Topic 3

Question 0

Disintermediation is

Answer 0

Where the lender and borrowers interact directly

Eg issue of shares

Question 1

Fin intermediary is…

Answer 1

An institution who borrows from a sector with a surplus to thos with a deficit at a profit

Question 2

4 reasons why intermediary are useful

Answer 2

Geographical location- bringing those together seperated geographically
Aggregation- deposit small, loan larger, they aggregate deps to overcome this mismatch
Maturity transformation- overcome maturity mismatch
Risk transformation-spead risk by aggregating and then lending to a wide variety of borrowers

Question 3

Product sales intermediaries

Answer 3

Ie brokers

Question 4

Proprietary org

Answer 4

Owned by shareholders, divs and shareholder meeting

Question 5

Mutual orgs and credit unions

Answer 5

Owned by members

Bulding soc, friendly soc and Credit unions which are fin co-ops run for benefit of members who are cnected some way

Question 6

Indepedant commission on banking - ICB

Answer 6

Est june 2010

To consider reforms to promote fin stablibity and competition

Question 7

ICB 5 recommendations

Answer 7

Uk retail ring fencing- sep retail from whole sale to allow continuation of service in event of another crisis
Capital - largest ringfenced bank hold equity capital of 10% of risk weighted assets+ 7-10% loss aborbing cap
Bail in and depositor protection
Competion- switch accs and greater transparency
Structural reform, set up seperate subsidaries for wholesale businesses

Question 8

Clearing is…

Answer 8

The process of settling transfer between bank at the end of each day as result of customer transactions

Question 9

Whole sale banking refers to the process…

Answer 9

Fin inst buy and sell assets. Normally finance houses but also retail banks to top up deposits from branch network to provide loans
Building soc can lend 50% of their liabilities, this can be inc t 75 by the treasury without changing legislation