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Certificate in Retail and Digital Banking (Cert RDB) > 1. Retail Banking Customers > Flashcards

1. Retail Banking Customers Flashcards

1
Q

Define a ‘personal’ customer

A

Someone who uses banking for themselves

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2
Q

Define a ‘person’ in the sense of banking (3)

A
  1. A ‘natural’ person
  2. A ‘legal’ person
  3. A partnership
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3
Q

Define a ‘legal person’

A

A separate legal entity that can enter into contracts and be sued

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4
Q

Are the following considered to be ‘legal persons’:
- Executors
- Attorneys
- Trustees

A

Yes, all of them.

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5
Q

Is a company a legal person?

A

Yes, it is separate from those who run it.

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6
Q

What types of people tend to use cash? (4)

A
  1. Opportunity seekers
  2. Older People
  3. No bank account
  4. Underground Economy Members
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7
Q

What is an opportunity seeker? Why do they use cash?

A

Someone who either carries cash for emergencies or for opportunity e.g. haggling someone for a better price if paying in cash

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8
Q

Why do old people use cash? (2)

A
  1. Habit
  2. Don’t trust technology
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9
Q

How many adults in the UK do not hold a bank account?

A

Around 1.3 million adults

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10
Q

Why might someone not have a bank account? (5)

A
  1. No family history of banking
  2. Low income, unemployed
  3. Bad credit history
  4. Lack of understanding of products
  5. Distrust of banks
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11
Q

Describe underground workers. What sorts of activities are they involved in? (2)

A

They are illegal workers who don’t declare their income for tax avoidance purposes.

  1. Trade illegal products/contraband
  2. Employing informal labour
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12
Q

Which profile of cash user is most likely to be involved in money laundering?

A

Underground workers

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13
Q

Why should someone keep their sole account separate from their business account?

A

To make sure they are charged the correct tariffs and tax

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14
Q

Who is liable for debt regarding a joint account?

A

Everyone is jointly and severally liable

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15
Q

At what age is someone considered a minor in relation to bank accounts?

A

Those under 18

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16
Q

Are minors allowed to have overdrafts on their accounts?

A

In practice, most banks just wont offer one. But legally, minors can have one, but only for non-luxury items e.g. food and clothes.

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17
Q

What are the main reasons that people open bank accounts? (3)

A
  1. To be in control of finances
  2. To make payments
  3. To gain access to credit
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18
Q

Which different facilities are available to business customers? (7)

A
  1. Money transmission services
  2. Working Capital
  3. Capital Investment
  4. Protection from risk (insurance)
  5. Foreign business services
  6. Treasury services
  7. Business Advice via a relationship manager
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19
Q

How do businesses use transmission services?

A

To pay wages and suppliers

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20
Q

What is working capital in relation to business accounts?

A

It bridges the gap, allowing businesses to pay suppliers when they have not yet received funds from customers.

A bit like an overdraft facility

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21
Q

What is capital investment in relation to business accounts?

A

Borrowing money from the bank to buy resources, e.g. machinery, equipment and employees. These are considered investments as they are expected to make returns.

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22
Q

What are foreign business services?

A

Sending money or exporting goods overseas

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23
Q

What are Treasury Services in relation to business accounts? (3) To who are they provided?

A

Transaction, investment and information services. Provided to the treasurer or chief financial officers of a business.

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24
Q

What does SME stand for?

A

Small to Medium Enterprise

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25
Q

What are the possible criteria for a small enterprise? (3) How many need to be met to qualify?

A
  1. No more than 50 employees
  2. £10.2 million in max annual sales
  3. £5.1 million max balance sheet

must meet two of these to qualify

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26
Q

What are the possible criteria for a medium enterprise? (3) How many need to be met to qualify?

A
  1. No more than 250 employees
  2. £36 million max annual sales
  3. £18 million max balance sheet

must meet two to qualify

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27
Q

What are the possible criteria for a micro enterprise? (3) How many need to be met to qualify?

A
  1. No more than 10 employees
  2. £632,000 max annual sales
  3. 316,000 max balance sheet
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28
Q

What proportion of UK businesses are SMEs?

A

99.9% (very important target market for banks)

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29
Q

What proportion of private sector employers are SMEs?

A

60% (very important target market for banks)

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30
Q

What is a sole proprietor?

A

Another name for a Sole Trader

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31
Q

Can a sole trader use their personal account for their business?

A

They could, but they shouldn’t as keeping a separate account for their business is better for HMRC/tax

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32
Q

What are the banking needs of a sole trader? (3)

A
  1. Business banking
  2. Loans and mortgages
  3. Business protection (insurance)
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33
Q

What types of insurance is a sole trader likely to need? (3)

A

1.Life insurance
2. For equipment
3. Key persons

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34
Q

What is a general partnership?

A

Two or more people carrying out business together for a profit

35
Q

Is a general partnership a legal entity? What does this mean?

A

No, not a separate legal entity from the individuals. This means the individual partners are jointly responsible for both assets and debt.

36
Q

Which other type of customer are general partnership needs similar to? In what way do they differ? (2)

A

Similar to a sole trader,
(1. Business banking
2. Loans and mortgages
3. Business protection (insurance) )
but business protection is even more important and they also need partnership protection.

37
Q

What is partnership protection?

A

Life assurance taken out by each partner in trust for the others. If a partner dies, the others get a lump sum payout to enable them to buy the deceased’s family to keep control of the business.

NB: the payout can be used for other things, they don’t have to do this, but it is the most common purpose.

38
Q

What legal requirement is there for Solicitors and Accountants regarding client money?

A

Need to have separate accounts for business expenses and client money accounts.

39
Q

Which type of professionals are likely to be LLPs? (2)

A

Accountants and Solicitors

40
Q

What does LLP stand for?

A

Legal Liability Partnership

41
Q

Is an LLP a separate legal entity?

A

Yes - the partners are only liable for the capital they have personally invested.

42
Q

Are LLPs registered with Companies House?

A

Yes

43
Q

How are General Partnerships and LLPs taxed?

A

As individuals. Taxed as if they are self employed and their share of profits are subject to normal income tax.

44
Q

What are the banking needs of LLPs?

A

Same as General Partnerships:
1. Business banking
2. Loans and mortgages
3. Business protection (insurance) )
but business protection is even more important and they also need partnership protection.

45
Q

Are private limited companies separate legal entities?

A

Yes, individuals are only liable for the amount they have invested in shares

46
Q

How are profits of LTD companies paid?

A

In dividends, based on the amount of shares held by an individual.

47
Q

What is one benefit and one challenge of LTD companies?

A

Benefit - easy to change personnel, they aren’t tied to the company like a partnership
Challenge - difficult to transfer shares. They cannot be listed on the stock exchange so it is difficult to assess their value. Shareholders are usually family members not wanting to sell.

48
Q

What is a memorandum?

A

The company’s powers to borrow, i.e. what the company can do, including the amount and purpose of any loans.

49
Q

What are the articles of association? What is included within? (3)

A

The working rules of a company.

e.g. duties /powers of the director, transfer of shares, company conduct

50
Q

Where is a certificate of incorporation registered? What info does it contain? (2)

A

Companies House
1. Shareholders names and shares held
2. Director & Secretary names and addresses

51
Q

What does PLC stand for?

A

Public Limited Company

52
Q

Does a PLC have a certificate of incorporation?

A

No, it has it’s own version called a Trading Certificate

53
Q

What is the main difference between a PLC and a LTD co?

A

PLCs can sell shares to the public on the stock market.

54
Q

What is the role of a PLC’s board of directors? (3)

A
  1. Responsible for overall strategy and direction of the company
  2. Elected by members at an AGM
  3. Are shareholders of the PLC
55
Q

What is the role of a PLC’s CEO?

A
  1. Day-to-day running of most matters
56
Q

What is the minimum capital that PLCs need to issue to its shareholders?

A

£50,000 min

57
Q

What are some examples of large PLC household names? (3)

A

Vodafone, Tesco, Barclays

Their share capital is in the billions

58
Q

Who is likely to be the majority shareholder of a PLC? What rights can this bring someone?

A

Institutional investors, e.g. investment houses and pension funds

Those with a big enough share have the right to appoint a board member

NB: CEOs are NOT likely to be majority shareholder

59
Q

What is a non-personal account? What are some examples?

A

One used not for individuals or companies. It is for people who look after funds on behalf of others. e.g. sports teams & charities

60
Q

What is a settlement?

A

Another name for a trust

61
Q

What is a Settlor?

A

The owner of an asset - the person who originally owns the property and creates the trust.

62
Q

Do trusts only come into affect after the death of the settlor?

A

No, can be whilst settlor is still living. Once the trust comes into effect, the settlor no longer has any rights over the property.

63
Q

Can a settlor also be a trustee?

A

Yes

64
Q

What is an asset benefitor?

A

Another name for beneficiaries. Those who benefit from the trust.

65
Q

What is meant by an asset of a trust?

A

The property held within it

66
Q

Who appoints the trustees?

A

Settlor

67
Q

What is the role of a trustee? (2)

A
  1. Legal ownership of the trust
  2. Administer the trust according to the Trust Deed
68
Q

What are the banking needs of a trustee? (3)

A
  1. Make payments to beneficiaries
  2. Investment services (on behalf of beneficiaries)
  3. Borrowing, if trust deed gives them the power to do so
69
Q

What is liable for the debt of a trust?

A

Trustee is personally liable for any debt

70
Q

What are the two types of personal representative?

A
  1. Executor - with valid will
  2. Administrator - without valid will
71
Q

What is a testator?

A

The deceased person in relation to inheritance

72
Q

What is the role of an executor?

A

Apply for probate which gives them the legal authority to distribute the testator’s estate according to their will

73
Q

How are executors appointed?

A

By the testator in the will, however, they don’t have to agree to act if they have been appointed. You can also appoint a solicitor to be your executor to ensure the estate is handled by an experienced professional.

74
Q

What is the role of the Administrator?

A

Grant of Letters of Administration gets issued & must deal with the estate according to the laws of intestacy

75
Q

What does intestate mean?

A

dying without a valid will

76
Q

What makes a will valid? (3)

A
  1. Completed by someone age 18+
  2. Completed in writing
  3. Properly executed
77
Q

What are the responsibilities of a personal representative?

A
  1. Distribute assets
  2. Settle any debts
  3. Be personal liable for any debt
78
Q

What can personal representatives do in banking?

A
  1. Open a bank account (sole or joint)
  2. Take out a probate loan (to help cover inheritance tax)
79
Q

Where must all charities register?

A

With the charity commission

80
Q

What are the banking needs of a charity? does this depend on its size?

A

All charities need business banking accounts.

Larger charities have needs similar to medium sized companies and may need more sophisticated services to distribute funds.

81
Q

Are clubs, associations and societies a separate legal entity? Can they take out loans?

A

NOT separate entity - club etc cannot be sued for debt

but can have debt, the bank will require individuals to act as guarantors & have full liability

82
Q

What are the banking needs of a club/association/society?

A

Basic business banking - e.g current and deposit accounts

83
Q
A

Certificate in Retail and Digital Banking (Cert RDB) (23 decks)

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