Chapter 1 Qs Flashcards
How does the UK financial market operate in respect of both investments and loans.
A) All short-term investments are used to create short-term loans.
B) Financial intermediaries help transform short-term savings to long-term loans.
C) Long-term risk is transformed to short-term risk via financial intermediation
D) Small investments are grouped together to facilitate larger loans via financial disintermediation
B) Financial intermediaries help transform short-term savings into long-term loans (1:1)
financial intermediary is an institution, such as a bank, building society, or unit-trust company, that holds funds from lenders in order to make loans to borrowers.
How do financial markets across the various EU member states operate?
A) As a single market governed by European Parliament
B) As independent markets regulated by bodies in each Member State where capital may flow in and out without restriction
C) As independent markets regulated by the European Central Bank where capital may flow in and out without restriction
D) As independent markets regulated by bodies in each member state where capital flow is restricted by limits set centrally
B) As independent markets regulated by bodies in each Member State where capital may flow in and out without restriction (1:1)
Within the UK economy, an example of disintermediation would be the?
A) Arrangement of life assurance policy through an independent adviser
B) Arrangement of a personal loan with a bank
C) Purchase of securities from a stockbroker
D) Purchase of UK gilts from a debt management company
D) Purchase of UK gilts from a debt management company (1:2)
Disintermediation, in finance, is the withdrawal of funds from intermediary financial institutions, such as banks and savings and loan associations, to invest them directly.
Reinsurance Means
A) insuring against certain situations using a form of policy l
B) small premiums paid on each insurance policy are 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)assessing and accepting a risk but passing it on for a proportion of the premium
What is the FATF an abbreviation of ?
A) Financial action task force
B) Financial action team force
C) Financial authority task force
D) Financial authority team force
A) Financial Action Task Force
What benefits could a building society member 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) Cash or shares in the new company
Demutualisation is when a private company turns into a public trading company. The members usually benefit from the money raised by either cash payments or shares in the newly listed company.
Banks and building societies were developed from the need to:
A) Provide a return on short term goals
B) Make a profit for shareholders using savings to make long term investment
C) Provide a safe but accessible place to keep individuals money
D) Turn short-term savings into longer-term loans
C) Provide a sage but accessible place to keep individuals money
How would you describe the impact of the EU on UK legislation?
A) UK financial services are not subject to regulations imposed by the EU
B) A limited amount of the UK financial services regulation originates from the EU
C) UK financial services regulation is solely derived from the EU
D) Around 70% of the FCAs policy making is driven by EU initiatives
D) Around 70% of the FCAs policy making is driven by EU initiatives
The UK financial services industry is heavily influenced by and subject to EU laws and regulations.
A UK life assurance company is establishing a separate offshore company in the Isle of Man. In respect of the relevant EU directives, the UK company should be aware that?
A) All EU directives that apply to the UK company will automatically apply to the company in the isle of man
B) EU directives will not apply in respect of the company in the Isle of Man
C) The UK companies registration by the FCA will be atomically passported to the Isle of Man
D) The Isle of Man regulators must apply all EU directives to non UK-based companies
B) EU directives will not apply in respect of the company in the Isle of Man (1:3)
How do the EU directives affect UK financial services companies, if at all?
A) Directives are binding on companies immediately and must be implemented as prescribed in the directive.
B) Directives are binding on all companies and the methods of implementation will be prescribed by the government.
C) Directives do not affect UK financial services companies
D) Directives may be considered by the Government and implemented only if appropriate to do so
B) Directives are binding on all companies and the methods of implementation will be prescribed by the government. (1:3)
With respect to UK short-dated gilts, index-linked gilts and national savings and investments products, a financial adviser should be aware that they?
a) Are always tax free to the investor
B) Are all issued by the debt management office
C) Are all used by the government to raise funds
D) Cannot be purchased by corporate investors
C) Are all used by the government to raise funds (1:3)
When the Bank of England announces it will undertake quantitative easing, a financial adviser should consider that?
A) Interest rates will fall as a result
B) A new tranche of gilts will be issued
C) The Debt Management Office will offer to buy back a limited number of gilts
D) The Bank of England will purchase an amount of gilts that are in circulation
D) The Bank of England will purchase an amount of gilts that are in circulation (1:3
The tripartite regulators of UK financial firms, when considering issued relating to financial stability will report to:
A) The European Systematic Risk Board
B) The European Central Bank
C) The Financial Task Force
D) The Basel Committee on Banking Supervision
A) The European Systematic Risk Board
The ESRBs role is to monitor and asses risks and stability of the financial system as a whole
The payment, settlement, clearing and trading systems are examples of:
A) Financial firms
B) Financial sector authorities
C) Financial infrastructure
D) Financial markets
C) Financial infrastructure
Financial infrastructure is the underlying foundation of the economy. It provides functions to allow money to flow through the economy. Examples of financial infrastructure include payment, settlement, clearing and trading systems.
If the EU issues regulations in respect of the financial services industry, how would the UK be expected to respond?
A) It must implement them without any changes.
B) It may ignore them if existing national regulations already exist.
C) It will amend and then implement them through new UK legislation.
D) The regulations must be reviewed by the UK regulators who will decide on the methods of implementation.
A) It must implement them without any changes. (1:3)
