Retail Bank Flashcards
Define a bank?
A bank is an organisation offering financial services, especially the safekeeping of customers’ money until required as well as making loans at interest. Fundamentally the purpose of the bank is to act as financial intermediation - between savers and borrowers.
How do we differentiate between banks?
Consider the size of an institution’s typical transactions and then decide whether it is involved in retail or wholesale operations.
- Retail Banks (Primary Banks) operate large branch networks and deals with small and large sums of money - e.g Barclays, Halfiax
- Wholesale Banks (Secondary Banks) has no branch networks and deals with large sum of money - e.g Goldman Sach, JP Morgan
- Other Financial Institutions do not accept deposits from the public but the provide facilities for long term saving and investment. e.g Investment Trust, Insurance Companies and Pension Funds
What are clearing banks?
Clearing banks are all examples of primary banks, which operate the payment mchanisim sstem within the country and offer a means of money transferral.
In what ways do clearing banks and other deposit takers compete?
- Range of services available online, instore and contact centres
- Extend and location of branch networks
- Interest rates charged on loans and paid on deposit
- Customer perception of bank
What is the advantages of being a clearing bank?
- accessible to a wide range of customers due to the branch network, contact centres and technology
- Offer a comprehensive direct banking service
- Risk is spread over different ranges of sectors
- Larger bank have the financial resources to have specialists departments
How does the Independent Commission on Banking (ICB) seek to promote banking stability?
- Increase the ability to bear lossess by having the ability to hold a great deal more capital
- Alter the banking structure - splitting wholesale and investment banking
- Aiming to isolate retail banking from the risks of global wholesale and investment banking
How does the Independent Commission on Banking (ICB) seek to promote banking competition?
- Ringfencing - Lloyds branch sell off to increase greater than 600 branches
- Improve the ability for customers to switch banks
What innovations came from scotish banking?
- Overdrafts
- developed from the cash credit introduced by RBS in 1728
- Branch banking
- Developed a network of branches which added to the stability of the banking system
- Joint stock banking
- Shareholder protection from personal liability of bank’s debts
- The clearing house
- introduced a note exchange, making bank notes more acceptable to the public
- The chartered banker institue
- The world’s first professional body for practising bankers
What is the organisation structure of the Bank of England?
- The Court of Directors
- The Governor
- Mange day to day activities
- Keep liaison with the city
- Represents the bank at internation financial and monetary meetings
- 2 Deputy Governors
- seperated by monetary stability and financial stability
- 16 Non-Executive Members
- Review the performance of the bank as a whole
- The Governor
What is the core purpose of the Bank of England?
- Maintaining the integrity and value of the currency
- Maintaining the stability of the financial system, both domestic and international
- Seeking to ensure the effectiveness of the UK financial services
What is the function of the bank of england?
- The government’s banker
- All governments reciepts are paid and all payments originate from the Exchequer Account
- BoE provide temporary finance options
- The bankers’ bank
- Issue of notes
- Lender of last resort
- International relations
- Manages the Excgange Equalisation Account (EEA)
- Regulatory Role
- Private Banking
What is the main provisions of the Bank of England Act 1998?
- Monetary policy objecitvess of the bank as set out in the statuory form are to maintain price stability and support the Governments economic policy
- Establishing a monetary policy comittee
- New accountability framework for the bank based on statutory duties - further emphasizing the need for greater transparency
Within the BoE what is responsibility of the Monetary Policy Committee (MPC)?
The Bank of England Act 1998 establishes the MPC as a committee of the Bank and sets a framework for its operations. The Bank’s monetary policy objectives under the Act are to:
– maintain price stability; and, subject to that
– to support the Government’s economic policies, including its objectives for growth and employment.
At least once a year, the Government specifies its price stability target and its growth and employment objectives. The MPC is responsible for achieving those objectives.
Within the BoE what is responsibility of the Financial Policy Committee (FPC)?
The Bank has an overarching statutory Financial Stability Objective to ‘protect and enhance the stability of the financial system of the United Kingdom’. The FPC contributes to the achievement of this objective by:
– identifying, monitoring and taking action to reduce risks to the financial system; and, subject to that,
– supporting the Government’s economic policies, including its objectives for growth and employment.
Within the BoE what is the responsibility of the board of the Prudential Regulation Authority (PRA)
The PRA is a subsidiary of the Bank. In April 2013, it became the UK’s prudential regulator for banks, building societies and credit unions (collectively known as deposit-takers), insurers and major investment firms.
The PRA’s objectives are set out in statute, principally the Financial Services and Markets Act 2000 as amended by the Financial Services Act 2012, and include:
– a general objective to promote the safety and soundness of the firms it regulates; and
– an objective specific to insurance firms, to contribute to the securing of an appropriate degree of protection for those who are, or may become, insurance policyholders.
