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Paraplanning > R01 Chapter 1 > Flashcards

R01 Chapter 1 Flashcards

1
Q

Payment system regulator objectives

A
  • developed in the interest of business’ and consumers that use them
  • promote effective competition in market for payment systems
  • create systems that work well
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2
Q

Payment systems regulator

A

Regulates £81 trillion payment system industry

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3
Q

Payment systems

A
  • crucial to wider economy
  • high values and volumes
  • Bank of England monitors and facilitates GBP Markets and payment systems
  • bacs chaps + faster payment scheme
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4
Q

Financial sector authorities

A

Bank of England
HM Treasury
Prudential Regulation Authority

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5
Q

Financial firms

A

Banks (retail + investment)
Pension funds
Insurance companies

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6
Q

Financial markets

A

On exchange
Over the counter

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7
Q

Financial infrastructure

A

Payment settling, clearing and trading systems

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8
Q

Fixed interest stocks

A

Allows money to be borrowed with pre defined terms, in exchange for interest payment.
The interest is higher as the risk is also higher

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9
Q

Shares

A

Buy a slice of a company
Benefit from dividend and stakeholder meetings

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10
Q

What are the capital markets 2 objectives

A

Allow investors to invest in assets that provide potential for real growth
Help companies raise funds without going through a bank

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11
Q

Transaction protection

A

More complex
Uses financial instruments called derivatives

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12
Q

What is a Re-insurance company?

A

Risks too big are spread between an insurance company and a reinsurance company. So one company isn’t solely responsible for the risk.

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13
Q

Employee benefits

A

Death benefit, sick benefit and pensions.
Usually paid for by employer
Can attract and retain employees

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14
Q

‘Key person’ insurance

A

Insure against seat or long term illness of individuals vital to the income stream to a company

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15
Q

Life assurance

A

In a family where 1 or 2 people provide for their family, without their income, there’s no food, no home etc.

Life assurance protects those earnings

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16
Q

What can be insured

A

Physical assets
Earnings
Profit potential
Financial transactions

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17
Q

What is NS&I premium bonds

A

No interest
Can win tax free cash prizes each month between £5-£1Million
Average return is roughly 4%

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18
Q

What is a green gilt

A

Investment money used in green/ecological/environmental projects

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19
Q

What is the most common form of government debt

A

Conventional gilts.
Pay interest in 6 month intervals
Paid back face value, could be worth more or less than original investment

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20
Q

What makes a building society different to a bank

A

No shareholders
Was created to lend money to buy houses
Money distributed as interest instead of dividends

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21
Q

How does a bank see loans and deposits

A

Loans = income generating asset
Deposits = Liability

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22
Q

What happened to Silicon Valley bank?

A

Invested too many deposits in government bonds
Their value dropped, and didn’t have enough liquidity to honour withdrawals

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23
Q

What do banks do with deposits?

A

Loan them out to borrowers to make a return

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24
Q

Can banks loans more than they have in reserve?

A

Yes.
Thanks so I interbank lending.
High risk
Contributing factor to the 2008 markets crash

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25
Q

What does a bank do with its return?

A

Cover cost and pay dividends

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26
Q

Short term savings

A

Keep peoples money safe but easily accessible
Bank generates a return from deposits from loaning the money

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27
Q

European systemic risk board

A

To monitor and assess risk to the stability of the financial system as a whole

28
Q

International securities market association

A

Trade association, self regulating, supervising markets in international debt

29
Q

International association of insurance supervisors

A

Supervise and sets common standards for banking supervisory matters

30
Q

International swaps and derivatives association

A

Represents participants in the privately negotiated derivatives industry

31
Q

International organisation of securities commissioners

A

Brings together the worlds securities regulators to set common standards

32
Q

Financial action task force

A

Sets international standards on anti-money laundering and countering terrorist finance

33
Q

Financial stability board

A

Co-ordinates national financial authorities and makes recommendations about global financial system

34
Q

What does EIOPA stand for?

A

European insurance and occupational pensions authority

35
Q

What does ESMA stand for?

A

European securities and markets authority

36
Q

What does eba stand for?

A

European banking authority

37
Q

What is the ‘friendly societies act 1992’

A

Friendly society’s can apply for corporate status.
Can expand to uni trusts OEICs and ISAs

38
Q

What is a friendly society

A

A mutual self help group
Granted commented tax exemption
Only a few group left that still offer tax exempt endowment based savings plans

39
Q

What does RDR stand for?

A

Retail distribution review

40
Q

Life assurance companies can distribute their products via

A

Independent + restricted advisers
Their own financial services sales team

41
Q

What are the three European supervisory authorities

A

European banking authority
European securities and markets authority
European insurance and occupational pensions authority

42
Q

How much of the FCA policy making was driven by European initiatives

A

Around 70%

43
Q

What is ‘on shoring’

A

Amending EU legislation and regulatory requirements that they work in a UK only context

44
Q

Financial sector assessment programme objectives

A

Create a single EU wholesale market
Achieve open and secure retail markets
Create state of the art prudential rules and structures of supervision

45
Q

Key legal instruments governing the regulation of business and the financial services industry are:

A

Financial services and markets act 2000
Financial services act 2012
Bank of England and financial services act 2016

46
Q

Prudential regulation authority

A

A part of the Bank of England
Responsible for the authorisation and prudential regulation of certain larger firms such as banks and insurers

47
Q

Prudential regulation committee

A

A committee of the Bank of England, operating alongside the financial policy committee and the monetary policy committee

48
Q

Financial policy committee

A

A committee set up with the Bank of England to monitor the UK economy

49
Q

Financial conduct authority

A

This regulator has market and conduct responsibilities. It also authorises smaller firms such as financial intermediaries and mortgage brokers

50
Q

Banks, building societies, insurers and major investment firms have how many groups of supervisors?

A

2

51
Q

What’s the aim of taxation?

A

Raise revenue for the government

52
Q

What products have tax concessions?

A
  • Pension schemes
  • ISAs
  • Some life assurance
  • Friendly society savings plans
  • Capital gains and directly held gilts
  • investments into companies listed on the Alternative Investment Market
53
Q

Fiscal policy

A

The control of taxation, borrowing and government spending.

54
Q

Monetary policy

A

Actions involving interest rates and the supply of money

55
Q

Chancellor of the exchequer

A

Defines level of government expenditure and borrowing

56
Q

Monetary policy committee

A

Has control of the interest rates

57
Q

How can the government stimulate the economy by spending?

A

Spend money on good and services provided by UK companies

58
Q

Who issues new government gilts

A

Debt Management Office

59
Q

Quantitative easing

A

BoE buys back gilts and corporate bonds from financial sector.

60
Q

Gilt repo market

A

When a party sells gilts to another with a legally binding agreement to purchase equivalent gilts for an agreed price at a specified future date

61
Q

What is the chancellors inflation target?

A

2% of consumer price inflation

62
Q

How many times does the MPC meet?

A

8 times a year

63
Q

Who are the 9 members of the MPC?

A
  • The governor
  • Three deputy governors
  • BoE’s chief economist
  • Four external members appointed by the chancellor
64
Q

Who decides on the final interest rate?

A

The chancellor of exchequer and an independent committee

65
Q

What are some of the welfare and benefits available?

A

NHS
Sickness and disability benefits
Tax credits
State pension
Pension credits
Universal credit

66
Q

Are benefits likely to increase or decrease in value

A

Decrease

Paraplanning (5 decks)

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