1 - The UK Financial Services Industry: An Overview Flashcards
What function do banks and building societies perform?
Turning short term savings into longer term lending.
What do government’s use to fund its own borrowing?
- private individuals’ savings
- National savings
- Investments
What is the principle of insurance and risk management?
To protect and safeguard assets from the financial effects of damage or loss
Why were capital markets developed?
To meet x2 key objectives:
1) the need for investors to be able to invest in assets that provide the potential for real growth
2) the need for companies to raise money without necessarily having to borrow it from a bank
What is real growth?
growth over and above the general increase in prices
What are the key components within the financial sector?
1) FINANCIAL INFRASTRUCTURE = the payments, settlement, clearing and trading systems
2) FINANCIAL MARKETS = both on exchange and OTC
3) FINANCIAL FIRMS = including banks (retail or investment) pension funds and insurance firms
4) THE FINANCIAL SECTOR AUTHORITIES = the BoE, the FCA, the PRA and HM Treasury
What are fully independent financial advisors?
Qualified and authorise to give advice on life assurance pensions and investments from any provider in the market
What are restricted advisors?
May be similar to independent financial advisors but they do not offer advice on all retail investment products, or only offer the products from one provider so may not describe themselves as independent
What is the FSAP
Financial Services Action Plan
- one of the key developments for European regulation of the financial services industry
- remove barriers & increase competition among financial services firms
Treasury
Responsible for the regulation of the financial services market under the direct authority of the chancellor of the Exchequer
What are they key legal instruments governing the financial services industry?
- Financial Services & Markets Act (2000)
- Financial Services Act (2012)
How does the Gov. stimulate private pension uptake?
- further sweeping pension simplification reforms
- introduction of auto-enrolment
- National Employment Savings Trust (NEST)
What would reduce the range of state benefits?
Increase demand for:
- UK savings
- pensions
- Insurance providers
Financial Action Task Force
The INTERNATIONAL standards setting body that is charged with combating money laundering and related threats to the global financial system
Who would regulate one of the largest UK life insurance companies?
- Prudential Regulation Authority (PRA); and
- Financial Conduct Authority (FCA)
Gilts
Considered as a savings vehicle that produces a predictable level of income which is paid back at regular intervals
Repo rate
The interest rate implied by the difference between the sale and repurchase rate
What is the potential return from company shares investment?
An increase in share value plus an income in the form of a dividend
Who oversees the UK payments system?
Bank of England
PSR
Payments Systems Regulator - ensures the payment systems work well for users
DOES NOT oversee the system
Discretionary vs execution only portfolio management service
Discretionary - here are my goals, IFA uses his discretion to reach client goals
Execution only - here is want I want to do, can you do it
How do you categorise clients spending? 2
3 ways:
- Essential
- Non-essential
- Occasional
Flexible whole of life policies 2
consumer has the ability to change sum assured at any time thus influencing the monthly premiums
What is the term ‘bancassurer’ used to describe?
a life office, owned by a bank, to distribute products via their branches
