1 - Understand the UK financial Services industry in its European and global context

Question 1

Four functions of financial services

Answer 1

1. Savings are protected and then into capital management
2. A means for savers to access capital which match borrower requirements for long term funds
3. Allow individuals and firms insure against risk with assumption of compensation
4. Allow investors to diversify portfolios

Question 2

Who do building socities owned by

Answer 2

The individuals who share accounts with them

Question 3

Who are banks owned by

Answer 3

Shareholders

Question 4

What do banks do with money that it receives in current account

Answer 4

Use it to make a return for itself. Eg lending it and charging interest

Question 5

What is the main purpose of a gilt?

Answer 5

Function as a loan to government

Question 6

Two objectives of capital markets

Answer 6

1. Enable investors to invest in assets that provide potential for real growth
2. Help firms raise moeny without borrowing from bank

Question 7

Two different types of financial instruments

Answer 7

1. Shares
2. Fixed interest stocks (bonds)

Question 8

What does financial infrastructure consist of?

Answer 8

• Payment
• Settlement
• Clearing and trading systems

Question 9

Who is PSR

Answer 9

Payment system regulator

Question 10

Who provides infrastructure of clearing and settlements of securities and derivatives market

Answer 10

Clearing houses and settlement systems

Question 11

What is it called when a building society turn into a bank

Answer 11

Demutualisation

Question 12

Indirect services offered by banks and building societies

Answer 12

• Portfolio management
• Stockbroking services
• Collective investment services
• Insurance and pensions

Question 13

Core services offered by banks and building societies

Answer 13

• Current acc
• Deposit acc
• Mortgages and loans

Question 14

Friendly societies

Answer 14

Established in 19th century as mutual self-help groups with no shareholder taking profits, thus all profits would be repayable to society’s members. They are tax exempt as they were “self-help”, however legislation has restricted size of contracts offered

Question 15

Multi-distribution organisations

Answer 15

Marketing of Financial services becomes easier once you are established. See Sainsbury’s, Tesco and M&S.

Due to introduction of government approval of products within charges, access and terms(CAT)

Question 16

3 European Supervisory authorities

Answer 16

European Banking Authority
European Securities and Market Authority
European Insurance and Occupational Pensions Authority

Question 17

What are the 3 key UK regs

Answer 17

FSMA, Financial services act and the Bank of England and financial services act

Question 18

Global: Who coordinates national financial authorities and makes recommendations about the global financial system

Answer 18

Financial stability board

Question 19

Global - who Sets international standards on anti-money laundry and counter-terrorist financing

Answer 19

Financial Action Task Force

Question 20

Global - Who supervises and sets common standards for the international insurance sector

Answer 20

International organisation of Insurance Supervisors (IAIS)

Question 21

Global - who sets prudential regulation of banks

Answer 21

Basel Committee on Banking Supervision (BCBS)

Question 22

Global - monitors and assess risks to the stability of the financial system as a whole

Answer 22

European Systemic Risk board

Question 23

Global - who supervises individual financial institutions

Answer 23

European system of financial supervision