English: Cloze Test for Upcoming Exams – Set 113

Directions: In the passage given below there are 10 blanks. Every blank has A PAIR of five alternative words given in options (A),(B),(C), (D) and (E). You have to tell which pair is APPROPRIATE according to the context. If all are appropriate then mark your answer as “E”.

Another blow to national pride: on January 13th DBRS, a Canadian rating agency, downgraded Italy’s sovereign debt, ____1____the country of its last A rating. Government bond-yields rose; so will the cost of funding for Italian banks. Erik Nielsen, chief economist of UniCredit, Italy’s biggest lender, calls the extra €5bn ($5.3bn) or so banks will have to put up as collateral for their loans from the European Central Bank (ECB) “immaterial”. Still, it is a burden they could do without.

Weighing heaviest on bankers’ minds is a planned state rescue of Monte dei Paschi di Siena, now Italy’s fourth-largest lender. A private recapitalisation scheme ____2____ in December, prompting it to seek government help. Days earlier, anticipating the plan’s demise, the state had created a €20bn fund to support ailing banks. 

Next month Monte dei Paschi’s chief executive, Marco Morelli, will present a new business plan. On January 18th he confirmed to a Senate committee that 500 branches and 2,450 jobs will go within three years. Soon the bank is expected to issue a state-backed bond, for perhaps €1.5bn, to ____3____ liquidity; it hopes eventually to raise €15bn to replace deposits that ____4____ away last year. Once the plan is out, negotiations between Italy and the European Commission will ensue, over the first state rescue of a big bank since the commission tightened state-aid rules.

Between 2007 and 2014 the commission approved €5trn-worth of state aid, including guarantees, for banks. Italy’s share was a piffling €130bn. But “bail-in” has since replaced “bail-out”. The Bank Recovery and Resolution Directive, which came fully into force last year, demands that banks receiving state help be put into “resolution”—in effect, bankruptcy. Shareholders and junior creditors cop it, for at least 8% of liabilities, if the state steps in.

For investors in Monte dei Paschi, the outlook may not be so____5____. The government plans a “precautionary recapitalisation”—allowed by the directive. To qualify, a bank must be solvent; the injection must be on market terms; and the capital must be needed to make up a shortfall identified in a stress test—such as one Monte dei Paschi failed last summer. That would imply “burden-sharing”, converting junior debt to equity, rather than a bail-in. Separately, retail investors who were “mis-sold” subordinated bonds may be compensated.

The world’s oldest bank, Monte dei Paschi was founded in 1472 by Sienese magistrates. Its recent history has been an ____6____ shambles. With exquisite timing, in 2007 it bought Antonveneta, another Italian bank, from Spain’s Santander for €9bn in cash. Further blunders followed. It has had two capital increases since 2014. In the year to December 23rd, when the private rescue failed and trading was suspended, its share price fell by 88%.

How much help it needs now remains unclear. The private plan, devised in July, would have stripped out and securitised €27.6bn-worth (gross) of non-performing loans and recapitalised the bank with €5bn. After it failed, the ECB told the bank that its capital shortfall, under an “adverse scenario” in the summer’s stress test, had widened to €8.8bn. But the capital required will depend on Mr Morelli’s revised plan, and in particular on what will be done to ____7____ bad loans. The conversion of bonds to equity could raise €4bn, but retail investors, who have around €2bn-worth of bonds and are in line for the same value in shares, may then be eligible for compensation. The government’s total bill could amount to around €6bn.

Pier Carlo Padoan, the finance minister, says the banking system is turning a page. If he is to be proved right, Monte dei Paschi must be sorted out. Yet other signs are encouraging. On January 12th UniCredit’s shareholders approved a €13bn share issue, part of an overdue____8____ . Last year was the first since 2008 in which banks’ total non-performing exposures declined, according to PwC, an accounting firm. ABI, the national banking association, and Cerved, a ratings agency, predict that by 2018 bad loans will almost be back to their pre-crisis level—although that may depend on what happens to Monte dei Paschi. The plan to securitise its portfolio was intended to kick-start a market in ____9____ debt.

Italy’s fragmented banking industry is also consolidating. The resolution in November 2015 of four tiny banks, in which bondholders were bailed in, caused uproar. Now UBI Banca, the fifth-largest lender, hopes to buy three of the four “good” residual banks for €1. A merger finalised on January 1st created Banco BPM, now Italy’s third-biggest bank. Another is on the horizon, of two Venetian banks. Analysts at Credit Suisse suggest that the government’s €20bn fund should suffice to plug any remaining capital gaps.

All this is necessary—but not sufficient. Most banks need to slash costs and get rid of ____10____ loans. With interest rates in the cellar, revenue is hard to find. And without stronger growth than Italy’s recent pitiful record, many lenders will find life a grind. Forecasters say GDP will expand by just 0.7% this year and 0.8% next. The vicious cycle will be hard to break.

  1. baring, appointing
    stripping, abrading
    destructing, decking
    ravaging, veneering
    All are correct
    Option B
    stripping = remove all coverings from.


  2. crashed, billowed
    slumped, distended
    failed, puffed
    collapsed, flopped
    All are correct
    Option D


  3. forsake, obstruct
    shore up, prop up
    thwart, impede
    choke, pull
    All are correct
    Option B
    shore up = to support (something) or keep (something) from falling by placing something under or against it


  4. bled, seeped
    wrung, dropped
    brought, fell
    oozed, put
    All are correct
    Option A


  5. grim, portentous
    drab, wretched
    bleak, dismal
    sombre, dreary
    All are correct
    Option E
    bleak = not hopeful or encouraging; unlikely to have a favourable outcome.


  6. sordid, bountiful
    degraded, venerable
    contemptible, comely
    ignoble, despicable
    All are correct
    ignoble = not honourable in character or purpose.


  7. clean up, expunge
    blighted, approve
    vague, begin
    permissive, accept
    All are correct
    Option A
    clean up = an act of cleaning a place.


  8. obstacle, purge
    overhaul, refurbish
    scratch, overhaul
    injure, fissure
    All are correct
    Option B
    overhaul = take apart (a piece of machinery or equipment) in order to examine it and repair it if necessary.


  9. advise, impotent
    duff, fanny
    butt, feeble
    competent, inapt
    All are correct
    Option B
    duff = of very poor quality.


  10. dud, defective
    broken-down, failed
    faulty, broken
    inoperative, unsound
    All are correct
    Option E
    dud = not working or meeting standards; faulty.



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3 Thoughts to “English: Cloze Test for Upcoming Exams – Set 113”

  1. Divaker

    yr options are out of my guts lets try to improve

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