Topic 3: The Impact of External Factors Flashcards
What is regulation?
A political factor that sets the rules for financial providers to follow
When was the present regulatory systems established and what act under?
April 2013 under financial services act of 2012
What 3 bodies replaced the FSA
FPC, FCA and PRA
financial policy committee, financial conduct authority and prudential regulation authority
What do the FPC, FCA and PRA do?
FPC = part of BoE which focuses on risk to whole financial system FCA = organisation that regulates financial firms providing products to consumers PRA = main regulator of financial services and sets standards
What is mis-selling with an example
When a providers is neglectful in selling an unsuitable product
misspelling of PPI prime example
What 3 services protect consumers and what is their purpose
Financial Ombudsman Service = independent party set by parliament that settles consumer complaints
Financial services compensation scheme = covers consumers certain amount if provider defaults
Competition and markets authority = body responsible for promoting competition in market
What is social exclusion
If someone is denied access to benefits for reasons such as racism poverty etc.
What is financial exclusion
the inability to access even the most basic of financial products
How did the government try to combat exclusion
Created Universal banking policy therefore providers had to offer basic accounts
however in 2010 1.75 million still without account
What is information failure
When a consumer is not fully informed about a product
What is the cost of compliance
Government regulation and pressure could lead to increased prices and loss of jobs
need to ensure regulation is balanced
What are interest rates
the price of saving or borrowing with a provider expressed as a percentage
Why did the Monetary Policy Committee change the interest rates in 08 and 2016
They cut it to 0.5 in 08 due to the crisis and to 0.25 in 2016 after brexit
When did the government give the BoE power to set rates
May 1997
What is target inflation rate
2%
What is the trend between share prices and interest rates
When rates rise, companies spend less and therefore share prices fall
What is equity
The difference between market price of property and outstanding mortgage balance
What is an equity loan
What is negative equity
Equity loan - loan secured on mortgage property
Negative equity - The mortgage loan is greater then property value
What are marginal borrowers
How many mortgage repossessions were there in 09 and 15
Marginal borrowers are people that are only just managing to repay mortgage
09- 49800, 15 -10500
What are the four factors that fuel economic activity in the UK
- consumer demand
- Corporate demand
- Government spending
- Demand for exports
What is Monetary policy
the manipulation of interest rates to keep inflation low
Fiscal policy
How the government manages its overall spending and raising of money
What is austerity policy
cuts in public spending to reduce government need for borrowing
Explain the results of the 2010 election and how it impacted the economy
Coalition of Conservative and Liberals won, public spending cut with jobs lost
National debt grew from 530 billion in 08 to 1457 billion in 2014
