3.1 - Political Factors Flashcards
Reasons to regulate banking and finance
- Protects customers from dishonest or financially unstable providers
- Reduces likelihood of future financial crisis
- Gives people confidence in financial system.
Three bodies that replaced the FSA
- FPC
- FCA
- PRA
What are the FPC, FCA and PRA responsible for?
- Enforcing system of regulation
- Maintaining stability of the industry and of individual providers
- Ensuring that consumers are fairly treated
Mis-selling definition
When a provider is reckless in selling a product to an unsuitable customer
Payment protection insurance definition
Insurance product that ensures repayment of loans if a borrower face unexpected events that prevent them from repaying the debt.
Who has responsibility for regulating consumer credit?
FCA
Political agenda definition
A set of government policies focused more directly on helping to ensure that every individual has access to the benefits that financial products can provide.
Social inclusion definition
Ensuring all individuals and groups in society have access to certain rights, such as employment
A society in which there is full social inclusion is one in which all members of society:
- Can participate fully
- Can influence decisions affecting them
- Are able to take some responsibility for what goes on in their communities.
Possible reasons for people being socially excluded:
- Physical or mental illness or disability
- Poor basic skills
- Live in a deprived urban area
Financial exclusion definition
The inability to get access to even the most basic financial services products and services
What can cause financial exclusion?
- The same issues as social exclusion
- Financial literacy
Financial literacy definition
An individual’s level of knowledge and understanding of financial matters
What is a measure of financial exclusion?
The number of people who do not have a bank current account
Someone without a bank account is unable to access other financial services such as
- Some savings accounts
- Some products usually require monthly payments by direct debit
- Gas, electricity and others often offer discounted prices if payment is made through direct debit.
Why did not having a current account become a problem for those relying on government benefits before 2003?
Claimants received a cheque but after 2003 benefits became payable into bank accounts by automatic credit transfer
What policy was a commitment of banks to offer basic bank accounts to any applicant?
Universal Banking policy
Financial inclusion definition
The delivery of financial services at affordable cost to disadvantaged segments of society
What has the government encourages banks and other providers to do?
- Offer a range of products aimed at the financially excluded
- Provide information on products in a way that is accessible to everyone
- Promote inclusion through financial education
Examples of banks developing their own financial education resources
- Moneysense for Schools
- Nationwide Education
- Barclays ‘Life Skills’
Passporting definition
The process whereby any British-based financial institution can sell their products and services into the EU without the need to obtain a license.
Perfect market definition
When there are large numbers of financial providers in the market selling the same product
Information failure definition
A situation in which consumers are not fully informed about a product
What should consumers know?
- The product itself
- The best way in which to buy it
- Your own needs and the products available to meet those needs
Political external factor examples:
- Government changes
- Shareholders and their demands
- Funding
