Topic 3 Flashcards
What is the conduct of a business
the way in which a business is run
Who enforces the conduct of business regulation
FCA
What is deleveraging
reducing the amount of debt in relation to assets
What is an example of deleveraging
paying of credit cards
What is economic stability
ensuring economic activity is carried out in a way that ensures it can continue in the long term
What is environmental stability
Reducing the negative impacts of human activity on the environment so that natural resources can be sustained
What is an example environmental stability
using renewable resource
What are equator principles
a set of ethical benchmarks for banks to follow when taking decisions to finance infrastructure
give an example of an equator principle
dams
What is ethical lending
lending money to companies with good ethics
What is an example of ethical lending
Lending money to a company that invests in green technology
what is financial contagion
where debt works its way through the global financial system
what is an impact of financial contagion
threats to confidence and sustainability of financial systems
what is leverage
the amount of borrowing a company has in relation to its assets
what is liquid assets
cash or assets that can easily be converted into cash without losing value
what is liquidation
the process by which a company or a part of is brought to an end
what happens to the assets and property of a company when forced into liquidation
they are redistributed
what is a moral hazard
a situation in which there is lack of incentive to guard against risk because the risk take believes that they will be protected from negative consiquences
what is an example of a moral hazard
banks believing that the government would bail them out if they got into any financial difficulty
what the mortgage market review
reforms made to the mortgage market to ensure it is sustainable and works better for consumers
when was the reforms made to the mortgage market
april 2014
what is perilous debt
a situation in which someone is spending more than half of their monthly income on debt repayments
what is provider sustainabilty
a company with a sustainable business model
what is an example of provider sustainability
a bank willing to take less risk even if it means giving up the chance to make additional profits
what is prudential regulation
regulation that is designed to ensure financial services providers do not fail and if they do fail, they failure does not impact the wider financial system
what is social sustainability
a concern with creating communities that foster well being, peace security and justice for the people who live in them
what are speculators
People who buy and sell the shares of many companies in order to make quick profits on the deals
what are stakeholders groups
the groups of people upon whom financial services providers have an impact
what is sustainable development
development that meets the needs of the present without compromising the ability of future generations to meet their own needs
what is a sustainable financial product
a financial product that is designed to meet the long-term requirements of the who buy it
what is a sustainable financial system
a system in which financial services are delivered in a way that means they can continue to be delivered and meets the needs of customers over the long term
what is systemic risk
risk that affects an entire system
what are systemically important financial institutions
the large firms within the financial services sector that would cause serious problems for the whole economy if they fail
what is ‘too big to fail’
believing that the consequences of one or more of the big banks failing would be too great for any government to allow it to happen
what are the 3 pillars of sustainability
environmental, social, economic
systemic risk is highest when the financial providers are…
large companies
what were the banks placed in when the government purchased failed banks in 2007/08
temporary public ownership
what is the procedure that takes place when a bank is in trouble
resolution
what a failing bank may receive since regulations were put in place
help from the government and bank of england but may be allowed to fail
what are directors
those who make the company’s strategic decisions
what is a sustainable financial product designed to meet
long term consumer requirments
What is self-insurance
regularly setting aside a sum of money to cover unexpected events
What do people do when deleveraging
stop spending and start saving to pay of existing debts
Who is fully responsible for assessing whether a potential mortgage customer can afford the loan and verify there income as a result of the mortgage market review
the lender
