5.3-Financial Regulation Flashcards
What is financial regulation?
Financial regulation refers to the rules and laws that govern financial institutions and markets to maintain stability and protect consumers.
True or False: Financial regulation only applies to banks.
False
Name one primary objective of financial regulation.
To ensure the stability of the financial system.
What does the term ‘systemic risk’ mean?
Systemic risk refers to the risk of collapse of an entire financial system or market, as opposed to individual entities.
Fill in the blank: The _____ is the primary regulator of financial markets in the UK.
Financial Conduct Authority (FCA)
What is the role of the Bank of England in financial regulation?
The Bank of England oversees monetary policy and ensures financial stability.
Multiple Choice: Which of the following is NOT a type of financial regulation? A) Capital requirements B) Consumer protection C) Market manipulation D) Tax evasion
D) Tax evasion
What is the purpose of capital requirements?
To ensure that financial institutions have enough capital to absorb losses and reduce the risk of insolvency.
True or False: The Financial Stability Board (FSB) was established after the 2008 financial crisis.
True
What is ‘prudential regulation’?
Prudential regulation refers to the framework that ensures financial institutions operate safely and soundly.
Fill in the blank: The _____ is responsible for consumer protection in financial services in the UK.
Financial Conduct Authority (FCA)
What does the term ‘liquidity’ refer to in finance?
Liquidity refers to how quickly and easily an asset can be converted into cash without affecting its market price.
Multiple Choice: Which of the following is a consequence of inadequate financial regulation? A) Increased consumer trust B) Financial instability C) Higher interest rates D) Increased investment
B) Financial instability
What is the purpose of stress testing in financial regulation?
To evaluate how financial institutions can handle economic shocks and adverse conditions.
True or False: The Basel Accords are international regulatory frameworks for banks.
True
What does the term ‘moral hazard’ mean?
Moral hazard is the risk that a party engages in risky behavior because they do not bear the full consequences of that risk.
Fill in the blank: The _____ regulates the conduct of investment firms and markets in the UK.
Financial Conduct Authority (FCA)
What is the primary goal of consumer protection regulations?
To ensure that consumers are treated fairly and to prevent financial abuse.
Multiple Choice: Which of the following is a financial regulatory body in the US? A) SEC B) FCA C) ECB D) FSB
A) SEC
What is ‘too big to fail’?
The concept that certain financial institutions are so large that their failure would be catastrophic to the economy.
True or False: Financial regulations can hinder economic growth.
True
What does ‘risk-based regulation’ involve?
It involves focusing regulatory resources on areas of greatest risk to the financial system.
Fill in the blank: The _____ was established to monitor and regulate systemic risk in the financial system.
Financial Stability Oversight Council (FSOC)
What is the main purpose of anti-money laundering regulations?
To prevent the process of making illegally obtained money appear legitimate.
