Author Insights Julie Pratten

Author Insights
English for international banking post-2008

Julie Pratten, author of Absolute Banking English, discusses the impact of the
global banking meltdown on English in the banking sector.
Since the global meltdown of 2008, it has become more important than ever for financial
experts to be able to deliver a coherent message in English. With confidence in bankers at
an all time low, they must go the extra mile to convince their clients, their investors, and
their shareholders that they are competent. At the same time, finance has become the
focus of daily conversation, hence most business professionals need to have some
knowledge of financial English to be able to communicate in this area.
Even the general public are much more clued up about finance. The man is the street knows
many specialist terms and understands quite complicated banking scenarios. Toxic assets,
sub-prime mortgages, risk asset weightings, quantitative easing; youd be surprised but all
these terms have even been featured in tabloid newspapers accompanied by cartoons of
Helicopter Ben; an image of the Governor of the US Federal Reserve, Ben Bernanke,
throwing bundles of banknotes from a helicopter to bailout the ailing economy. In the UK,
people used to be rather complacent about the flaws of other countries banking systems.
When they heard Greece was in trouble, they presumed it was only other countries whose
bankers offered highly dodgy credits (in terms of risk) until someone twigged that the crossborder aspect, i.e. systemic risk, had a domino effect on all banks and can have a
devastating impact on the economy.
In terms of global communication, bankers enhanced knowledge of financial English and

ability to express themselves fluently and accurately is the key to gaining a competitive
edge. Some of the main issues that have been constantly discussed in the business and
banking community have been responsible lending practices, accountability and
transparency. In short, this means banks have to be more cautious in their lending decisions
and in the case of negligence, they need to own up and face the consequences of their
mismanagement. Absolute Banking English stimulates discussion on a range of sticky
scenarios that have arisen where the finger can be pointed at bankers, and challenges them
to defend their corner.
2013
One of the topical issues of the global banking community which is focused on in Absolute
Banking English is bank stress. We are all susceptible to stress and after the global
meltdown of 2008 several banks became chronic sufferers. Bank stress is a disease which
last year hit the heart of the economies of several European countries and is still at
epidemic levels. For some banks, this stress even led to their collapse. With the banks
image in the gutter, bankers have to smarten up their act and go the extra mile to win back
lost confidence. Banking authorities have also implemented a number of measures to
supervise banking activities more thoroughly to make sure that past mistakes are not
repeated.
Here are some activities which you can use with your students, focusing on bank failure and
stress testing.
2013
Focus on Bank Failure

Lead in
1. What is bank failure and what causes it?
2. How can bank failure affect the economy of a country?
3. What steps can the banking authorities take to prevent bank failure?
What is bank failure?

With a partner, complete the description of bank failure using the words in the box below.
Bank failure occurs when a bank is unable to meet its (1) ....................to its depositors or
other (2) .............................because it has become (3) ......................or too illiquid to meet its
liabilities. More specifically, a bank usually fails economically when the market value of its
(4) ..........................declines to a value that is less than the market value of its (5)
.......................... . The insolvent bank either borrows from other solvent banks or sells its
assets at a lower price than its market value to generate liquid money to pay its depositors
on demand. This situation creates a panic among the depositors which leads a bank
(6)....................... as more depositors (7) ....................their funds.
The failure of a bank is a serious issue in any country because of the interconnectedness and
(8) ..........................of banking institutions. Governments fear that the (9)
..............................effects of the failure of one bank can quickly spread throughout the (10)
........................and possibly lead to (11) .....................risk which could cause the whole
economy to (12) ....................
assets creditors fragility spill over liabilities collapse

run systemic insolvent obligations
2013
withdraw
economy
Stress Testing For Banks

With a view to tackling fragilities in the banking sector, financial authorities such as the
European Banking Authority (EBA) devised a series of stress tests for banks. The aim of these
tests is to assess the ability of financial institutions to withstand adverse market
developments, as well as to contribute to the assessment of systemic risk in the EU financial
system.
1 Check your understanding

Read the short text above and complete these notes.
1.To deal with weaknesses in the financial world, the leading authorities
....................................................................................................................................................
....................................................................................................................................................
2.The two main aims of the stress tests
a...................................................................................................................................................
....................................................................................................................................................
b..................................................................................................................................................
....................................................................................................................................................
2013
2 Check the facts

Now read this short text about the test procedure and decide if the statements below are
True or False.
Stress Testing of Banks: The Procedure
The EBA conducted the bank stress test in European Union member states and Norway in
the first half of 2011 in cooperation with national supervisory authorities, the European
Central Bank (ECB) and the European Systemic Risk Board (ESRB). 91 banks participated
from 21 countries, which represent around 50% of the total assets of each respective
national banking sector or 65% of the assets of the entire European banking system.
In recent years, due to the confidence-starved market environment, there has been
mounting pressure on banks to create transparency about their resilience to shocks such as
a serious economic downturn, a decline in asset values or a rise in country risk. The aim of
publishing detailed results of the stress test was to improve this atmosphere of uncertainty;
however, it is important to note that the bank stress test is based on hypothetical scenarios,
that is, what if x happens?
1 The stress test was undertaken in 2011 by various Central Banks in EU countries and
Norway.
2. The ECB hopes that stress tests will help to restore the lack of confidence in banks.
3. Nowadays banks are urged to improve transparency on their soundness in the case of
financial turbulence.
4. One of the limitations of the stress tests is that they are only based on assumed scenarios.
2013
3 Synonyms
Match the words in bold in the text with similar words or expressions in the box below.
Results of Stress Testing
GERMANY All 12 German banks that participated in last years bank stress test conducted
by the European Banking Authority (EBA) managed to make the grade.
The banks achieved the minimum core tier 1 capital ratio of 5.0% in the adverse scenario
required to pass the bank stress test. This EBA requirement is well above the current
minimum supervisory ratio applicable in Europe.
Sabine Lautenschlger, Vice-President of the Bundesbank commented: The results of the
bank stress test show that the German banks in the sample are sufficiently capitalised in
the adverse scenario, and their capitalisation is also robust under these pessimistic
assumptions.
On a similar note, head of banking supervision at BaFin Raimund Rseler pointed out the
positive stress test outcome underscores successful efforts implemented by many banks
last year to fortify their capital base.
ITALY The five Italian banking groups that participated in the EU stress test achieved the
threshold of 5 per cent; banks involved represent more than 62 per cent of the total assets
of the Italian banking system. Results endorse the adequacy of Italian banks' capital to mop
up the shocks coming from further deterioration of macroeconomic and market conditions.
However, the banks health check was not rosy in all of the EU member countries. Five
banks in Spain, two in Greece and one in Austria flunked the test.
confirm failed have adequate funds absorb adopted adverse expectations

explained... passed the tests reported BIS Tier Capital Requirement highlights
carried out decline limit
2013
4 Review
Complete the sentences, using words and expressions from the texts. The first letter is
given.
1 German banks p........................ in the European bank stress test demonstrated their
r........................ even though the stress scenario was more severe than in 2010.
2 Most Italian banks a............................. the required core tier 1 capital r...............of at least
5.0%.
3 The aim of such tests is to a............. the robustness of financial institutions to a..................
market developments.
4 Critics of the health check say that it fails to reflect market e.................................... that
some EU countries will default on their debt. Another problem is that the stress tests are
merely h.........................................., so they only represent fictional scenarios.
2013
5 Vocabulary Guessing Activity

The text below contains some nonsense words in bold. With a partner discuss what words
could be used to complete the text.
Bank of Iceland Made Serious Mistakes
The Special Investigation Commission (SIC), responsible for carrying out (1) pliff in the case
of bank (2) flitts, reported that the Central Bank of Iceland had made a series of (3) praffs
before the banking (4) segg in October 2008. The report reached the (5) lutt that the bank
had acted carelessly. Proposals on the banks actions were not (6) ruyy to the government,
and the bank made a serious error when its employees forgot to (7) drudd a loan channel at
the Bank for International Settlements in Basel. When they realized the (8) stamm error, it
was clear that the Central Bank would have to (9)increase its access to foreign currency. The
loan channel would have (10) ruww USD 500 million (EUR 366 million). The bank
immediately (11) mogged a renewal of the loan channel; however, this was (12) norgd by
the BIS. The report also (13) gepp that the bank had sent a formal request for a currency
(14) sroff agreement with the Bank of England but this request was also refused.
2013
Answer key
What is bank failure? Page 3
1 Obligations, 2 creditors, 3 insolvent, 4 assets, 5 liabilities, 6 run, 7 withdraw, 8 fragility, 9
spill over, 10 economy, 11 systemic, 12 collapse.
Check the facts. Page 5
1 True, 2 False, 3 True, 4 True
Synonyms. Page 6
carried out, passed, BIS Tier Capital Requirement, reported, have adequate funds, adverse
expectations, explained, highlights, adopted, strengthen, limit, confirm, absorb, decline, failed
Review. Page 7
1 participating, resilience, 2 achieved, ratio, 3 assess, adverse, 4 expectations, hypothetical
Vocabulary Guessing Activity. Page 8
1 investigations, 2 failure, 3 errors, 4 collapse, 5 conclusion, 6 presented, 7 renew, 8 fatal, 9
increase, 10 provided, 11 requested, 12 denied, 13 indicates, 14 swap
Original text
Bank of Iceland Made Serious Mistakes
The Special Investigation Commission (SIC), responsible for carrying out (1) investigations in
the case of bank (2) failure, reported that the Central Bank of Iceland had made a series of
(3) errors before the banking (4) collapse in October 2008. The report reached the (5)
conclusion that the bank had acted carelessly. Proposals on the banks actions were not (6)
presented to the government, and the bank made a serious error when its employees
forgot to (7) renew a loan channel at the Bank for International Settlements in Basel. When
they realized the (8) fatal error, it was clear that the Central Bank would have to (9) increase
its access to foreign currency. The loan channel would have (10) provided USD 500 million
(EUR 366 million). The bank immediately (11) requested a renewal of the loan channel;
however, this was (12) denied by the BIS. The report also (13) indicates that the bank had
sent a formal request for a currency (14) swap agreement with the Bank of England but this
request was also refused.
Sources:
http://www.euractiv.com
http://www.bancaditalia.it/stress_test2011;internal&action=_setlanguage.action?LANGUA
GE=en
2013

Author Insights Julie Pratten

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Author Insights Julie Pratten

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Author Insights

English for international banking post-2008

In terms of global communication, bankers enhanced knowledge of financial English and

Focus on Bank Failure

What is bank failure?

assets creditors fragility spill over liabilities collapse

Stress Testing For Banks

1 Check your understanding

2 Check the facts

confirm failed have adequate funds absorb adopted adverse expectations

5 Vocabulary Guessing Activity

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