CHAPTER 1 SECTION 2

Question 1

Name the 3 European Supervisory Authorities (ESA’S)

Answer 1

1. European Banking Authority (Banking).
2. European Securities & Markets Authority (stock market & credit rating agencies).
3. European Insurance & Occupational Pensions Authority (Life & Pensions).

Question 2

What is the European Central Bank responsible for?

Answer 2

Controls monetary policy & interest rates across EU states.

Question 3

What does the European Systemic Risk Board do?

Answer 3

MONITOR & ASSESS stability of financial system (Macro-prudential regulation)

Question 4

What does the European System of Financial Supervisors do?

Answer 4

SUPERVISION of individual financial institutions. (Micro-prudential regulation).

Question 5

What does the Financial Action Task Force do?

Answer 5

Monitors WORLDWIDE GLOBAL ANTI-MONEY LAUNDERING POLICY & DEVELOPMENT.

Question 6

What are the 4 key components of UK Financial Services Sector?

Answer 6

F: Firms
I: Infrastructure
R: Regulatory Authorities
M: Markets

Question 7

What does financial infrastructure relate to?

Answer 7

Systems and processes for money movement overseen by the Bank of England.

Question 8

The Bank of England’s role forms part of the European system of what?

Answer 8

CENTRAL COUNTERPARTIES covered under EUROPEAN MARKET INFRASTRUCTURE REGULATION (EMIR).

Question 9

Who regulates clearing companies in UK that are responsible for cheque processing, standing order administration etc?

Answer 9

FCA

Question 10

What is the PURPOSE of the Payment Systems Regulator?

Answer 10

TO MAKE PAYMENT SYSTEMS WORK WELL FOR THOSE THAT USE THEM.

Question 11

What is the PSR’S 3 STATUTORY OBJECTIVES?

Answer 11

1. Ensure payment systems operated & developed to consider & promote interests of businesses that use them
2. Promote effective competition for payment services between operators, payment service & infrastructure providers.
3. Promote development & innovation in payment systems.

Question 12

What type of powers does the PSR have?

Answer 12

Regulatory & Competition.

Question 13

What are 3 examples of the PSR Competition & Regulatory powers?

Answer 13

1. Acting against Anti-Competetive Behaviour.
2. Imposing requirements for system rules
3. Provide direction to direct bodies setting standards.

Question 14

What are 2 ways of organising financial markets & what are they?

Answer 14

1. ON-EXCHANGE MARKETS: FCA regulated trading floors for stocks & shares
2. OVER-THE-COUNTER MARKETS: COMMITTEES formed by market users ensuring smooth operation

Question 15

What is a key difference been On-Exchange Markets & OTC?

Answer 15

OTC markets less Transparent & Subject Fewer regulations

Question 16

What are the 3 main financial markets to be aware of?

Answer 16

1. Capital Markets (stock market)
2. Money Markets (commercial lenders)
3. Foreign Exchange Markets (OTC market for currency trading).

Question 17

What is KEY to remember regarding international markets & the UK?

Answer 17

INTERNATIONAL MARKETS are INTERLINKED WITH UK AS MAJOR FINANCIAL CENTRE.
MONIES FLOW IN & OUT.

Question 18

What are the CORE services offered by Banks & Building societies?

(OFTEN TESTED)

Answer 18

1. Current/cheque accounts
2. Deposit/Savings accounts
3. Wills & executorship services
4. Mortgages & Loans

Question 19

What are INDIRECT activities/services offered by Banks & Building Societies?

(OFTEN TESTED)

Answer 19

1. Portfolio Management
2. Discretionary Management Service
3. Advisory Management Service
4. Execution Only Service
5. Stockbroking Services
6. Offering access to COLLECTIVE INVESTMENTS (OEIC’S).

Question 20

Define Core & Indirect Services provided by Banks/Building Societies.

Answer 20

1. CORE SERVICES: Main activities organisation originally set up to conduct
2. INDIRECT SERVICES: ‘Peripheral to business’ & developed to meet consumer needs.

Question 21

What are the 2 main categories of advice?

Answer 21

1. INDEPENDANT

2. RESTRICTED

Question 22

What are the 3 types of RESTRICTED advice?

Answer 22

1. WHOLE OF MARKET
2. RESTRICTED (MULTI-TIED): Providers from panel considered & restricted to panel.
3. RESTRICTED (TIED): Advise on products from one company

Question 23

What are the 2 methods life assurance companies use to distribute their products?

Answer 23

1. Intermediaries (providers of advice)

2. Direct Sales Team.

Question 24

Outline 2 key features of ‘FRIENDLY SOCIETIES’…

Answer 24

1. Profits shared between members/customers

2. Tax free status