Topic 1 key words

Question 1

Counterparties

Answer 1

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

Question 2

Competition and Markets Authority
(CMA)

Answer 2

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

Question 3

Divestment

Answer 3

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

Question 4

Financial intermediary

Answer 4

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 5

Financial intermediation

Answer 5

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 6

Financial Policy Committee (FPC)

Answer 6

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 7

Investment banks

Answer 7

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 8

Lloyd’s insurance
market

Answer 8

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

Question 9

Long-term capital
markets

Answer 9

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 10

Oligopoly

Answer 10

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

Question 11

Peer-to-peer (P2P)
lenders

Answer 11

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 12

Retail banks

Answer 12

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

Question 13

Short-term money
markets

Answer 13

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.