Text 13. How Banks Choose Overseas Offices

Traditionally banks have initially moved into external markets with an agency or a representative office because of the relative ease with which they can be established. The most important factor affecting the choice of type office is the attitude of the host country as reflected in its laws, regulations and policies towards financial institutions. Some countries prohibit foreign commercial branches; others prohibit foreign-held subsidiaries (or affiliates). And, of course, some governments exclude both foreign branches and subsidiaries. In other instances, entry of new firms is prohibited, but outside firms already in existence are permitted to function under grandfather provisions*. Over a dozen foreign countries permit no foreign commercial banking except for representative offices; only a small amount of trade is conducted with these countries.

In some cases, the policy of the home country of the parent bank may determine or at least influence the type of office established abroad. In at least a few instances, certain types of overseas office are not permitted by the government of the parent company.

Generally, branches are easier to establish than a subsidiary in a foreign country and they afford the parent company the greatest degree of control. Accordingly, as full service types of offices, branches play a key role in external operations. The type of office a bank establishes abroad also depends upon the extent of market participation desired by the bank, the amount that can be invested in the facility, and the availability of trained and talented staff.

 

*It means that companies already in existence at a certain date are allowed to continue, but no banks can set up after that date.

 

Exercise 9 8 . Answer the questions.

1. Is the host or parent country usually more important in influencing the type of overseas office which is set up? 2. Which types of overseas offices do banks often have? Why? 3. Which type of overseas office gives the parent company most control? 4. What are five different attitudes of host countries to foreign banks? 5. What advantages do foreign branches have over foreign subsidiaries?

 

Exercise 99. Delete the words which, according to the text, are wrong in the following sentences.

1. Home country regulations (sometimes / never) affect the establishment of foreign banking offices.

2.  Generally (all / most) types of overseas representation are permitted by parent company governments.

 

Exercise 10 0 . According to the text, which of the following factors do not affect a bank’s choice of overseas office? (more than one answer is possible)

a) The availability of subsidies from overseas governments.

b) The funds that the parent company can spare.

c) The existence of the right type of employees.

d) How much experience of overseas banking the parent company has.

e) The degree to which the parent bank wishes to penetrate the foreign market.

 

Exercise 10 1 . Using one word in each gap, complete the following summary of the text. All the necessary words are in the text.

In the past banks have first entered foreign markets by means of an ____ or a _____ office. Which type of office was chosen depended on the attitude of the _____ country. According to its laws, ______ and policies different types of office may be ______. Grandfather _____ sometimes allow long-established banks to ______. More than twelve countries allow only _______ offices.

Sometimes the home country of the ______ bank may forbid certain forms of _______ offices.

On the whole _______ are easier to set up than a ______ and also allow more ________. Because they also offer ________service, foreign branches are very important.

 

Exercise 10 2 . Learn the following words and word combinations.

start-up	– “стартап”, нещодавно створена компанія
founder	– засновник
risk-averse	– обережний, не готовий ризикувати
venture capital/ risk capital/  start-up capital	– венчурний капітал; ризиковий капітал
high net worth individual	– заможна приватна особа
angel investor	– бізнес-ангел ( особа, яка вкладає кошти у молоду компанію або ризикований проект, який може принести більший дохід, ніж традиційні інвестиції)
entrepreneur	– підприємець
rate of return	– дохід на капітал; ставка доходу
public company	– відкрита акціонерна компанія
exit strategy	– стратегія виходу (з компанії, бізнесу); стратегія вилучення капіталу
mezzanine financing	– проміжне фінансування
convertible bond	– конвертована (в акції) облігація
preference shares (BrE)/ preferred stock (AmE)	– привілейована акції, акції з фіксованими дивідендами
private company	– закрите акціонерне товариство

 

Exercise 10 3 . Read, translate and give the gist of text 14.

 

Text 14. Venture Capital

New businesses, called start-ups, are all private companies that aren’t allowed to sell stocks or shares to the general public. They have to find other ways of raising capital. Some very small companies are able to operate on money their founders - the people who start the company - have previously saved, but larger companies need to get capital from somewhere else. As everybody knows, banks are usually risk-averse. This means they are unwilling to lend to new companies where there's a danger that they won't get their money back. But there are firms that specialize in finding venture capital: funds for new enterprises.

Some venture capital or risk capital companies use their own funds to lend money to companies, but most of them raise capital from other financial institutions. Some rich people, who banks call high net worth individuals, and who we call angels or angel investors, also invest in start-ups. Although new companies present a high level of risk, they also have the potential for rapid growth - and consequently high profits - if the new business is successful. Because of this profit potential, institutions like pension funds and insurance companies are increasingly investing in new companies, particularly hi-tech ones.

Venture capitalists expect entrepreneurs - people with an idea to start a new company - to provide them with a business plan.

Because of the high level of risk involved, investors in start-ups usually expect a higher than average rate of return - the amount of money the investment pays - on their capital. If they can't get a quick return in cash, they can buy the new company's shares. If the company is successful and later becomes a public company, which means it is listed on a stock exchange, the venture capitalists will be able to sell their shares then, at a profit. This will be their exit strategy.

Venture capitalists generally invest in the early stages of a new company. Some companies need further capital to expand before they join a stock exchange. This is often called mezzanine financing, and usually consists of convertible bonds - bonds that can later be converted to shares - or preference shares that receive a fixed dividend. Investors providing money at this stage have a lower risk of loss than earlier investors, but also less chance of making a big profit.

 

Exercise 10 4 . Translate into English.

Закрите акціонерне товариство, відкрита акціонерна компанія, засновник, нещодавно створена компанія, залучати капітал, обережний, венчурний капітал, заможні приватні особи, підприємець, бізнес-ангел, ставка доходу, проміжне фінансування, привілейовані акції, конвертовані облігації, стратегія виходу.

 

Exercise 10 5. Match the two parts of the sentences.

1. Banks are usually reluctant	a) a higher than average return on their money
2. Start-ups often get money	b) and so are potentially profitable
3. New companies can grow rapidly	c) before a company joins a stock exchange
4. Risk capitalists usually expect	d) to get their money back after a few years.
5. Venture capitalists need an exit strategy	e) to lend money to new companies.
6. Mezzanine financing is a second round of financing	f) from specialized venture capital firms.

Exercise 10 6 . Complete the sentences with the words from     text 14.

1. A firm listed on a stock exchange is a … . 2. Individuals who lend money to new companies are sometimes called … . 3. Banks that are risk-… usually don’t want to finance new companies. 4. The amount of money made from an investment is its rate of … . 5. New businesses often have to get finance from … companies. 6. The people who start companies are called… . 7. People who have ideas for setting up new businesses are called… . 8. … capital firms specialize in financing new companies. 9. People who want to borrow money to start a company write a business … . 10. Money invested in a company just before it joins a stock exchange is sometimes called … financing.

 

Exercise 107 . Put 5 key questions to text 14 and answer them in pairs.

 

Exercise 108. Discuss the questions.

1. Would you invest in start-ups? In which fields?

2. If you wanted to start a business, how would you try to raise capital?

 

Exercise 109 . Read, translate and give the gist of text 15.

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