RO1: Chapter 1 Flashcards
What is a GILT?
Loan from bondholder to government
What is a conventional GILT?
Pays fixed interest rate at set intervals (Monthly etc)
Who are GILT’s issued through?
UK Debt Management Office (agency of the HM Treasury)
What is the purpose of Insurance?
To protect assets from damage or loss.
What can Insurance protect?
- Physical assets (Vehicles, land, equipment etc)
- Earnings
- Profit potential
- Financial transactions
What does pooled mean?
When money is combined together, for example on Insurance products premiums paid are ‘pooled’ together by the insurer who then invest the money.
What is a Reinsurance company used for?
When risks are too high for a Insurance company they use a Reinsurance company who take a proportion of the premium being paid on the policy to insure the higher risks.
Who is one of the most well known Reinsurance companies?
Lloyds of London
What are the four key components to the UK financial services structure?
- Financial Infrastructure = Payment, settlement, clearing and trading systems
- Financial Markets = On-exchange market (Trade investments via trading floor) & Over the counter market (No physical exchanges)
- Financial Firms = Banks, Pension funds and Insurance firms
- Financial Sector Authorities = BoE, PRA, FCA & HM Treasury
What is a Friendly Society?
This is a mutual association which is exempt from tax on products.
How can a Friendly Society extend their services? (offer more products etc)
They can apply for corporate status which allows them to provide services on more products such as Unit trusts & OEIC’s.
What is High Taxation?
This reduces consumers with the ability to spend their money and businesses to invest their money which slows down economic growth.
What is Low Taxation?
This leaves more money available for expenditure and commercial investment which stimulates economic activity.
What are Tax Concessions?
This is where the Government can reduce the amount of tax payable.
What is the aim of Taxation?
To raise revenue for the Government.
What is Economic policy?
This is actions taken by the Government to control the country’s economy through expenditure, borrowing and interest rates (also known as Fiscal policy)
Who is Economic policy responsible for?
Chancellor of the Exchequer.
What is Monetary policy?
Actions which involve interest rates and money supply into the country’s economy.
Who controls interest rates?
Monetary Policy Committee.
What is the current inflation target which needs to be met by the Chancellor of the Exchequer?
2% of Consumer Inflation Price.
Who is the FCA?
Financial Conduct Authority
Who is the PRA?
Prudential Regulation Authority
Who is the BoE?
Bank of England.
Who are the PRC?
Prudential Regulation Committee
