topic 1

Question 1

Competition and
Markets Authority
(CMA

Answer 1

The body responsible for strengthening business competition and
preventing and reducing anti-competitive activities

Question 2

Counterparties

Answer 2

People and organisations (eg companies) who lend money to and borrow
from financial intermediaries (ie financial institutions such as banks)

Question 3

Credit union

Answer 3

A mutual organisation (that is, owned by its members) that provides a
range of financial products to members, eg savings accounts and personal loans. Members of a credit union must share a common bond,
eg all work for the same employer or all work in the same district.

Question 4

Divestment

Answer 4

The process of selling off parts of a company to make it smaller, eg the
Lloyds sell-off that created new TSB branches.

Question 5

Financial Conduct
Authority (FCA)

Answer 5

The organisation that regulates financial firms providing services to
consumers, and maintains the integrity of the UK’s financial markets

Question 6

Financial
intermediary

Answer 6

A financial institution that facilitates the process of lending and
borrowing, by taking deposits from those with a surplus and lending
those funds out to those who need to borrow

Question 7

Financial
intermediation

Answer 7

the process of taking in deposits from those with a surplus and lending
those funds out to those who need to borrow (see financial intermediary)

Question 8

Financial
Ombudsman
Service (FOS)

Answer 8

An independent body set up by Parliament that settles customer
complaints about providers at no charge to consumers.

Question 9

Financial Policy
Committee (FPC)

Answer 9

A part of the Bank of England that monitors and responds to risk posed to
the entire financial services market. Its focus on the whole market makes
it a macro-prudential authority.

Question 10

Financial Services
Compensation
Scheme (FSCS)

Answer 10

A compensation scheme that pays compensation to account holders of up
to a certain amount per provider if the provider goes into default (so
cannot pay account holders the money they have in their accounts)

Question 11

Friendly society

Answer 11

A mutual organisation that offers its members a wide range of financial
products, which can include savings, investments, insurance, pensions
and annuities

Question 12

HM Treasury

Answer 12

Her Majesty’s (HM) Treasury, the government department responsible for development and implementation of financial and economic policy

Question 13

Independent
financial adviser
(IFA)

Answer 13

A professional who makes financial recommendations to clients, based on
products offered by a wide range of providers

Question 14

investment banks

Answer 14

Banks that raise funds on the financial markets, rather than accepting deposits as a retail bank does. They use these funds to provide special services to large corporations and to governments. Also known as wholesale banks.

Question 15

Lloyd’s insurance
market

Answer 15

An insurance marketplace where members (corporations and individuals) employ underwriters to come together and accept insurance risk, dividing
it out between the members

Question 16

Long-term capital
markets

Answer 16

Financial markets where long-term debt (ie bonds) and shares in the bank (equity) are bought and sold. This provides a source of funding for banks.

Question 17

Monetary policy

Answer 17

The manipulation of interest rates to maintain low inflation

Question 18

Monetary Policy
Committee (MPC)

Answer 18

The Bank of England committee responsible for keeping inflation under control by the manipulation of interest rates

Question 19

Mutual
organisation

Answer 19

An organisation owned by its customers, who are also its members, rather than by shareholders

Question 20

Oligopoly

Answer 20

A market dominated by a few large firms, eg the financial services sector

Question 21

Payday loan
companies

Answer 21

Online firms that provide instant, very short-term (ie for a few days or weeks), unsecured cash advances of small amounts to customers who need cash immediately, and who are in employment and have payroll records.

Question 22

Peer-to-peer (P2P)
lenders

Answer 22

Online marketplaces that enable people to lend to and borrow from each other without using a traditional financial institution such as a bank or
building society.

Question 23

Prudential
Regulation
Authority (PRA)

Answer 23

One of the two main regulators of financial services in the UK (the other is the Financial Conduct Authority).

Question 24

Restricted financial
adviser

Answer 24

A professional who can only recommend certain types of product from one or a limited number of providers. They are not allowed to use the
word ‘independent’ to describe their advice.

Question 25

Retail banks

Answer 25

Banks that deal directly with consumers, eg providing current accounts and mortgages

Question 26

Retail ring-fencing

Answer 26

Separating the deposit-taking part of a bank or building society from the rest of its business so that, in the event of financial difficulties, the ring- fenced deposits of retail customers cannot be used to pay the debts of the more risky investment section of the bank

Question 27

Short-term money markets

Answer 27

Financial markets where banks borrow over short periods (ie months,weeks or even days), especially from the interbank market, where banks with short-term surpluses lend to banks with short-term deficits.

Question 28

Which of the following is an example of a large public limited company? a bank, credit union or friendly society

Answer 28

a bank

Question 29

The government department that has overall responsibility for financial stability in the UK is the ?

Answer 29

HM Treasury

Question 30

what do retail banks do ?

Answer 30

provide services to individuals and to small and medium-sized businesses

Question 31

The largest building society in the UK is:

Answer 31

Nationwide Building Society

Question 32

The providers of insurance can be subdivided into two main categories:

Answer 32

individual insurance companies and Lloyd's insurance market.

Question 33

Credit unions are regulated by

Answer 33

the Prudential Regulation Authority and the Financial Conduct Authority

Question 34

The Bank of England's Monetary Policy Committee (MPC) is responsible for

Answer 34

carrying out government monetary policy

Question 35

An independent financial adviser is permitted to sell the products of

Answer 35

any provider

Question 36

An objective of the Financial Policy Committee is to

Answer 36

support the government's economic policy

Question 37

An example of a payday loan company is

Answer 37

Lending Stream

Question 38

UK Financial Investments (UKFI) was set up to manage the shareholdings of banks rescued by the government in the 2007/8 financial crisis

Answer 38

true

Question 39

In relation to financial intermediation, those in the deficit sector have more money coming in than going out.

Answer 39

false

Question 40

People who lend money to intermediaries and borrow from them are known as counterparties

Answer 40

true