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DipsFS Unit 4 > 1.1 An Overview of the Financial System > Flashcards

1.1 An Overview of the Financial System Flashcards

1
Q

Types of financial institutions:

A
  • Banks
  • Building societies
  • Credit unions
  • Friendly societies
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2
Q

What does financial intermediation involve?

A

Taking in money and using it to provide financial services and to make a profit

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3
Q

What are the two types of banking?

A
  • Retail business

- Investment business

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4
Q

What is investment business also known as?

A

Wholesale business

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5
Q

What are banks that carry out both types of business known as?

A

Universal banks

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6
Q

What do retail banks do?

A

Provide services to individuals and small and medium-sized businesses.

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7
Q

What are the different headings that retail bank services can be grouped under?

A
  • Money transmission
  • Savings and investment
  • Lending
  • Insurance
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8
Q

What are the main retail banking firms?

A
  • RBS Group
  • HSBC
  • Barclays
  • Lloyds Banking Group
  • Standard Chartered
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9
Q

Examples of smaller institutions:

A
  • Co-op Banking Group

- Virgin Bank

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10
Q

What do investment banks do?

A

They raise funds on the financial markets, which they then use to provide special services to large corporations and governments

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11
Q

Activities of investment banks:

A
  • Lend large amounts to companies
  • Help companies raise funds from investors by issuing shares on the markets
  • Advise companies on mergers and takeovers
  • Deal in the financial market to make profits for themselves
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12
Q

What type of banking do UK banks engage in?

A

Both

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13
Q

Examples of firms that only offer investment banking:

A
  • Goldman Sachs

- JP Morgan Chase

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14
Q

Building societies are mutual organisations, what does this mean?

A
  • They are not PLC’s and do not have share capital
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15
Q

Who are building societies owned by?

A

Their members

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16
Q

What is done with surplus in a building society?

A

It is retained within the business for the benefit of the members

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17
Q

Providers of insurance can be divided into what categories?

A
  • Individual insurance companies

- Lloyds specialist insurance market

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18
Q

Are most insurance companies corporates or mutual?

A

Mutual

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19
Q

What is the structure of the Lloyds insurance market?

A

It is made up of syndicates (groups) of members who employ specialists known as ‘underwriters’ to accept insurance risk and to divide it out between them.

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20
Q

What are friendly socieities?

A

They are mutual organisations that offer members a wide range of financial products

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21
Q

How can someone be eligible to become a member of a credit union?

A

They must meet the common bond criteria that is has laid down e.g. live or work in a certain area

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22
Q

Functions of the Bank of England:

A
  • Achieve monetary stability
  • Achieve financial stability
  • Acting as a banker to the banks
  • Issuing UK banknotes
  • Managing the UK’s gold and foreign exchange services
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23
Q

What does the MPC do?

A

They raise and lower interest rates in order to achieve stable prices and confidence in the currency.

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24
Q

What is the Bank of England a member of?

A

The European System of Central Banks

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25
Q

The three financial regulatory bodies in the UK are:

A
  • FPC
  • PRA
  • FCA
26
Q

What is the FPC responsible for?

A

The survival and stability of the financial system

27
Q

What is the main objective of the FPC?

A
  • Identifying and taking action to remove risks

- Supporting the economic policy of the Government

28
Q

Is the FPC part of the Bank of England?

A

Yes

29
Q

What is the PRA responsible for?

A

The regulation and supervision of individual financial services providers

30
Q

Main objectives of the PRA:

A
  • Promote safety and soundness of financial services providers
  • Secure protection for insurance policyholders
  • Facilitate effective competition in financial services
31
Q

Is the PRA part of the Bank of England?

A

Yes

32
Q

Is the FCA part of the Bank of England?

A

No

33
Q

What is the aim of the FCA?

A

To ensure that financial markets work well for consumers

34
Q

What are the objectives of the FCA?

A
  • Secure protection for consumers
  • Protect and enhance the integrity of the UK financial system
  • Promote effective competition
35
Q

What is the HM Treasury?

A

The UK’s economic and finance ministry

36
Q

What is the HM Treasury responsible for?

A

Lawmaking and forming the framework of regulation

37
Q

What is the MAS?

A

An independent service that offers free and unbiased information to the public

38
Q

What is the aim of the MAS?

A

To enhance people’s financial knowledge

39
Q

What are the responsibilities of the CMA?

A
  • Investigate mergers
  • Prosecute businesses that operate cartels
  • Ensure companies to not operate in a way that makes it difficult for consumers to choose between suppliers
40
Q

What does the FOS do?

A

Settles complaints that customers and financial businesses are unable to resolve for themselves

41
Q

What is the FSCS?

A

A fund that can pay compensation to customers if an institution is unable to pay its debts

42
Q

What is the limit of compensation under the FSCS?

A

100% if savings deposits up to £85,000 per person per firm

43
Q

What is the British Bankers’ Association?

A

The leading association for the UK banking sector

44
Q

What is the Building Societies Association?

A

The trade association for UK building societies

45
Q

What is the Association of British Insurers?

A

The trade body for insurance companies in the UK

46
Q

Is the FPC part of the Bank of England?

A

Yes

47
Q

What financial products do building societies specialise in?

A
  • Current and savings accounts

- Mortgage loans

48
Q

The UK Government is a shareholder in which two banks?

A
  • RBS Group

- Lloyds Banking Group

49
Q

Sustainable financial system definition

A

One that comprises of institutions that behave wisely

50
Q

Which is riskier out of retail banking and wholesale banking?

A

Wholesale banking

51
Q

When was the RBS Group formed?

A

When Royal Bank of Scotland acquired NatWest

52
Q

What providers did Lloyds Bank buy to become Lloyds Banking Group?

A
  • Trustee Savings Bank
  • Scottish Widows
  • HBOS
53
Q

What is the largest building society in the UK?

A

Nationwide

54
Q

What is happening to the number of building societies?

A

They are falling

55
Q

Why were building societies affected by the financial crisis?

A

Because of their investment in property and exposure to falling property prices

56
Q

Legislative changes in the UK mean that credit unions can now do what?

A

Extend their services to new groups, including community groups and businesses

57
Q

What are the main products offered by credit unions?

A
  • Savings accounts

- Loans

58
Q

What is the membership organisation for UK credit unions?

A

The Association of British Credit Unions Ltd

59
Q

When were friendly societies first formed?

A

When people began to group together to contribute to a mutual fund and to receive benefits in times of need

60
Q

What does the name of a friendly society often hint at?

A

Its history with a place or occupation e.g. Shepherd’s Friendly Society

61
Q

What happens if a customer has savings split across institutions that share a banking authorisation under the rules of the FSCS?

A

The institutions will be treated as one.

62
Q

What happens under the rules of the FSCS if someone has savings of £85,000 in one bank and another £85,000 in another that belongs to the same financial services group?

A

The person will only be eligible to receive £85,000

DipsFS Unit 4 (52 decks)

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