Chapter One: The UK Financial Services Industry: An Overview Flashcards
What do banks do with the money they receive into current and savings accounts?
Lend it out to other customers in the form of loans
Who issues Gilts?
The Debt Management Office (DMO)
What is the primary function of a Gilt?
To function as a loan to the Government
What are the names of the two institutions that fund Government borrowing?
- National Savings & Investments (NS&I)
2. The Debt Management Office (DMO)
Over what period do Gilts accrue interest?
Every 6 months
What is the difference in ownership between a Bank and a Building Society?
A Bank is owned by Shareholders and Building Societies are owned by their ‘Members’
What financial product would you use to “transfer risk”?
Insurance
‘Physical Assets’, ‘Earnings’ and ‘Financial Transactions’ can all be insured. Apart from these three, what else can be insured?
Profit Potential
‘Physical Assets’, ‘Earnings’ and ‘Profit Potential’ can all be insured. Apart from these three, what else can be insured?
Financial Transactions
What are the two objectives of the Capital Markets?
- Enable investors to invest in assets that provide the potential for ‘real growth’;
- Help companies to raise monies without resorting to debt
What are the two types of financial investments in the Capital Markets?
- Shares;
2. Fixed-Interest Bonds (Stocks)
How does an investor hope to financially benefit from Shares?
Through the appreciation of Capital and the distribution of Dividends
How can an investor purchase a percentage of a company?
Through Shares
How does an investor hope to financially benefit from Stocks?
Through a return of interest from the company and potentially through Capital appreciation from selling on the Stock
How do the majority of investors access Stocks & Shares investments?
Through Collective Investment Schemes (CIS)
What are the 4 key components of the UK Financial Services Sector?
- Financial infrastructure;
- Financial markets;
- Financial firms;
- Financial sector authorities
What is the name of the 2 Financial Authorities that regulate the retail financial services?
- Financial Conduct Authority (FCA);
2. Prudential Regulation Authority (PRA)
What is it referred to as when a Building Society becomes a Bank?
Demutualisation
What are Unit Trusts and Open Ended Investment Companies an example of?
Collective Investment Schemes (CIS)
What benefits are afforded to Friendly Societies?
Tax exempt status
Who regulates payment systems?
Payments Systems Regulator (PSR)
Who oversees payment systems?
The Bank of England (BoE)
What are the two types of Financial Adviser?
Independent & Restricted
List the indirect services offered by Banks and Building Societies?
- Portfolio management;
- Stockbroking services;
- Wills & Executorships;
- Collective Investment Schemes;
- Insurance & Pensions
Who is the ultimate authority of the Treasury?
The Chancellor of the Exchequer
What is the key European Union initiative for the financial services called?
The Financial Services Action Plan (FSAP)
*On a bit of a tangent, ‘FSAP’ was the sound made when my mate threw a Nodder at our German teacher in high school!
** You’ll remember the acronym now!!!
What happens to Economic Growth when taxes are increased?
It slows down
What are the two forms of Economic Policy utilised by the UK government?
- Fiscal Policy - the adjustment and application of taxes;
2. Monetary Policy - the rates of interest and money supply
Which institution has the responsibility for determining the interest rates?
The Monetary Policy Committee (MPC) which is a part of the Bank of England (BoE)
What is Quantitative Easing?
Where the Bank of England purchases both Gilts and Corporate Bonds
How does Quantitative Easing help stimulate the Economy?
By increasing the amount of money in circulation
What is the impact of Quantitative Easing on interest rates?
Interest rates decline
