Chapter 1 - Introduction To Financial Markets Flashcards
Conscious vs Unconscious Saving
Depositing money in bank vs Using a fund manager
2 ways companies lend money
Short Term Money Markets, Long Term Bond Markets
Name of the UK Govt shortfall in spending
Public Sector Net Cash Requirement (PSNCR)
Wholesale vs Retail Investors?
Institutional (pension, charities, insurance) vs everyday fellows
Role of Inv Bank
– Trading as principal: Buying and selling shares for their own account
– Broking: Dealing on behalf of clients
– Market making: Quoting prices to other market participants
– Research: Providing analysis on investments and their potential
– Corporate finance: Advice and execution related to the raising of capital by companies
– Mergers and acquisitions: Takeover advice
– Fund management: Investing client funds to maximise returns
What differentiates Building Socs from Retail banks?
They are owned jointly by all of their savers
and borrowers and do not pay returns to shareholders
Name 3 Investment Distribution Channels?
Direct, via IFAs, or Appointed Reps
Economic focus of Governments
They have the ultimate goal of establishing low unemployment and low interest rates to create a
constant and sustainable growth.
Whats the governments Inflation Benchmark?
2.0%
How is inflation affected by the Gov, and BoE
Gov: Spending and Taxation, Boe: Controlling base rate of interest
FSA (2012) Four Objectives
One strategic objective:
* Ensure the relevant markets work well
Three operational objectives
* Consumer protection: Ensuring an appropriate degree of protection for consumers
* Integrity: Protecting and enhancing the integrity of the UK financial system
* Competition: Promoting effective competition in the interests of consumer
Major objectives of the EU?
- Economic and social progress
- Sustainable development
- An area without internal frontiers
- Economic and monetary union
The three European Supervisory Authorities (Post Brexit)
- The European Securities and Markets Authority (ESMA)
- The European Banking Authority (EBA)
- The European Insurance and Occupational Pensions Authority (EIOPA)
ESMA Mission and 3 objectives
- To enhance investor protection and promote stable and orderly financial markets
ESMA has three objectives:
* Investor protection
* Orderly markets
* Financial stability
ESMA Four activities to achieve objectives
- Promoting supervisory convergence
- Assessing risks to investors, markets and financial stability
- Completing a single rulebook for EU financial markets
- Directly supervising financial entities
What does the ESRB do?
Monitor the entire financial sector to identify potential
problems.
Objectives of the FSAP
- To create a single EU wholesale market
- To achieve open and secure retail markets
- To create state of the art prudential rules and structures of supervision
What did FSMA 2000 do?
Created the framework for regulation in the UK financial services industry.
What 3 things fell out of the FSA 2012 overhaul?
FPC, PRA, FCA
Role of the BoE
Overseeing financial markets infrastructure (FMI)
* E.g. payment systems and recognised clearing houses
- Broad overview of the financial system
- Maintaining stability in the financial system
- Appointing the chairman of the Takeover Panel
Oh you like PRA? Name 3 PRA Firms?
- Deposit takers
- Insurers
- Significant investment firms
Penalty for breaching GDPR?
4% of annual global turnover or €20m
1 strategic and 3 operational FCA objectives
Strategic objective
* To ensure that relevant markets function well
Operational objectives
* Consumer protection
- Securing an appropriate degree of protection for consumers
* Integrity
- Protecting and enhancing the integrity of the UK financial system
* Competition
- Promoting efficiency and choice in the market for financial services
General Powers of FCA
4A Auth
4A Rulemaking
Financial Crime Prosecution
Supervision and Disciplinary Action
