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During the 1980s, however, high interest rates and world recession prevented
several countries from meeting their repayment obligations. Banks have had to
reschedule loans, that is arrange for interest payments and repayment instalments to be
delayed, and the debt crisis, as it has been termed, has put banking in the industrialized
countries under a certain amount of strain. Some observers see the financial strength of
the banks as now depending on the financial strength of the debtors. In this way, they
claim, the debt problem threatens both the development of the debtor countries and the
stability of the banking system of the industrialized world.
A second challenge faced by banks recently is the increasing competition from
other organizations, both in terms of numbers and in the range of financial services
offered. Banks are generally very closely regulated, examined, restricted and supervised,
making it sometimes difficult to meet new competition from institutions operating under
different regulations, such as insurance companies. Laws and regulations restraining the
activities of banks and other financial organizations have been changing, and continue to
change. One example in the UK is the so-called Big Bang, which in 1986 deregulated
the traditional procedures for dealing in UK securities. The changes taking place in the
financial services industry are not confined to any one country, however, and innovation
and development are contributing to general market evolution, both nationally and
internationally.
A third trend in banking during recent years has been the growth in the application
of technology in the industry. Accounting records are maintained with the aid of
computer systems, where ledgers were once kept by hand. Messages can now be
transmitted and funds can be transferred around the world electronically in a matter of
moments. Dealing rooms often use the latest technology, with electronic hardware and
software providing the essential data. The information systems used may include a
transaction input capability, an interface with main office systems, large high resolution
colour displays, and so on, to provide the up-to-the minute data on which effective
trading decisions are based.
While electronic systems reduce time and paper, they do involve certain risks, such
as those of computer system failure and fraud. Security operations in both cases are
therefore of vital importance to modern banks. If a system breaks down, it is imperative
that information is not lost. With large sums of money being sent around the world
electronically, it is also imperative that banks prevent outsiders or unauthorized users
from penetrating their systems and diverting funds for their own use. One professional
survey in the UK in the mid-1980s estimated that computer fraud involving funds
transfer in the UK totalled some 50 million pounds a year.
Banking services offered to the general public are also becoming increasingly
automated, as banks try to reduce their costs associated with branch over-the-counter
transactions, such as personnel costs.
Сomprehension Questions
31
During the 1980s, however, high interest rates and world recession prevented
several countries from meeting their repayment obligations. Banks have had to
reschedule loans, that is arrange for interest payments and repayment instalments to be
delayed, and the debt crisis, as it has been termed, has put banking in the industrialized
countries under a certain amount of strain. Some observers see the financial strength of
the banks as now depending on the financial strength of the debtors. In this way, they
claim, the debt problem threatens both the development of the debtor countries and the
stability of the banking system of the industrialized world.
A second challenge faced by banks recently is the increasing competition from
other organizations, both in terms of numbers and in the range of financial services
offered. Banks are generally very closely regulated, examined, restricted and supervised,
making it sometimes difficult to meet new competition from institutions operating under
different regulations, such as insurance companies. Laws and regulations restraining the
activities of banks and other financial organizations have been changing, and continue to
change. One example in the UK is the so-called Big Bang, which in 1986 deregulated
the traditional procedures for dealing in UK securities. The changes taking place in the
financial services industry are not confined to any one country, however, and innovation
and development are contributing to general market evolution, both nationally and
internationally.
A third trend in banking during recent years has been the growth in the application
of technology in the industry. Accounting records are maintained with the aid of
computer systems, where ledgers were once kept by hand. Messages can now be
transmitted and funds can be transferred around the world electronically in a matter of
moments. Dealing rooms often use the latest technology, with electronic hardware and
software providing the essential data. The information systems used may include a
transaction input capability, an interface with main office systems, large high resolution
colour displays, and so on, to provide the up-to-the minute data on which effective
trading decisions are based.
While electronic systems reduce time and paper, they do involve certain risks, such
as those of computer system failure and fraud. Security operations in both cases are
therefore of vital importance to modern banks. If a system breaks down, it is imperative
that information is not lost. With large sums of money being sent around the world
electronically, it is also imperative that banks prevent outsiders or unauthorized users
from penetrating their systems and diverting funds for their own use. One professional
survey in the UK in the mid-1980s estimated that computer fraud involving funds
transfer in the UK totalled some 50 million pounds a year.
Banking services offered to the general public are also becoming increasingly
automated, as banks try to reduce their costs associated with branch over-the-counter
transactions, such as personnel costs.
Сomprehension Questions
31
