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R01 > The UK FS Industry: an overview > Flashcards

The UK FS Industry: an overview Flashcards

1
Q

E Page 12 Whose role is it to maintain economic stability?

A

UK Government

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2
Q

E Page 12 Who regulates and also participates in finance through its role to maintain the economic stability of the country?

A

UK Government

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3
Q

E Page 12Whose responsibility is it to protect the interests of UK citizens?

A

UK Government

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4
Q

E1 Page 12 Taxation, both in its form and amount, has a great impact on what? (state 2 things)

A
  1. the economy 2. the financial services industry
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5
Q

E1 Page 12 What impact does high taxation have on consumers (1 thing)

A

Inability to spend

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6
Q

E1 Page 12 What impact does high taxation have on businesses (1 thing)

A

Inability to invest

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7
Q

E1 Page 12 What is the overall result of high taxation on the economy (1 thing)

A

As consumers spend less and businesses invest less, it SLOWS DOWN ECONOMIC GROWTH IN THE PRIVATE SECTOR

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8
Q

E1 Page 12 What impact does low taxation have on consumers (1 thing)

A

More money available for private expenditure

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9
Q

E1 Page 12 What impact does low taxation have on businesses (1 thing)

A

More money available for commercial investment

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10
Q

E1 Page 12 What is the overall result of low taxation on the economy (1 thing)

A

As consumers have more money available for private expenditure and businesses have more money available for commercial investment, IT STIMULATES THE ECONOMY

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11
Q

E1 Page 12 What’s the primary aim of taxation? (2 things)

A
  1. To raise revenue for the Government

2. Redistribution of wealth (depending on policies of party in power, but increased welfare payments and NHS)

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12
Q

E1 Page 12 How can the Government encourage savings and investments?

A

Through tax concession

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13
Q

E1 Page 12 Name 6 things there are tax concessions on?

A
  1. pensions schemes (including personal pensions and stakeholder schemes); 2. ISAs (including junior ISAs); 3. qualifying life assurance policy proceeds; 4. friendly society savings plans; 5. capital gains on directly-held gilts and corporate bonds; 6. certain NS&I products
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14
Q

E1 Page 12 What do tax concessions do?

A

Influence the extent to which the products are taken up my the investing public as removal of the concessions can influence a change in investment strategy

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15
Q

E1 Page 13 What tax policy did Government introduce for first-time buyers?

A

Abolition of SDLT on properties up to £300K for 1st time buyers (in 2018 the no of 1stTB hit 12 year high at 175,500)

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16
Q

E1 Page 13 What tax policy did Government introduce to restrict purchase of 2nd homes?

A

Additional 3% SDLT being applied to purchase of 2nd homes such as buy to let or holiday homes

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17
Q

E1 Page 13 What impact has the hike in SDLT for 2nd time buyers had?

A

Prevented the market flowing as it should resulting in a slow down in property transactions

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18
Q

E1 Page 13 Different forms of investment can attract / discourage different classes of investor depending on what income tax is payable. Give 3 example

A
  1. gross interest on bank, BS, gilts and some NS&I products, together with personal savings allowance, make them more attractive
  2. tax free interest on certain NS&I products can appeal to higher rates tax payers
  3. but inability of non-tax payers to recover tax paid by life assurance funds is not attractive
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19
Q

E1 Page 13 Overall what do tax rates determine (name 4 things)

A

1.affects the ability determines the amount of money received by the Treasury; 2. affects the economic activity of the country; 3. the ability of people to invest; 4. influences the best/most convenient choice of investments for individuals

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20
Q

E1 Page 13 How can changes in tax rates be used to manipulate the economy?

A
  1. they can encourage people to save thus restricting growth in the economy or 2. they can encourage people pto spend on goods to stimulate the economy
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21
Q

E2 Page 13 What is the set of actions a government proposes to take on expenditure, borrowing and the setting of interest rates to help control the country’s economy? Who’s responsibility it it to set these?

A

The Economic Policy

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22
Q

E2 Page 13 What is the collectively name for the control of taxation, borrowing and government spending methods?

A

Fiscal Policy

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23
Q

E2 Page 13 What is the name given to the policy that involves interest rates and money supply

A

Monetary Policy

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24
Q

E2 Page 13 Whose responsibility is it to define the the level of Government expenditure and borrowing?

A

The Chancellor of the Exchequer

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25
Q

E2 Page 13 Whose responsibility is it to control interest rates?

A

MPC: Monetary Policy Committee (independent arm of Bank of England)

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26
Q

Government spending can have a significant influence on what?

A

the domestic economy

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27
Q

Why does Government spending have an influence on the domestic economy:

A

Because Government typically spends money of GOODS and SERVICES provided by UK COMPANIES within THE UK. (This stimulates the companies concerned and feeds through to the economy as a whole)

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28
Q

What can exert more significant effect on the economy (or stimulate the economy) more than tax cuts?

A

Government spending

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29
Q

What are the 3 European Supervisory Authorities (ESAs)?

A

European Banking Authority (EBA)
European Securities and Markets Authority (ESMA)
European Insurance and Occupational Pensions Authority (EIOPA)

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30
Q

Which one of the following is not a European Supervisory Authority (ESA)?
European Banking Authority (EBA)
European Securities and Markets Authority (ESMA)
European Insurance and Occupational Pensions Authority (EIOPA)
European Central Bank (ECB)

A

European Central Bank (ECB)

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31
Q

Whose role is it to coordinate and control monetary policy and interest rates in the EU states?

A

European Central Bank (ECB)

32
Q

Who co-ordinates national financial authorities and makes recommendations about the global financial system?

A

The Financial Stability Forum (FSF)

33
Q

Who sets international standards on anti-money laundering?

A

The Financial Action Task Force (FATF)

34
Q

Who brings together the world’s securities regulators to set common standards?

A

The International Organization of Securities Commissioners (IOSCO)

35
Q

Who supervises and sets common standards for the international insurance sector?

A

The International Association of Insurance Supervisors (IAIS)

36
Q

Who is the primary standard setter for the prudential regulation of banks and provides a forum for banking supervisory matters?

A

The Basel Committee on Banking Supervision (BCBS)

37
Q

Who represents participants in the privately negotiated derivatives industry, including interest rate, currency, commodity, credit and equity swaps

A

The International Swaps and Derivatives Association (ISDA)

38
Q

Who represents firms trading fixed-income securities

A

The Bond Market Association (TBMA)

39
Q

What is the name of the trade association and self regulating organisation, supervising markets in international debt?

A

The International Securities Market Association (ISMA)

40
Q

In the EU, who monitors and assesses risks to the stability of the financial systems as a whole (macro-prudential supervision)?

A

European Systemic Risk Board (ESRB)

41
Q

In the EU, who supervises individual financial institutions (micro-prudential supervision) consisting of a network of national financial supervisors (eg. the FCA in the UK)

A

European System of Financial Supervision (ESFS)

42
Q

E2A (page 13): Name 2 things that stimulate the economy, which one is better and why?

A
  1. Government spending
  2. Tax cuts
    Government spending better as they typically spend money on goods and services provided by UK co’s within UK (whereas tax cuts means consumers have more to spend but will prob spend it on foreign holidays or imported goods boosting the economy of another country)
43
Q

E2A (page 14) Give an example of how government expenditure could boost the economy ?

A

Could spend it on:
buildings, infrastructure or services
which would stimulate the EMPLOYMENT and PROFITS of the companies concerned,
thereby generating MORE TAX and NI CONTRIBUTIONS for the Government, and
an increase in VALUE OF PENSIONS AND SAVINGS as the shares in the company could form the underlying investment of the scheme.

44
Q

E2B (page 14) How can the Government borrow money from individuals and institutions?

A

By issuing financial instruments such as gilts.

45
Q

E2B (page 14) Who issues NEW UK Government Gilts?

A

The Debt Management Office

46
Q

E2B (page 14) What is The Debt Management Office

A

An executive agency of HM Treasury responsible for issuing NEW UK Government gilts

47
Q

E2B (page 14) Where is subsequent or secondary trading of UK gilts carried out?

A

London Stock Exchange

48
Q

E2B (page 14) How does Government borrowing effect the economy?

A

It effectively REDUCES the amount of MONEY IN CIRCULATION and can have a dampening effect

49
Q

E2B (page 14) How does Government payback of loans effect the economy?

A

It INJECTS MONEY back into circulation) and therefore can stimulate economy

50
Q

E2B (page 14) What is quantitative easing?

A

Tends to be used when all else fails to stimulate economy like interest rates. Broadly, this involves the BofE buying back existing gilts and corporate bonds from the financial sector, thereby injecting MORE LIQUIDITY into the system to stabilise the banking and financial sector.

51
Q

E2C (page 14) What does the Bank of England use the Gilt Repo Market for?

A

To influence short-term interest rates.

52
Q

E2C (page 14) What is ‘repo’ short for?

A

Sale and Repurchase Agreemnet

53
Q

E2C (page 14) What is the repo rate?

A

The interest rate implied by the difference between the sale and repurchase price.

54
Q

E2C (page 14) What is the Gilt Repo Market

A

where one party agrees to sell gilts to another with a legally binding agreement to purchase equiv gilts at an agreed price at a specified date in future.

55
Q

E2C (page 14) Who is responsible for setting intersr rates

A

The MPC

56
Q

E2C (page 14) What’s purpose of setting an intrest rate

A

enable the Chancellors inflation target to be met.

57
Q

E2C (page 14) How often does the MPC meet per year and what does it set

A

8 times and sets the banks lending rate by which all interest rates derive

58
Q

E2C (page 14) WHy does the MPC include 4 external/ independt members?

A

To ensure a balance of opinion and for the Bof E to benefit from wider thinking and expertise

59
Q

E2C (page 14) Why was final decision of interes rate taken from Chanlellor?

A

To ensure it is used to influence the current rate of inflation (and hence the economy) rather than political

60
Q

E2D (page 14) What 3 other key factors influence the economy as well as interest rates

A

Expenditure, borrowing and taxation

61
Q

E3 (page 15): name the 7 different needs under the UK welfare and benefit system:

A
  1. the NHS
  2. sickness and disability benefits
  3. unemployment benefits
  4. tax credits
  5. the State Pension
  6. pension credits
  7. NHS funded nursing care
62
Q

what does index-linking do?

A

Protects against inflation

63
Q

What is used instead of an insurance policy to offset the losses related to financial transations

A

Derivatives

64
Q

What are the 2 key objectives of the capital markets?

A

To enable investor s to invest in assets that can provide real growth
To enable companies to raise money without getting a loan

65
Q

Name the 4 key componet within the UK financial services sector

A
  1. Financial Infrastutre
    2.Financial Markets
  2. Financial Firms
    Financial Scetor Authorities
66
Q

Name the UK’s financial sector authorities

A
  1. Bank of England (inc. the The Pruudential regulation Authority (PRA) and Financial Policy Committee (FPC))
  2. The Financial Conduct Authority (FCA)
  3. HM Treasury
67
Q

What is UK financial INFRASTRUCTURE mainly made up of (4 things)

A
  1. payment systems
  2. settlemnet systems
  3. clearing systems
  4. trading systems
68
Q

Wny are payment systems important (2 things)

A
  1. either deal with high values

2. or used widely by customers

69
Q

Who oversees payment systems in the UK and monitors and facilitates the functioning of the Sterling money markets ansd payment systems?

A

Bank of England

70
Q

NAme the clearing companies responsible for maintaining the operation efficiency and integrity of thepayment systems

A 
CHAPS Clearing Co
Cheque and Credit Clearing Co
Faster Payments Scheme
BACS ayments SCheme
But Bof E has close ,inks with the  all as is ultimately responsible
71
Q

What is name of main service company for providers of payment systems?

A

The UK Payments Administartions Ltd (UKPA)

72
Q

Who is the econmoic REGULATOR for the £81 trillion payment systems industry in the UK

A

The Payment Systems Regulator (PSR)

73
Q

Who regulates the key exchanges in the UK?

A

The FCA

74
Q

Who is the regulator of recogised investment exchanges?

A

The FCA

75
Q

WHo sup[ervises recognised clearining houses under which regulation?

A

The BofE uner Infrasture Regulation the European Market (EMIR)

76
Q

What committee has been formed comprising of senior represnetatives of the 3 UK financial authrires and meets monthly to discuss financial stability

A

The Standing Commitee of Financial STbaility

77
Q

What provides an established mechanism for coordinating the response of the 3 UK financial authories

A

The Standing Commitee of Financial STbaility

R01 (1 decks)

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