Chapter 1 Flashcards
- Insurance and risk management is one of the four essential functions of the financial services industry. Reinsurance means:
A. insuring against certain situations using a form of policy
B. small premiums paid on each insurance policy being pooled by the insurer
C. assessing and accepting a risk but passing it on for a proportion of the premium
D. a risk that is too small for an insurance company to take on
C - A company may consider certain insurance risks too great to take on alone; however, they may still agree to insure but pass the risk to a reinsurance company for a proportion of the premium. This is called reinsurance.
- What is FATF an abbreviation of?
A. Financial Action Task Force
B. Financial Action Team Force
C. Financial Authority Task Force
D. Forum Action Task Force
A - The Financial Action Task Force (FATF) is the global regulatory body for money laundering.
- Historically, UK banks and building societies were developed from the consumer need to:
A. provide a return on short term deposits
B. make a profit for shareholders using savings to make long term investment
C. provide a safe but accessible place to keep individual’s money
D. turn short-term savings into longer term lending
C -Banks and building societies were developed for investors as a place to keep their money safe and easily accessible. Both organisations provide investors with a return on short term deposits; however, this is not essentially why these organisations were developed. Banks have shareholders and therefore aim to make enough profit to pay dividends. Building societies are mutual companies owned by their members. Any profit they make is returned to members in the form of better interest on savings or lower interest on loans.
- Gary holds a share account with his local building society branch. What benefits might Gary expect in the event of demutualisation?
A. Lower interest rates on borrowings
B. Higher interest rates on savings
C. Increased product range
D. Cash or shares in the new company
D - On the demutualisation of a building society, its members usually benefit from the money raised by way of either a cash payment or shares in the new listed company.
- How would you describe the impact of the EU on UK regulation?
A. UK financial services are not subject to regulations imposed by the EU
B. A limited amount of UK financial services regulation originates from the EU
C. UK financial services regulation is solely derived from the EU
D. Around 70% of the FCA’s policy making is driven by EU initiatives
D - The UK financial services industry is heavily influenced by and subject to EU laws and regulations. Around 70% of the FCA’s policy-making has been driven by EU initiatives.
