1. UK Financial Services Sector Flashcards
(39 cards)
Key aims of a government’s economical policy (6)
- Gives legal and regulatory framework for economic activity
- Involved in directing and managing an economy
- Sustainable growth
- Control inflation
- Full employment
- Manage balance of payments
What is sustainable economic growth
Implies increase in national income in real terms (.per head of population)
Implies major fluctuations in business cycle (boom/bust) are avoided
economic activity grows in upward trend
key aim of government econ policy
What is the UK aim of a moderate inflation level (%)
2%
Objective of Bank of England
Full employment government target?
Target level of employment with low levels of unemployment
involuntary unemployment is short term
Balance of payments (gov target)?
Between import and export
What is fiscal policy? 2 key tools?
- gov policy on taxation, public borrowing and public spending
- direct taxation - taxation of incomes of individuals and on the profits of companies (corporation tax), as well as on wealth transfers in the form of inheritance tax.
indirect taxation - taxation of products and services that consumers/companies purchase and use (i.e. VAT)
Direct taxation
tool of government fiscal policy
taxation of incomes of individuals and on the profits of companies (corporation tax), as well as on wealth transfers in the form of inheritance tax.
INDIRECT TAXATION
- tool of fiscal policy
the taxation of products and services that consumers/companies purchase and use
ie, value added tax (VAT)
PSNCR?
Public sector net cash requirement - offish term for UK gov budget defecit
Rat at which gov must borrow to maintain financial commitments
prev known as PSBR (public sector borrowing requirement)
How can government intervene in the economy
Spend, collect, divert
- spending more money and financing this expenditure by borrowing (issuing gilts to investors)
- collecting more in taxes without increasing spending (ie, increase tax levels/lower threshold levels)
- collecting more in taxes in order to increase spending, thus diverting income from one part of the economy to another.
Gov increases spending - what happens to national income?
Rises
What government action indicates a contractionary fiscal stance
Increasing tax collection without increasing spending, or reducing spending alone
Raising tax can also ease inflationary pressures
hopes of slowing down unsustainable production or lowering asset prices.
What gov action indicates neutral fiscal stance
Increased tax collection (either increased taxes or lower threshold) in order to increase spending
Diverting income between parts of economy
Balanced budget multiplier
measures changes in aggregate output when the government changes its spending and taxes at an equivalent rat
if the government increases spending and taxation by the same amount
(taxpayers would save some of the money now paid in increased tax, but the government spends 100% of increased tax within economy
increased aggregate monetary demand
More real money is spent
How does government fiscal policy impact balance of payments
gov spending/tax reductions may be inflationary - by increasing demand for products
increased domestic prices makes imports relatively cheaper and exports less competitive
How can fiscal policy affect employment
increased government spending on capital projects, on which people are employed to work
government-funded training schemes
taxation of companies on the basis of the numbers and pay levels of employees
gov spending can create inflationary pressures leading to unemployment
fiscal policy = tightrope
Fiscal policy planning
Fiscal policy changes can have knock on effects with long timeframes
Budget spending to then plan how much will need to be raised by tax/borrowing
Annual cycle - Autumn in UK statement of changes to budget
Is fiscal policy short or long term
Long term - annual cycle of gov finances - not responsive to short term developments
Gov uses monetary policy for shorter term adjustments
What does European system of financial regulation consist of
EIOPA
EBA
ESMA
European systemic risk board
3 supervisory authorities
- EIOPA (european insurance and occupational pensions authority)
- EBA (european banking authority)
- ESMA (european securities and markets authority)
Financial services regulation in China
CRSC
CBIRC
PBOC
The China Securities Regulatory Commission (CSRC)
The China Banking and Insurance Regulatory Commission (CBIRC)
The People’s Bank of China (PBOC).
Fin services regulation in HK
SFC SEHK HKFE HKME IA
Securities and Futures Commission (SFC) Stock Exchange of Hong Kong (SEHK) Hong Kong Futures Exchange (HKFE) Hong Kong Monetary Authority (HKMA) Insurance Authority (IA)
Fin services regulation in Japan
FSA
SRO
JSDA
Financial Services Agency (FSA), which includes planning, supervisory and inspection functions.
Self-regulatory organisations (SROs), such as the various Japanese securities exchanges and the Japan Securities Dealers’ Association (JSDA)
Fin regulation in Singapore
MAS
SGX
SIC
Monetary Authority of Singapore (MAS) Singapore Exchange (SGX) Securities Industry Council (SIC).
Impact of recession on financial markets
recession + early recovery = low/falling inflation, low/falling interest rates
(loan demand slow, bond prices increase, central bank eases monetary policy)
