3 Flashcards
Conduct of
business
The way in which a business is run. In financial services, the FCA
enforces conduct of business regulations, which include requirements
for providers to carry out their operations with integrity, skill and
diligence, treat customers fairly and communicate with them clearly.
Deleveraging
Reducing the amount of debt in relation to assets. In personal terms,
this might mean paying off loans, credit cards, etc.
Economic
sustainability
Ensuring that economic activity is carried out in a way that ensures it
can continue in the long term, eg by taking account of the capacity of
natural and human resources to sustain it
Environmental
sustainability
Reducing the negative impacts of human activity on the environment
so that natural resources can be sustained into the future, eg by
reducing atmospheric pollution and making more use of renewable
resources
Equator Principles
A set of ethical benchmarks for banks to follow when taking decisions
to finance infrastructure projects, such as dams or pipelines
Ethical lending
Lending money to, for example, companies that invest in green
technology, or charging lower insurance premiums to people with
more carbon-efficient cars.
Financial contagion
A situation in which debt works its way through the global financial
system; the problems of one group of institutions spread to other
institutions, threatening confidence in and the sustainability of
financial systems. See systemic risk
Leverage
The amount of borrowing a company has in relation to its assets.
Liquid assets
Cash or assets that can be easily converted into cash without losing
any of their value
Liquidation
The process by which a company (or part of a company) is brought to
an end, and the assets and property of the company are redistributed
Moral hazard
A situation in which there is lack of incentive to guard against risk
because the risk-taker believes that they will be protected from any
negative consequences. For example, the banks believing that the
government would bail them out if they got into financial difficulty
and so they would not have to face the consequences of imprudent
actions
Mortgage Market
Review (MMR
Reforms made to the mortgage market in April 2014 to ensure it is
sustainable and works better for consumers.
Perilous debt
A situation in which someone is spending more than half of their
monthly income on debt repayments
Provider
sustainability
A company with a sustainable business model. For example, a bank
that is willing to take less risk even if this means giving up the chance
of making additional profits. If providers are run sustainably, they will
be less likely to fail and, therefore, less likely to trigger a systemic
failure.
Prudential
regulation
Regulation that is designed to ensure financial services providers do
not fail or, if they do, that their failure does not have an impact on the
wider financial system. One of the ways that this is done is by
requiring providers to hold a certain level of capital and also a certain
level of liquid assets, so that they can meet demand from customers
seeking to withdraw funds
Social sustainability
A concern with creating communities that foster well-being, peace,
security and justice for the people who live in them.
Speculators
People who buy and sell the shares of many companies in order to
make quick profits on the deals
Stakeholder groups
The groups of people upon whom financial services providers have an
impact – including employees, customers and shareholders
Sustainable
developmen
Development that meets the needs of the present without
compromising the ability of future generations to meet their own
needs.
Sustainable
financial produc
A financial product that is designed to meet the long-term
requirements of those who buy i
Sustainable
financial system
A system in which financial services are delivered in a way that means
they can continue to be delivered and meet the needs of customers
over the long term
Systemic risk
Risk that affects an entire system. In financial services terms, it is risk
that begins with one provider or group of providers and spreads
because different parts of the financial system are interconnected
Systemically
important financial
institutions
The large firms within the financial services sector that would cause
serious problems for the whole economy if they were to fail.
