5)_____________, or
through (6)_____________, which involves a financial (7)_____________ that stands
between the lender-savers and the borrower-spenders and helps transfer funds from one
to the other. This channeling of funds (8)_____________ the economic welfare of
everyone in the society, because it allows funds to move from people who have no
productive investment opportunities to those who have such opportunities, thereby
contributing to increased (9)_____________in the economy. In addition, channeling of
funds directly benefits consumers by allowing them to make (10)_____________ when
they need them most.
2.2. Put the words/phrases in order to make sentences
1. If/ prices/ stay/ oil and gas/ impact/ food/ prices/ high/ there/ be/ on/ will.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

2. The/ every/ information/ financial market/ money/ available/ any/ without/

makes/ type of/ spending.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

3. The/ financial market/ traded/ is/ currencies/ forex market/ where/ are/ a.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

4. Mutual fund/ ability/ give/ buy/ to/ once/ a lot of stocks/ at/ investors/ the

…………………………………………………………………………………………..
…………………………………………………………………………………………..

5. The/ forces/ any/ the/ demand and supply/ of/ price/ goods or services/ is/ by/
determined/ of.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

2.3. Find the best answer

1) Financial markets have the basic function of
a) getting people with funds to lend together with people who want to borrow funds.
b) assuring that the swings in the business cycle are less pronounced.
c) assuring that governments need never resort to printing money.
d) providing a risk-free repository of spending power.

2) Financial markets improve economic welfare because

a) they channel funds from investors to savers.
b) they allow consumers to time their purchase better.
c) they weed out inefficient firms.
d) eliminate the need for indirect finance.

3) Well-functioning financial markets

a) cause inflation.
b) eliminate the need for indirect finance.
c) cause financial crises.
d) produce an efficient allocation of capital.

4) The principal lender-savers are

a) governments.
b) businesses.
c) households.
d) foreigners.

5) Which of the following can be described as direct finance?

a) You take out a mortgage from your local bank.
b) You borrow $2,500 from a friend.
c) You buy shares of common stock in the secondary market.
d) You buy shares in a mutual fund.
2.4. Match the words on the left with the phrases on the right
1. Money 4. Monetary theory
2. Inflation 5. Budget deficit
3. Financial crisis 6. Fiscal policy

a. is a major disruption in the financial markets.

b. is defined as anything that is generally accepted in payment for goods and
services or in the repayment of debt.
 c. relates changes in the quantity of money to changes in aggregate economic
activity and the price level.
d. is a continually rising price level.
e. involves decisions about government spending and taxation.
f. occurs when government expenditures exceed tax revenues for a particular time
period
2.5. Put these words and phrases in the appropriate columns

Commercial banks Shares Finance companies Financial market

Financial intermediaries Stock Exchange Savings Associations
Financial cooperatives Stocks Bank borrowing Bonds
Lending interest rate Dividend

Direct finance Indirect finance

--------------------------------- --------------------------------------
--------------------------------- --------------------------------------
--------------------------------- --------------------------------------
--------------------------------- --------------------------------------
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3. TRANSLATION
Translate the following texts into Vietnamese, paying a special attention to the
standard use of terms and clarification of expression.
Text 1
Primary and Secondary Market
The financial market is a world where new securities are issued to the public
regularly. It is a world full of varied financial products and services, tailored to the need
of every individual from all income brackets. These financial products are bought and
sold on the capital market, which is divided into primary market and secondary market.
The primary market is also known as new issues market. Here, the transaction is
conducted between the issuer and the buyer. In short, the primary market creates new
securities and offers them to the public.
For instance, Initial Public Offering (IPO) is an offering of the primary market where
a private company decides to sell stocks to the public for the first time. An important
point to remember here is that in the primary market, securities are directly purchased
from the issuer.
In secondary market, the securities issued in the primary market are bought and sold.
Here, you can buy a share directly from a seller and the stock exchange or broker acts
as an intermediary between two parties.
The secondary market is actually formed by another layer of investors who deal with
primary market investor to buy and sell financial securities such as bonds, futures
and stocks. These dealings happen in the proverbial stock exchange.
National Stock Exchange (NSE) and New York Stock Exchange (NYSE) are some
popular stock exchanges. Majorly, the trade happens between investors without any
involvement with the company that issued the securities in the primary market.
(Source: http://www.financewalk.com/primary-market-secondary-market/ )

Text 2
The Bond Market
The bond market is where organizations go to obtain very large loans. Generally,
when stock prices go up, bond prices go down. However, there are many different types
of bonds, including Treasury Bonds, corporate bonds, and municipal bonds. Bonds also
provide some of the liquidity that keeps the U.S. economy functioning smoothly.
It's important to understand the relationship between Treasury bonds and Treasury
bond yields. Basically, when Treasury bond values go down, the yields go up to
compensate. When Treasury yields rise, so do mortgage interest rates. Even worse,
when Treasury values decline, so does the value of the dollar. This makes import prices
rise, which can trigger inflation. Treasury yields can also predict the future - an inverted
yield curve usually heralds a recession.
(Source: https://www.thebalance.com/an-introduction-to-the-financial-markets-
3306233)
4. TERMINOLOGY
Bear –Nhà đầu tư bi quan: a name for shareholders who sell because they expect the
price to fall
Bull –Nhà đầu tư lạc quan: a name for investors who buy shares because they expect
their price to rise
Corporate bond –Trái phiếu doanh nghiệp: A corporate bond is a debt
security issued by a corporation and sold to investors. The backing for the bond is
usually the payment ability of the company, which is typically money to be earned from
future operations. In some cases, the company's physical assets may be used
as collateral for bonds.
Day trader - Người giao dịch nội nhật: a person who buys and re-sells shares in a
very short time, often just a few hours.
Direct finance –Tài chính trực tiếp: Direct finance is a method of financing where
borrowers borrow funds directly from the financial market without using a third party
service, such as a financial intermediary.
Indirect finance –Tài chính gián tiếp: Indirect finance is where borrowers borrow
funds from the financial market through indirect means, such as through a financial
intermediary. This is different from direct financing where there is a direct connection
to the financial markets as indicated by the borrower issuing securities directly on
the market.
Financial market - Thị trường tài chính: A financial market is a market in which
people trade financial securities, commodities, and other fungible items of value at low
transaction costs and at prices that reflect supply and demand. Securities include stocks
and bonds, and commodities include precious metals or agricultural products.
Forex market (foreign exchange market) - Thị trường ngoại hối: The foreign
exchange market (forex, FX, or currency market) is a global decentralized market for
the trading of currencies. This includes all aspects of buying, selling and exchanging
currencies at current or determined prices.
Futures market - Thị trường tương lai: A futures market is a central financial
exchange where people can trade standardized futures contracts; that is, a contract to
buy specific quantities of a commodity or financial instrument at a specified price
with delivery set at a specified time in the future. These types of contracts fall into the
category of derivatives.
Municipal bond –Trái phiếu địa phương: A municipal bond is a debt security issued
by a state, municipality or county to finance its capital expenditures, including the
construction of highways, bridges or schools. Municipal bonds are exempt from federal
taxes and from most state and local taxes, making them especially attractive to people
in high income tax brackets.

Mutual fund - Quỹ tương hỗ: A mutual fund is a professionally managed investment
fund that pools money from many investors to purchase securities. While there is no
legal definition of the term "mutual fund", it is most commonly applied to open-end
investment companies, which are collective investment vehicles that are regulated and
sold to the general public on a daily basis. They are sometimes referred to as
"investment companies" or "registered investment companies".
Options market - Thị trường quyền chọn: An option is a financial derivative that
represents a contract sold by one party (the option writer) to another party (the option
holder). The contract offers the buyer the right, but not the obligation, to buy (call) or
sell (put) a security or other financial asset at an agreed-upon price (the strike price)
during a certain period of time or on a specific date (exercise date).
Primary market - Thị trường sơ cấp: A primary market is a financial market in which
new issues of a security, such as a bond or a stock, are sold to initial buyers by the
corporation or government agency borrowing the funds.
Secondary market - Thị trường thứ cấp: A secondary market is a financial market in
which securities that have been previously issued (and are thus second-hand) can be
resold.
Securities broker – Nhà môi giới chứng khoán: is a regulated professional individual,
usually associated with a brokerage firm or broker-dealer, who buys and sells
stocks and other securities for both retail and institutional clients through a stock
exchange or over the counter in return for a fee orcommission.
Securities dealer – Nhà kinh doanh chứng khoán: is a person or firm in the business
of buying and selling securities for their own account, whether through a broker or
otherwise.
Treasury bond – Tín phiếu kho bạc: A Treasury bond (T-Bond) is a marketable,
fixed-interest U.S. government debt security with a maturity of more than 10 years.
Treasury bonds make interest payments semi-annually, and the income received is only
taxed at the federal level. Treasury bonds are known in the market as primarily risk-
free; they are issued by the U.S. government with very little risk of default.
5. REFERENCES
1. Federic S. Mishkin (2006), The Economics of Money, Banking and Financial
Markets, Seventh Edition Update, Addison-Wesley, Longman.
2. http://www.financewalk.com/primary-market-secondary-market/
3. https://www.thebalance.com/an-introduction-to-the-financial-markets-3306233.
 PART 1: FINANCIAL SYSTEM
Unit 2: Regulation of Financial System

Introduction: The key issues on regulations of financial system are discussed in

this lesson. The enforcement of regulations is triggered by two main reasons, which are
increasing the information available to investors and ensuring the soundness of financial
intermediaries. The government regulates the financial system using six types of
regulations, namely entry barriers, disclosure, restrictions on assets and operations,
deposit insurance, limits on competitions and interest rate control. The regulation of
financial system could make the system grow sustainably or get worse off, basing on
the levels of deregulation and types of policies issued. Students will be given reading
passages, exercises and translations to improve their reading, pronunciation, translation
and writing skills. They are also introduced to new terms and terminologies related to
financial system and its regulations.
1. READING
Regulatory Control in the American Financial System
The financial system is among the most heavily regulated sectors of the American
economy. The government regulates financial markets for two main reasons: to increase
the information available to investors and to ensure the soundness of the financial
system. We will examine how these two reasons have led to the present regulatory
environment.
Increasing Information Available to Investors
Asymmetric information in financial markets means that investors may be subject to
adverse selection and moral hazard problems that may hinder the efficient operation of
financial markets. Risky firms or outright crooks may be the most eager to sell securities
to unwary investors, and the resulting adverse selection problem may keep investors
out of financial markets. Furthermore, once an investor has bought a security, thereby
lending money to a firm, the borrower may have incentives to engage in risky activities
or to commit outright fraud. The presence of this moral hazard problem may also keep
investors away from financial markets. Government regulation can reduce adverse
selection and moral hazard problems in financial markets and increase their efficiency
by increasing the amount of information available to investors.
Ensuring the Soundness of Financial Intermediaries
Asymmetric information can also lead to widespread collapse of financial
intermediaries, referred to as a financial panic. Because providers of funds to financial
intermediaries may not be able to assess whether the institutions holding their funds are
sound, if they have doubts about the overall health of financial intermediaries, they may
want to pull their funds out of both sound and unsound institutions. The possible
outcome is a financial panic that produces large losses for the public and causes serious
damage to the economy. To protect the public and the economy from financial panics,
the government has implemented six types of regulations.
Restrictions on Entry. State banking and insurance commissionshave created very
tight regulations governing who is allowed to set up a financial intermediary.
Individuals or groups that want to establish a financial intermediary, such as a bank or
an insurance company, must obtain a charter from the state or the federal government.
Only if they are upstanding citizens with impeccable credentials and a large amount of
initial funds will they be given a charter.
Disclosure. There are stringent reporting requirements for financial intermediaries.
Their bookkeeping must follow certain strict principles, their books are subject to
periodic inspection, and they must make certain information available to the public.
Restrictions on Assets and Activities. There are restrictions on what financial
intermediaries are allowed to do and what assets they can hold. Before you put your
funds into a bank or some other such institution, you would want to know that your
funds are safe and that the bank or other financial intermediary will be able to meet its
obligations to you.
Deposit Insurance. The government can insure people’s deposits so that they do not
suffer any financial loss if the financial intermediary that holds these deposits should
fail.
Limits on Competition. Politicians have often declared that unbridled competition
among financial intermediaries promotes failures that will harm the public. Although
the evidence that competition does this is extremely weak, it has not stopped the state
and federal governments from imposing many restrictive regulations. First are the
restrictions on the opening of additional locations (branches).
Restrictions on Interest Rates. Competition has also been inhibited by regulations
that impose restrictions on interest rates that can be paid on deposits. These regulations
were instituted because of the widespread belief that unrestricted interest-rate
competition helped encourage bank failures during the Great Depression.
(Source: Federic S. Mishkin (2006), The Economics of Money, Banking and
Financial Markets, Seventh Edition Update, Addison-Wesley, Longman).
QUESTIONS
1.1. Why does the government regulate financial markets?
1.2. What problems does asymmetric information bring about?
1.3. What are adverse selection and moral hazard problems?
 1.4. What methods does the government use to prevent financial panics?
1.5. How do restrictions on entry work?
1.6. What tool did the American government apply to deal with the Great
Depression?
2. EXERCISES
2.1. Find the best answer
1) Which of the following is not a goal of financial regulation?
a) Ensuring the soundness of the financial system
b) Reducing moral hazard
c) Reducing adverse selection
d) Ensuring that investors never suffer losses

2) Increasing the amount of information available to investors helps to reduce

the problems of ________ and ________ in the financial markets.
a) adverse selection; moral hazard
b) adverse selection; risk sharing
c) moral hazard; transactions costs
d) adverse selection; economies of scale

3) Government regulations to reduce the possibility of financial panic include

all of the following except
a) transactions costs.
b) restrictions on assets and activities.
c) disclosure.
d) deposit insurance.

4) In order to reduce risk and increase the safety of financial institutions,

commercial banks and other depository institutions are prohibited from
a) owning municipal bonds.
b) making real estate loans.
c) making personal loans.
d) owning common stock.
5) The primary purpose of deposit insurance is to
 a) improve the flow of information to investors.
b) prevent banking panics.
c) protect bank shareholders against losses.
d) protect bank employees from unemployment.
6) Asymmetric information is a universal problem. This would suggest that
financial regulations
a) in industrial countries are an unqualified failure.
b) differ significantly around the world.
c) in industrialized nations are similar.
d) are unnecessary.
2.2. Read the paragraph below and find the right word or phrase from the box
to fill each of the gaps

insurance maximum restrictions assets

increase disclosure soundness intermediaries

The government regulates financial markets and financial (1)_____________for two

main reasons: to (2) _____________ the information available to investors and to
ensure the (3) _____________of the financial system. Regulations include requiring (4)
_____________ of information to the public, (5) _____________ on who can set up a
financial intermediary, restrictions on what (6) _____________ financial intermediaries
can hold, the provision of deposit (7) _____________, reserve requirements, and the
setting of (8) _____________ interest rates that can be paid on checking accounts and
savings deposits.

2.3. Match the words 1-6 to the phrases a-f to make word partnerships

1. compliance a. according to law or regulation

2. mandate b. authorization given to an organization to carry
out specific responsibilities
3. supervision c. following rules and regulations
4. counterparties d. working with companies and institutions, and
not personal or retail customers
5. statutory e. other institutions in an agreement, contract or
transaction
 6. wholesale f. watching over people or an organization to
make sure they are behaving correctly

2.4. Put the words/phrases in order to make the sentences

1. An important trend/ years/ financial markets/ growing/ in/ recent/
internationalization/is/of/the.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

2. The yield/ climbed/ 10-year Treasury note/ 2.39 percent/ on/ to/ the.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

3. Citigroup/ a/ capacity/ in/ has/ 180 percent/ forecasted/ by 2020/ increase.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

4. Trump/ a/ 45 percent/ has/ on/ tariff/ suggested/ from China/ goods/ slapping.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

5. Financial shares/ three of/ reported results/ American lenders/ climbed/ after/ the
largest.

…………………………………………………………………………………………..
…………………………………………………………………………………………..

2.5. Work in pair. One is for and the other is against the following statements –
explain why. Then the whole class put their answers in the blackboard and check
who are more convincing.

1. The current bank regulation in Vietnam is very good.

2. Commercial banks in Vietnam need to be regulated more strictly.

3. Securities market in Vietnam has not been well-regulated.

4. Deposit insurance in Vietnam covers for all depositors.

5. State Bank of Vietnam’s Circulars are more concrete than Prime Minister’s Decisions
on similar topic.

6. The global financial crisis 2008 is rooted from the de-regulation environment to
financial system.

7. Optional….. (as students may think of more topics)

3. TRANSLATION
Translate the following texts into Vietnamese, paying a special attention to the
standard use of terms and clarification of expression.
Text 1
The creation of the International Money Market
In most countries, local corporations commonly need to borrow short-term funds to
support their operations. Country governments may also need to borrow short-term
funds to finance their budget deficits. Individuals or local institutional investors in those
countries provide funds through short-term deposits at commercial banks. In addition,
corporations and governments may issue short-term securities that are purchased by
local investors. Thus, a domestic money market in each country serves to transfer short-
term funds denominated in the local currency from local surplus units (savers) to local
deficit units (borrowers).
The growth in international business has caused corporations or governments in a
particular country to need short-term funds denominated in a currency that is different
from their home currency. First, they may need to borrow funds to pay for imports
denominated in a foreign currency. Second, even if they need funds to support local
operations, they may consider borrowing in a currency in which the interest rate is
lower. This strategy is especially desirable if the firms will have receivables
denominated in that currency in the future. Third, they may consider borrowing in a
currency that will depreciate against their home currency, as they would be able to repay
the loan at a more favorable exchange rate over time. Thus, the actual cost of borrowing
would be less than the interest rate of that currency.
Meanwhile, there are some corporations and institutional investors that have motives
to invest in a foreign currency rather than their home currency. First, the interest rate
that they would receive from investing in their home currency may be lower than what
they could earn on short-term investments denominated in some other currencies.
Second, they may consider investing in a currency that will appreciate against their
home currency because they would be able to convert that currency into their home
currency at a more favorable exchange rate at the end of the investment period. Thus,
the actual return on their investment would be higher than the quoted interest rate on
that foreign currency.
(Source: Jeff Madura (2008), International Financial Management, Ninth Edition,
Thomson South – Western).
Text 2
The Great Depression
The Great Depression was a severe worldwide economic depression that took place
during the 1930s. The timing of the Great Depression varied across nations; in most
countries it started in 1929 and lasted until the late 1930s. It was the longest, deepest,
and most widespread depression of the 20th century. In the 21st century, the Great
Depression is commonly used as an example of how far the world's economy can
decline.
The Great Depression had devastating effects in countries both rich and poor.
Personal income, tax revenue, profits and prices dropped, while international trade
plunged by more than 50%. Unemployment in the U.S. rose to 25% and in some
countries rose as high as 33%.
Cities all around the world were hit hard, especially those dependent on heavy
industry. Construction was virtually halted in many countries. Farming communities
and rural areas suffered as crop prices fell by about 60%. Facing plummeting demand
with few alternate sources of jobs, areas dependent on primary sector industries such as
mining and logging suffered the most.
(Source: https://en.wikipedia.org/wiki/Great_Depression).

4. TERMINOLOGY

Adverse selection - Lựa chọn đối nghịch: Adverse selection refers to a situation where
sellers have information that buyers do not, or vice versa, about some aspect of product
quality. In the case of insurance, adverse selection is the tendency of those in dangerous
jobs or high-risk lifestyles to get life insurance.
Asymmetric information – Thông tin không cân xứng: Asymmetric information,
sometimes referred to as information failure, is present whenever one party to an
economic transaction possesses greater material knowledge than the other party. This
normally manifests itself when the seller of a good or service has greater knowledge
than the buyer, although the opposite is possible. Almost all economic transactions
involve information asymmetries.
Debt market - Thị trường nợ: A market that is involved in the trading of debt
instruments such as government and corporate bonds, as well as has an involvement
with the trading of packaged loan products that are sold to investors.
Deposit Insurance - Bảo hiểm tiền gửi: Protection provided usually by a government
agency to depositors against risk of loss arising from failure of a bank or other
depository institution. Deposit insurance is mandatory, and pays claims from a pool of
funds to which every depository institution regularly contributes. However, it covers
only a fixed maximum amount per account holder. Also called depository insurance.
Disclosure – Công khai thông tin: Disclosure is the act of releasing all relevant
information pertaining to a company that may influence an investment decision. For
example, to be listed on major U.S. stock exchanges, companies must follow all of the
Securities and Exchange Commission's (SEC) disclosure requirements and regulations.
To make investing as fair as possible for everyone, companies must disclose both good
and bad information.
Dividend - Cổ tức: A dividend is a distribution of a portion of a company's earnings,
decided by the board of directors, to a class of its shareholders. Dividends can be issued
as cash payments, as shares of stock, or other property.
Equity market - Thị trường vốn chủ sở hữu: The market in which shares are issued
and traded, either through exchanges or over-the-counter markets. Also known as
the stock market, it is one of the most vital areas of a market economy because it gives
companies access to capital and investors a slice of ownership in a company with the
potential to realize gains based on its future performance.
Moral hazard - Rủi ro đạo đức: Moral hazard is the risk that a party to a transaction
has not entered into the contract in good faith, has provided misleading information
about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in
a desperate attempt to earn a profit before the contract settles. Moral hazards can be
present any time two parties come into agreement with one another. Each party in a
contract may have the opportunity to gain from acting contrary to the principles laid out
by the agreement.

5. REFERENCES
1. Frederic S. Mishkin (2006), The Economics of Money, Banking and Financial
Markets, Seventh Edition Update, Addison-Wesley, Longman.
2. Jeff Madura (2008), International Financial Management, Ninth Edition,
Thomson South – Western.
3. https://en.wikipedia.org/wiki/Great_Depression
 PART 2: COMMERCIAL BANKING

Unit 1: An Overview of Commercial Banking

Introduction: The banking sector, which is the backbone of an economy, plays

a critical role in its development. Through an intermediary institution as a bank, savers
(lenders) give funds to spenders (borrowers), probably in the form of loans or
mortgages. Acting as a financial intermediary, bank promotes the soundness and
efficiency of the financial system and the economy as a whole. Students are exposed
to main items of bank’s balance sheet, through which they will see how banks earn
profits. Non-transaction deposit accounts for highest proportion in liabilities and
equity, while loans take the largest share in assets. This fact somehow reveals how
banks earn income. Additional information is located in the translation part.
1. READING
Main Items of Commercial Bank’s Balance Sheet
Banks play a pivotal role in the economy, channeling funds from units in surplus
to units in deficit. They reconcile the different needs of borrowers and lenders by
transforming small-size, low-risk and highly liquid deposits into loans which are of
larger size, higher risk and illiquid (transformation function). We discussed the
main reasons banks have advantages in the intermediation process relating to
matching the needs of ultimate lenders (depositors) and borrowers.
There are some main items of bank’s assets and liabilities:
Checkable Deposits. Checkable deposits are bank accounts that allow the owner
of the account to write checks to third parties. Checkable deposits include all
accounts on which checks can be drawn: non-interest-bearing checking accounts
(demand deposits), interest-bearing NOW (negotiable order of withdrawal)
accounts, and money market deposit accounts (MMDAs). Checkable deposits and
money market deposit accounts are payable on demand; that is, if a depositor shows
up at the bank and requests payment by making a withdrawal, the bank must pay
the depositor immediately. Checkable deposits are a liability for the bank. They are
usually the lowest-cost source of bank funds because depositors are willing to forgo
some interest in order to have access to a liquid asset that can be used to make
purchase.
Non-transaction Deposits. Non-transaction deposits are the primary source of
bank funds. Owners cannot write checks on non-transaction deposits, but the
interest rates are usually higher than those on checkable deposits. There are two
basic types of non-transaction deposits: savings accounts and time deposits (also
called certificates of deposit or CDs). Savings accounts, to which funds can be
added or from which funds can be withdrawn at any time, transactions and interest
payments are recorded in a monthly statement or in a small book (the passbook)
held by the owner of the account. Time deposits have a fixed maturity length,
ranging from several months to over five years, and have substantial penalties for
early withdrawal (the forfeiture of several months’ interest). Small-denomination
time deposits are less liquid for the depositor than passbook savings, earn higher
interest rates, and are a more costly source of funds for the banks.
Borrowings. Banks obtain funds by borrowing from the Federal Reserve
System, the Federal Home Loan banks, other banks, and corporations. Borrowings
from the Fed are called discount loans (also known as advances). Banks also borrow
reserves overnight in the federal (fed) funds market from other banks and financial
institutions. Banks borrow funds overnight in order to have enough deposits at the
Federal Reserve to meet the amount required by the Fed. Other sources of borrowed
funds are loans made to banks by their parent companies, loan arrangements with
corporations, and borrowings of Eurodollars (deposits denominated in U.S. dollars
residing in foreign banks or foreign branches of U.S. banks).
Securities. A bank’s holdings of securities are an important income-earning
asset: Securities. These securities can be classified into three categories:
government and agency securities, state and local government securities, and other
securities. The government and agency securities are the most liquid because they
can be easily traded and converted into cash with low transaction costs. Because of
their high liquidity, short-term government securities are called secondary reserves.
State and local government securities are desirable for banks to hold, primarily
because state and local governments are more likely to do business with banks that
hold their securities. State and local government and other securities are less
marketable (hence less liquid) and are also riskier than government securities,
primarily because of default risk.
Loans. Banks make their profits primarily by issuing loans. They have generally
produced more than half of bank revenues. A loan is a liability for the individual or
corporation receiving it, but an asset for a bank, because it provides income to the
bank. Loans are typically less liquid than other assets, because they cannot be turned
into cash until the loan matures. Loans also have a higher probability of default than
other assets.
(Source: Barbara Casu, Chaudia Giradone, Philip Molyneux (2006), Introduction
to Banking, Pearson Education Canada Publishing House;
Frederic S. Mishkin (2015), The Economics of Money, Banking and Financial
Markets, Pearson Education Limited Publishing House).
QUESTIONS
 1.1. What is a key role of banks?
1.2. How many ways can banks use to raise funds?
1.3. Why do checkable deposits be the low – cost source of banks?
1.4. What is a passbook?
1.5. Why do banks pay higher interest rate on time deposit than saving deposit?
1.6. Can banks borrow fed funds from Fed?
1.7. What is Eurodollar?
1.8. Why are government bonds called secondary reserves of banks?
1.9. What is a major source of bank’s revenues?
2. EXERCISES
2.1. Match the words 1-7 to the words/phrases a-g to make word partnerships
1. apply a) a balance
2. withdraw b) online
3. choose c) for a loan
4. shop d) money
5. set e) money onto a pre-paid crad
6. carry f) a credit limit
7. load g) a viariable interest rate
2.2. Complete the sentences with the word partnerships from Excersise 2.1
1. I may use my card to__________________ and buy goods from a website.
2. With my PIN code and my multi-functional card I can __________________ from
cash dispensers everywhere.
3. It is cheaper if you don’t__________________ from one month to the next but
choose the debit option.
4. The bank uses the credit rating to__________________ for a customer.
5. Parents can__________________ onto a pre-paid card for their children to take
with them when they travel.
6. When customers arrange a mortgage, they can__________________ a fixed
interest rate.
7. If you need money, you can__________________ at your bank.

2.3. Complete this mortgage application form with the words in the box. You
may not need all the words/phrases.
borrow collateral house or flat variable
 maturity date property valuation interest and principal credit

MORTGAGE APPLICATION
1. The amount of the mortgage: how much do you want to______________?
2. You will need to make a deposit. What can you arrange as______________ for
the bank to have some security.
3. Why do you need the money: are you buying a(n) __________________?
4. When will the _______________ be – in 25 or 30 years?
5. Do you want to have a fixed interest rate or a(n)_____________interest rate?
6. Do you want to pay interest only or_________________?

2.4. Put the words/phrases in order to make sentences

1. Credit institution/ an enterprise/ in / one or/ several or / means/ engaging/ all
banking activities
…………………………………………………………………………………………..
…………………………………………………………………………………………..

2. A commercial banks / making loans / as / whose /a bank main business/ is

deposit-taking / and / is defined
…………………………………………………………………………………………..
…………………………………………………………………………………………..

3. A microfinance institution / for / that / specializes / banking services / a

financial organization / in / low-income groups / or individuals/ means
…………………………………………………………………………………………..
…………………………………………………………………………………………..

4. Interest rate / a rate / means / or paid / for / money/ which is charged / the
use of
…………………………………………………………………………………………..
…………………………………………………………………………………………..

5. A mortgage / that / by / the collateral / is secured / of / specified real estate /

property / is a debt instrument
…………………………………………………………………………………………..
…………………………………………………………………………………………..
 2.5. Find the best answer
1. The interest _________________ will be lowered if you make 12
consecutive payments on time.
a)_Rate
b) Return
c) Level
2. We can transfer the money _________________ into your bank account.
a) Exactly
b) Directly
c) Evenly
3. This is not a one-time fee. It is a _________________ fee.
a) Re-occurring
b) Re-happening
c) Re-taking
4. He _________________ on his loan. (= He couldn't pay his loan)
a) Defeated
b) Defaulted
c) Devastated
5. In the United States, it is illegal to _________________ an application fee for
a federal loan.
a) Cover
b) Cause
c) Charge
3. TRANSLATION
Translate the following texts into Vietnamese paying special attention to the
standard use of terms and clarification of expressions.
Text 1

Credit Overview
Credit is your reputation as a borrower. It tells others how likely you are to repay
your loans. Credit is made up from information about your borrowing history. Most
of the information comes from your credit reports. A credit report contains
information about your borrowing history. Lenders (and others) provide
information that ends up on credit reports. They report how much you’ve borrowed,
how you’ve repaid, and other details about your borrowing behavior. Your credit
report is the master document that's behind your "credit." You can view your own
report for free (at least once per year under federal law).
When somebody wants to see your credit report, they request one from a credit
reporting company or "credit bureau" - credit reporting agencies collect all of the
information that appears in your credit report. Credit bureaus are information
warehouses, but they might not keep as much data as you think. Again, they get
that information from lenders you've worked with, public records databases, and
other sources. They distribute or sell that information when you apply for a loan or
when a company wants your information. Credit bureaus have a ton of information.
There are hundreds or thousands of lines of information about you in their
databases, and it’s difficult for lenders to sort through all of it.
Most companies use credit scores instead of reading through everything in your
credit reports. Credit scores are numbers generated by a computer program that
reads through your credit reports. It looks for patterns, characteristics, and red flags
in your history. Based on what the program finds, it generates a credit score. Credit
was originally used for lending decisions. Nowadays, credit scores and reports are
used in other areas of your life. Consumers and lawmakers constantly watch what
credit is used for, and debate about the fairness of credit scoring and the expanding
use of those scores. In addition to lending decisions, credit score is used for
insurance and employment approvals.
(Source:http://www.capitalone.co.uk/creditmadeclearer/what-is-credit.jsf
http://banking.about.com/od/creditscoresandreporting/a/whatiscredit.htm)
Text 2
How to Use an ATM to Deposit Money
Automated Teller Machines (ATMs), also known as cash points, were created
in 1972 by IBM. They have since grown in popularity to dispense money to millions
of people each year. Banks are now computerizing most everyday banking
procedures. As well as dispensing cash, ATMs can also print bank statements,
dispense postage stamps, transfer money and deposit cash or checks. This article
will tell you how to use an ATM to deposit money.
1. Verify that your bank or credit union offers deposits through the ATM.
Although a growing number of institutions offer this service, it is not
guaranteed. If you cannot find out by looking online or at bank literature, then
you should be able to tell once you place your card in the machine.
2. Endorse and gather your checks before going to the ATM. Add up the
amount of deposit. Even if a deposit slip is not required, you will be asked to
enter the deposit amount.
 3. Bring a pen to the ATM, in case you need to fill out a deposit slip.
4. Fill out a deposit slip when you arrive at the bank, if your bank requires
a slip for deposits. Many larger banks do not require a deposit slips; however,
ATMs that require envelopes will probably require a deposit slip to be
included in your envelope.
5. Place your card inside the ATM.
6. Cover the keypad with your left hand and enter your Personal
Identification Number (PIN) on the keypad. Press "Enter" when you are
done.
7. Scroll through the menu until you find the "Deposit" option. If you do not
see it, then deposits are likely not offered at that ATM.
8. Select the account that you would like the money to be deposited into.
9. Enter the amount of your deposit. Press "Enter" when you have finished.
10. Place your checks or cash in an envelope, if the ATM directs you to. Not all
ATMs require an envelope. In some cases, the ATM will ask you if you need
an envelope, and then dispense it for you. Seal the envelope by wetting the
flap.
11. Place the envelope, or your cash or checks directly into the deposit slot.
Look for arrows pointing to the deposit slot. In most cases, a beeping noise
will sound until your money is inserted. Many banks allow you to insert 10 to
50 bills or checks directly into the deposit slot. You will need to place them in
a neat pile and insert them at once.
12. Wait for the ATM to process the bills. If you have deposited checks, their
images may appear on the screen. Make sure the amount on the screen matches
the amount you added before you made the deposit.
13. Select your receipt option. You can choose between an e-receipt, a receipt
with pictures of checks or a standard receipt.
14. Select the "Return card" button. Place the card and receipt back in your
wallet.
(Source: http://www.wikihow.com/Use-an-ATM-to-Deposit-Money)

4. TERMINOLOGY
Bank account - Tài khoản ngân hàng: an account which customer has with a
bank, where customer can deposit and withdraw money.
Checks (Cheque) - Séc: a note to a bank asking them to pay money from your
account to the account of the person whose name is written on the note.
Credit score - Điểm tín dụng: a credit score is a numerical expression based on a
level analysis of a person's credit files, to represent the creditworthiness of that
person. A credit score is primarily based on credit report information typically
sourced from credit bureaus.
Current account (Check account) - Tài khoản vãng lai: an account in a bank from
which customers can withdraw money when they want. Current accounts do not
always pay interest.
Deposit account - Tài khoản tiền gửi: an account which pay interest but on which
notice has to be given to withdraw money.
Interest-bearing demand deposit - Tiền gửi giao dịch có trả lãi suất: is the
deposit that provides all services as non-interest bearing deposits and pay interest
to the depositor as well.
Maturity - Kỳ hạn: the date at which something becomes due for payment or
repayment.
Noninterest - bearing demand deposit - Tiền gửi giao dịch không trả lãi suất:
Non-interest bearing deposits represents deposits that do not earn explicit interest
payment but provide the customer with payment services, safekeeping of funds, and
recordkeeping for any transactions carried out by check, card, or via an electronic
network.
Non-transaction deposit - Tiền gửi phi giao dịch: a deposit that cannot be used
for payment directly but must be converted into currency for general use.
Outstanding loan - Dư nợ cho vay: An outstanding loan is the portion of a loan
that has yet to be repaid. Creditors sometimes use the term "outstanding balance"
to describe the part of a loan that still needs to be repaid.
Overdraft - Thấu chi: an overdraft occurs when money is withdrawn from a bank
account and the available balance goes below zero. In this situation the account is
said to be "overdrawn". If there is a prior agreement with the account provider for
an overdraft, and the amount overdrawn is within the authorized overdraft limit,
then interest is normally charged at the agreed rate. If the negative balance exceeds
the agreed terms, then additional fees may be charged and higher interest rates may
apply.
Preferential loan - Khoản vay ưu đãi: preferential loan means a loan, in respect
of which no interest is payable or interest is payable at a preferential rate, made
directly or indirectly to an individual or an institution by a credit institution.
Saving account - Tài khoản tiết kiệm: an account maintained by retail financial
institutions that pay interest but cannot be used directly as money.
Saving deposit/Thrift deposit - Tiền gửi tiết kiệm: Interest - bearing fund left
with a depository institution for a period of weeks, months or years.
Standard accounting practices - Thông lệ kế toán chuẩn: Standard accounting
practices require publicly traded companies to follow certain accounting rules when
presenting financial statements so that the readers of the statements can easily
compare different companies. Private companies are also often required by banks
and shareholders, for example, to present information according to their specified
rules.
Store card - Thẻ tín dụng cửa hàng hay Thẻ đồng thương hiệu: is a type of
credit cards but you are restricted to using them in certain shops or stores.

Transaction deposit - Tiền gửi giao dịch: a deposit service in which checks or
draft against the deposit may be used to pay for purchase of goods and services.
Yield curve - Đường cong lãi suất: a graphic picture of how interest rates vary
with different maturities of securities as viewed at a single point in time.

5. REFERENCES
1. Barbara Casu, Chaudia Giradone, Philip Molyneux (2006), Introduction to
Banking, Pearson Education Canada Publishing House.
2. Frederic S. Mishkin (2015), The Economics of Money, Banking and
Financial Markets, Pearson Education Limited Publishing House.
3. Capital one, Introduction to credit, retrieved at
http://www.capitalone.co.uk/creditmadeclearer/credit-intro.jsf#what-is-
credit.
4. Justin Prichard (2014), What is credit and How is it used?, Retrieved at
http://banking.about.com/od/creditscoresandreporting/a/whatiscredit.htm
5. How to use an ATM to deposit money, Retrieved at:
http://www.wikihow.com/Use-an-ATM-to-Deposit-Money.
6. National Assembly (2010), Law on Credit Institutions No. 47/2010/QH12
approved by the Vietnam National Assembly on June 16, 2010.
7. National Assembly (2010), Law on The State bank of Vietnam No.
46/2010/QH12 approved by the Vietnam National Assembly on June 16,
2010.
 PART 2: COMMERCIAL BANKING
Unit 2: Internet Banking

Introduction: Human is standing on the brink of revolution of technology that we

often call the “4.0 Age” will fundamentally alter the way we live, work, and contact
others. In its scale, scope, and complexity, the transformation will be unlike anything
humankind has experienced before. The banking sector is no exception. Internet
banking is the latest delivery channel as well as new services for financial system.
Internet banking is a self-service that allows customers to perform financial activities
over the Internet. Students will learn the banking services provided through internet,
and challenges that both banks and their clients have faced. The technology of Internet
banking is further introduced the translation part to expose students to the new age of
banking sector.
1. READING
Perspective on Internet Banking
Internet banking is the latest delivery channel for financial services. Internet banking
is a self-service that allows customers to perform financial activities over the Internet.
It is defined as a self-service that enable bank customers to get access to their accounts
and the latest general information on bank products and services, and conduct all
financial transactions anytime from anywhere through the use of a bank’s website.
Through the Internet banking, customers can: i) Verify real time account balances
anytime from any location; ii) Move funds instantly from one account to another; iii)
Confirm that deposits have been made, checks have cleared and online transactions
have taken place; iv) View and print images of checks that have passed through a
customer’s account; v) Place an order for a new check; vi) Submit an application for
loans and credit cards; vii) Carry out online bill paying
For banks, Internet banking may save the price of services - in the long run - a bank
can save on money by not paying for tellers or for managing branches. Plus, it's cheaper
to make transactions over the Internet. Customer Base- the Internet allows banks to
reach a whole new market- and a well-off one too, because there are no geographic
boundaries with the Internet. The Internet also provides a level playing field for small
banks who want to add to their customer base. Efficiency- Banks can become more
efficient than they already are by providing Internet access for their customers. The
Internet provides the bank with an almost paper less system. Customer Service and
Satisfaction- Banking on the Internet not only allow the customer to have a full range
of services available to them but it also allows them some services not offered at any of
the branches. The person does not have to go to a branch where that service may or may
not be offer. With more better and faster options a bank will surely be able to create
better customer relations and satisfaction. No wonder some experts have predicted that
the expansion of Internet banking may eventually spell the doom for neighborhood
brick and mortar branch offices with their huge resource demands.
Challenges in providing Internet services
However, there are some real limits to what the Internet can do, at least with current
technology. Customers of many virtual banks have to mail in their deposits or drive to
pre-arranged ATM location to obtain the spendable cash they need. They sometimes
complain about their inability to speak with “real live” service representatives in order
to straighten out problems. Most online only bankers have found they must compensate
their customers when they do not have a network of neighborhood branch offices by
promising higher interest rates on electronic accounts they do attract.
The Net and customer privacy and security
Probably the greatest challenge facing Internet services is the issue of customer
safety and security. The Net has proven especially vulnerable to fraud and identity theft
in which sensitive private information about businesses and individuals is stolen by
unauthorized person and used to run up large credit card bills Or to ravage the savings
and reputation of victims. Moreover, the Net has been used to move money around the
global to finance terror. In an attempt to combat account fraud, money laundering,
diversion of funds to terrorist organizations, and thieves of credit cards and Social
Security numbers and other forms of private data, regulated financial firms have been
asked to assess the risk they and their customers face from illegal manipulation of their
accounts and, to move beyond today’s dominant single – factor authentications systems
(in which customers are usually asked for password, PIN, or Social Security number)
toward multi-factor authentication systems (in which customer may be asked for a
password initially, then perhaps for a card or token with encoded information, and then
possibly must pass a fingerprint, voice recognition, or other biometric test to gain access
to their accounts). Clearly, customer privacy and account security are major issues that
will shape the future expansion of Internet provided financial services.
(Source: Vishesh Srivastav (2014), “E-banking and its overview”, Institute of Research
Engineers and Doctors.
Peter S. Rose and Sylvia C. Hudgins (2010), “Bank Management and Financial
Services”, McGraw-Hill Irwin Press, Eighth Edition.)
QUESTIONS
1.1. What is Internet banking? How is it different from traditional banking services?
1.2. What are financial services currently available on the Internet?
1.3. What have problems been encountered in trying to offer Internet services?
 1.4. List some solutions for online banks to make their services more approachable
to customers.
1.5. What are the risks exposed to customers when they use the Internet banking?
1.6. Are financial institutions concerned enough about security and privacy to take
significant steps to protect their customers? Explain your judgment.
1.7. What should you do if suspect yourself become the victim of Internet fraud?
1.8. Make a list of the advantages and disadvantages of Internet banking. Discuss it
with a partner.
2. EXERCISES
2.1 Match the verbs 1-8 with the nouns a-h
1. to access a. a bill online
2. to carry b. a password
3. to click on c. a risk
4. to enter/input/key in/type in d. an electronic payment
5. to fall into e. an icon
6. to make f. funds
7. to pay g. the Internet
8. to transfer h. the wrong hands

2.2 Put the words/phrases in the box in the appropriate columns

retailer purse convenience make a payment
bank withdraw deposit cost-savings
service provider telephone POS device smart card
security reader flexibility transfer money

Participants Devices Benefits Transactions

Retailer purse convenience make a payment
--------------- -------------- --------------- ----------------
--------------- -------------- --------------- ----------------
--------------- -------------- --------------- ----------------

2.3 Use the words and phrases given in Excersise 2.2 to complete the sentences
1. Electronic money provides more______________ than cash because the lock
function makes it difficult to steal.
2. The_________________ is used by the retailer to receive payment from customers.
3. A company that offers a service is called a____________________.
4. When you put money in your bank account, we say that you have made a (n)
_____________________
5. Recently, commercial banks and retailers have offered more _________________
with Internet banking services.
2.4 Match the words 1-6 to the words/phrases a-f to make word partnerships
1. a high a. business hours
2. a low risk of b. fraud
3. an Internet only c. interest rates
4. offers higher than average d. level of security
5. outside e. saving account
6. vulnerable f. to fraud
2.5 Put the words/phrases in order to make sentences
1. Banks / an essential element /which / transforms / idle capital / in the form of
deposits / into / working capital/ in a free enterprise system / in the form of loans
/ for a fee/ are
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..

2. Consumers / from / for financial products and services / offered online and their
availability 24/7/ have benefitted/ lowering of transactional costs
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..

3. Use of the internet / banks / to deliver/ a lower cost / standard and expanded
banking services / at / than / through bricks-and-mortar branches / allowed / to
more customers
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
………………………………………………………………………………………..

4. Technology / has permitted / many financial management transactions / that /

previously were / considered disparate/ the convergence of
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..

5. Banks / are / in a free enterprise system / which / idle capital / in the form of
deposits/ an essential element / in the form of loans/ for a fee/ transforms/ into
working capital
…………………………………………………………………………………………..
…………………………………………………………………………………………
…..………………………………………………………………………………………
…..………………………………………………………………………………………

2.6 Find the best answer

1. How much is your __________________? = How much money did you borrow?
a) Interest
b) Origination fee
c) Principal
2. The bank hasn't __________________ our loan yet.
a) Processed
b) Provided
c) Answered
3. __________________ interest is basically accumulated interest.
a) Accredited
b) Accrued
c) Acclimated
4. __________________ of the loan amount = No matter how much the loan amount is
a) Apart
b) Instead
 c) Regardless
5. He couldn't pay his loan. = He is _________________ in repaying his loan.
a) Delinquent
b) Devious
c) Deprived

3. TRANSLATION
Translate the following texts into Vietnamese paying special attention to the
standard use of terms and clarification of expressions.
Text 1
ACHs and Checks: the Tide is Turning, but Slowly
Everyday billions of dollars flow across the United State as businesses, households,
and governments pay their bills and depository institutions collect those funds and route
them into the correct accounts. Some institutions and individuals pay by checks – still
a popular route, though now accounting for less than half of value of all payments made
in the United States – and others by currency and coins, money orders, and credit and
debit cards. A third route is the direct deposit of funds electronically. At work daily
route these “electronic dollars” to the accounts of their rightful owners is a nationwide
network of automated clearinghouses (ACHs).
ACHs permit businesses to electronically deposit their employee’s paychecks and
permit households and businesses to make regular payments on their mortgages and to
pay utility bills and other recurring costs via computer, thereby avoiding checks and
other less convenient payment methods. The hard fact to explain, however, is why
electronic transactions have not completely taken over the American payment system.
In Europe they nearly have (with some countries reporting that at least two-thirds of
their payments move electronically).
(Source: Peter S. Rose and Sylvia C. Hudgins (2010), Bank Management and Financial
Services, McGraw-Hill Irwin Press, Eighth Edition)
Text 2
Financial Service Facilities of the Future
Despite continually advancing technology, most experts seem to agree that the total
number of financial service outlets industry wide will probably not decline
significantly; indeed, the total of all financial services facilities may continue to grow
in the future if the population desiring to use these services continues to increase.
However, the design and function of most financial service facilities are likely to evolve
into new configurations – more wholly or partially automated facilities with broad self-
service capability and adjacent to other stores and shops. Future facilities will also likely
include information accessing equipment that is so portable that financial service outlets
will be able to visit or accompany the customer, whether he or she goes, rather than
requiring the customer to visit them.
The use of “digital cash” will permit customers to be their own financial service
branches for certain transactions. Customers will be able to carry a pocketsize computer
terminal to register payments for goods and services and to transfer funds as needed or
carry a “smart card”, which is an electronic purse holding a specified amount of
electronic money to spend. When all the customer’s electronic money is spent on
purchases of goods and services, the card can be electronically “refilled” again with
digital cash in order to support future purchases. But even with these services
innovation, there is still likely to be a significant role for traditional full service branch
offices geared to the special service needs of the neighborhoods and communities they
serve, helping customer plan for the future with the aid of a broad menu of service
offerings and expert financial advice.
(Source: Peter S. Rose and Sylvia C. Hudgins (2010), Bank Management and Financial
Services, McGraw-Hill Irwin Press, Eighth Edition)

4. TERMINOLOGY
ATM (Automatic Teller Machine) - Máy giao dịch tự động: An ATM combines a
computer, recordkeeping system, and cash vault in one unit, permitting customers to
enter a financial firm’s bookkeeping system with either a plastic card.
Authentication - Xác thực: (1) an action of checking that something is true, such as
an instruction sent to a bank by email; (2) a method of proving the identity of a person
or company
Biometric - Sinh trắc học: là công nghệ sử dụng các thuộc tính vật lý hoặc các mẫu
hành vi, các đặc điểm sinh học đặc trưng như mẫu vân tay, mẫu võng mạc mắt, dọng
nói, khuân mặt, dáng đi...để nhận diện ra cá thể người là duy nhất tồn tại trong một cơ
sở dữ liệu.
CHAPS (Clearing House Automated Payments System) - Hệ thống thanh toán bù
trừ tự động:a computerized system for clearing cheques organized by the banks.
Depository Institution - Tổ chức nhận tiền gửi: a financial institution that obtains its
funds mainly through deposits from the public. This includes commercial banks,
savings and loan associations, saving banks and credit unions.
Digital Cash (E-Cash) - Tiền điện tử: a European Commission describes digital cash
(e-cash) as a digital equivalent of cash, stored on an electrolic devide or remotely at a
server.
Direct debit - Ghi nợ trực tiếp: a system where a customer allows a company to charge
cost to his or her bank account automatically and where the amount charged can be
increase or decreased with the agreement of the customer.
Electronic Banking - Ngân hàng điện tử: the use of computers to carry banking
transactions, such as withdrawals through cash dispensers or transfer of funds at point
of sale.
E-business - Kinh doanh điện tử: general term that refers to any type of business
activities on the Internet, including Marketing, branding, and research.
E-commerce - Thương mại điện tử: a general term that is normally used to refered to
the process of buying and selling goods or services over the Internet.
Electronic Fund Trasfer - Thanh toán điện tử: a system for transferring money from
one account to another electronically (as when using a smart card)
Electronic Purse (same as digital wallet) - Ví điện tử: a piece of personalized
software on the hard drive of a user’s computer that contains, in coded form, such items
as credit card information, digital cash, a digital identity certificate, and standardized
shipping information, and can be used when paying for a transaction electronically
Fraud and Identity Theft - Lừa đảo và trộm danh tính: is when your personal details
are stolen and identify fraud is when those detail are used to commit fraud.
Money Laundering - Rửa tiền: the process of creating the apperance that large
amounts of money obtained from serious crimes, such as drug trafficking or terriost
activity, orginated from a legitimate source.
Smart Card - Thẻ thông minh: credit card with microchip, used for withdrawing
money from ATMs or for purchases at POS terminal
Security Token - Thiết bị xác thực: a physical devide that an autherized user of
computer services is given to ease authetication.

Virtual bank - Ngân hàng ảo: Internet based financial institution that offers deposit
and withdrawal facilities, and other banking services, through automated teller
machines or other devices, without having a physical (brick and mortar) walk in
premises.

5. REFERENCES
1. Karen Furst, William W. Lang, Daniel E. Nolle (2000), “Internet Banking:
Developments and Prospects”, Retrieved at:
https://www.newyorkfed.org/medialibrary/media/newsevents/events/research/2
001/Furst.pdf
2. Ioannis KOSKOSAS (2011), “The pros and cons of internet banking: A short
review”, Business Excellence and Management.
3. Matthew Johnson (2008), “A new approach to Internet banking”, Technical
Report, University of Cambride.
4. Peter S. Rose and Sylvia C. Hudgins (2010) “Bank Management and
Financial Services”, McGraw-Hill Irwin Press, Eighth Edition.
5. Vishesh Srivastav (2014), “E-banking and its overview”, Institute of Research
Engineers and Doctors.