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ICAS TC Finance > Module 14 Financial Services Sector > Flashcards

Module 14 Financial Services Sector Flashcards

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1
Q

Types of banks

A
  • Commercial banks
  • Investment banks
  • Central banks
  • Merchant banks
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2
Q

What is Financial Intermediation?

A

Pooling funds from different sources and using these funds to provide loans and make investments

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3
Q

Bulding society

A
  • no external shareholders
  • borrowers and lenders are ‘members’ who vote on how the society is run
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4
Q

NS&I

A
  • operates online and through some Post Offices
  • takes deposits from the public and is backed by HM Treasury
  • not a bank and does not provide lending services
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5
Q

Peer-to-peer lending

A
  • borrow money directly from investors
  • avoiding the role of the bank as intermediary
  • borrow money more cheaply
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6
Q

What do investment banks do?

A
  • providing advice to corporate customers who want to raise finance and assisting in the issue of securities
  • managing corporate mergers and acquisitions
  • buying and selling shares and bonds on behalf of both corporate and private customers
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7
Q

Types of General/Non-life insurance

A
  • Vehicle insurance
  • Buildings and contents insurance
  • Pet insurance
  • Health insurance
  • Accident insurance
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8
Q

Additonal types of general insurance for business

A
  • Employer’s liability insurance
  • Professional indemnity insurance
  • Public liability insurance
  • Business interruption insurance
  • Cyber and data risks insurance
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9
Q

What is the difference between life insurance and life assurance?

A
  • Life insurance is a fixed-term policy which insures against an individual’s death for the duration of that period
  • Life assurance is not for a fixed term and will provide cover until the insured person passes away
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10
Q

8 Advantages of collective investment funds

A
  • invest relatively small amounts
  • managed by professional fund managers (past performance)
  • pooling of investments enables the fund to make purchases of securities at a lower cost
  • Risk is reduced by exposure to a widelydiversified spread
  • no capital gains tax (‘CGT’) payable when a fund trades in shares only when their
    investment in the fund itself is sold
  • investor can gain exposure to foreign stocks
  • Different funds provide for different investment objectives
  • Specialisation in particular sectors is possible
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11
Q

4 Disadvantages of Collective investment schemes

A
  • individual cannot choose their own investments
  • Fund manager may change jobs
  • Larger collective funds find it more difficult to invest in shares of companies with a relatively small capitalisation
  • layer of charges which are payable within funds
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12
Q

Active investment managment

A
  • changes their portfolio on a regular basis
  • do not believe that the securities markets are efficient
  • believe that markets and securities can be mis-valued
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13
Q

Passive investment management

A
  • believe in the efficient market hypothesis, so design their funds to mirror specific indices without attempting to ‘beat’ the market.
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14
Q

Hybrid investment management

A
  • fund managers are being requested to outperform indices
  • fund managers to use a mixture of the two
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15
Q

Unit Trust

A
  • open-ended fund
  • monitored by trustees
  • overall objectives are determined in advance and laid out in a trust deed
  • trust deed also sets out the charges which an investor is subject to
  • not continuously priced, value of the underlying fund is determined at regular intervals (valuation point)
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16
Q

Open-Ended Investment Companies

A
  • open-ended but are structured as a company so they can continually issue and redeem their own shares
  • must use a depositary to look after the funds must be independent and separately authorised
  • originally required to have one price with no bid-offer spread. Since October 2008 been permitted to use dual pricing, although few do.
17
Q

Investment Trusts

A
  • public limited companies whose shares are listed on a stock exchange
  • closed-ended which means that they issue a fixed amount of shares
  • not subject to the same inflows and outflows do not need much liquidity
  • more flexibility in gearing, and therefore the risk thereby increasing possible returns
18
Q

Monetary stability

A
  • prices are stable and there is confidence in the local currency
  • Stable prices are defined by the government’s inflation target
  • Bank has responsibility by decisions taken by its Monetary Policy Committee
19
Q

Financial stability

A
  • detecting and reducing threats to the financial system as a whole maintina public confidence
  • delegating work to the Financial Policy Committee.
20
Q

What is the Financial policy commitee?

A
  • committee of the BoE established in 2013
  • looks for risks and weaknesses in the UK financial system
  • 13 expert members (6 from within the BoE)
  • meet quarterly and at times of crisis
21
Q

What can the Finacial policy commitee do?

A
  • setting the minimum capital requirements for banks to hold
  • setting limits on the gearing levels of banks
  • setting limits on borrowing
  • set limits on lending
22
Q

Three objectives of the Prudential Regulation Authority?

A
  1. promote the safety and soundness of the firms it regulates
  2. contribute to the securing of an appropriate degree of protection for insurance policyholders
  3. facilitate effective competition between firms
23
Q

Three operational objectives of the FCA

A
  1. Secure an appropriate degree of protection for consumers
  2. Protect and enhance the integrity of the UK financial system
  3. Promote effective competition in the interests of consumers
24
Q

What does the European System of Financial Supervision (ESFS) consits of?

A
  • The European Systemic Risk Board (‘ESRB’)
  • Three European supervisory authorities:
    • the European Banking Authority (‘EBA’)
    • the European Securities and Markets Authority (‘ESMA’)
    • the European Insurance and Occupational Pensions Authority (‘EIOPA’)
25
Q

Penalties of Bribary

A
  • Maximum jail time of 10 years
  • Company convicted of failing to prevent bibery could receive ulimited fine

ICAS TC Finance (14 decks)

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