The Uk Financial Services Industry

Question 1

What is not a key element of risk management, when considering client investments?

Answer 1

Insuring any potential loss

Question 2

What is the main difference between banks and building societies?

Answer 2

Banks have shareholders, building societies do not

Question 3

What method can the Government use to fund borrowing requirements by public money?

Answer 3

Gilts and National Savings and Investments (NS and I)

Question 4

What does the Bank of England use to influence short term Interest Rates?

Answer 4

The Gilt Repo Market

Question 5

Which body sets interest rates in the UK?

Answer 5

The Monetary Policy Committee (MPC)

Question 6

What do Banks do with the money they receive into current accounts?

Answer 6

The place it in long term investments and some is lent back to customers in the form of loans

Question 7

What is the main purpose of a GILT

Answer 7

Allows the government to borrow money in return for a fixed level of interest. Note - some index linked guilts will vary due to changes in RPI

Question 8

In addition to financial transactions and earnings, what else can be insured?

Answer 8

Physical assets and profit potential

Question 9

What are the 4 key components of the financial sector?

Answer 9

Financial Infrastructure
Financial Markets
Financial Firms
Financial Sector Authorities

Question 10

What is the UKPA and who regulates it?

Answer 10

UK Payments Administraion LTD, regulated by the PSR (Payments System Regulator)

Question 11

What is the main purpose of a Reinsurance Company?

Answer 11

Provides security to insurance companies by diversifying risk

Question 12

What were the three European Supervisory Authorities created in 2011? (ESA’s)

Answer 12

The EBA - European Banking Authority

The EIOPA - European Insurance and Markets Authority

The ESMA - The European Securities and Markets Authority

Question 13

What were the three key objectives of the FSAP (Financial Services Action Plan)?

Answer 13

Create a single EU wholesale market

Achieve open and secure retail markets

Create state of the art prudential rules and structure of supervision

Question 14

What are the three instruments governing regulation and conduct of the financial services industry?

Answer 14

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

Question 15

What are the four key components of the UK regulatory framework?

Answer 15

PRA - Prudential Regulation Authority
PRC - Prudential Regulation Committee
FPC - Financial Policy Committee
FCA -Financial Conduct Authority

Question 16

On what savings and investment schemes does the government currently provide tax consessions to?

Answer 16

Pension Schemes
ISA’s
Qualifying life insurance policy proceeds
Friendly society savings plans
Capital gains on gilts and corporate bonds
Certain NS and I products

Question 17

How can changes in tax rates be used to manipulate the economy?

Answer 17

Changing the tax benefits of certain investments can encourage people to save and therefore restrict growth or unlock capital and spend savings on goods to stimulate growth and the economy

Question 18

Does the UK welfare system offer sufficient benefits to avoid the need for a private provision?

Answer 18

No, most would find that State welfare is well below the standards they currently expect

Question 19

Who is responsible for the for the regulation of the financial services sector and under who’s authority?

Answer 19

The Treasury is responsible, under the direct authority of the Chancellor of the Exchequer

Question 20

What other actions could the government consider to support the welfare system?

Answer 20

Extension of laws relating to compulsory pension contributions
Introduction of compulsory private medical insurance
Tax breaks for health insurance
Further increases to the state pension age