Topic 3 - The Impact of External Factors Flashcards
what does political factors refer to
government policies which affect the products and services offered by financial providers, and the impact these policies have on individuals
what does the new system of regulation post financial crisis set out
what they are and aren’t allowed to do, including transparency of pricing, quality of advice and how they respond to complaints
5 reasons why do we need regulation
protects consumers from dishonest, incompetent or unstable providers
a regulated and sustainable system will enhance individual sustainability - reducing risk of another financial crisis
gives confidence in the financial system
requires prudent business management and properly managed risks
requires providers to ensure consumers are fully informed of features, benefits, restrictions and terms and conditions of products
when the Financial Services Authority was abolished under the Financial Services Act 2013, who took its place
Financial Policy Committee
Financial Conduct Authority
Prudential Regulation Authority
what was the aim of the 3 new regulators
to maintain stability of the industry and providers, and ensure that consumers are treated fairly and fully protected
what agencies are in place to protect financial services consumers
Financial Conduct Authority
Financial Ombudsman Service
Financial Services Compensation Scheme
Competition and Markets Authority
Citizens Advice
Local Authority Trading Standards Offices
what is the political agenda
focused more directly on helping to ensure that every individual has access to the benefits that financial products and services can provide
social inclusion is a key policy within the agenda, what makes a person socially excluded
if certain groups or individuals in certain situations are denied access to the benefits enjoyed by most
if full social inclusion existed, what would every member of society experience
full participation in community life
can influence decisions affecting them
able to take some responsibility for what goes on in communities
exercise the right to access information and support that they may need
equal access to services and facilities
why do people find themselves social excluded
what is the extra feature for financial exclusion
physical/mental illness/disability
poor basic skills
live in deprived areas
have a low income due to low paid jobs
unable to find work
no fixed address/ homeless
discriminated against due to ethnicity/religion/gender/age/disability
level of financial literacy
what is financial exclusion
inability to access even the most basic financial products/services
what is meant by financial literacy
level of knowledge and understanding of financial matters
why were basic bank accounts introduced as part of the Universal Banking Policy 2003
benefits became payable by automatic credit transfer rather than cheque, so needed an account
what is the Post Office Card Account
the same as a basic bank account but accessed at the post office
what do the government promote providers to do to combat social and financial exclusion
offer products targeted at the financially excluded
provide information accessible to everyone
make own efforts to promote social inclusion through financial inclusion
how has the internet helped to reduce financial exclusion
who has it allowed access to
making broadband accessible to everyone
those who are housebound and cant get to the bank
have a disability
work unsociable hours
feel uncomfortable with sales staff
what is necessary for a perfect market
need competition, need confidence in buying products which will meet needs, at best price, and be informed about the product, the best way to buy it and own needs : perfect knowledge
what happens when consumers are not fully informed - information failure
no guarantee that free competition and market forces will deliver the best products at the best prices - market failure
what is the cost of complying to the new regulation
banks have to pay more for training of staff and costs of redesigning products
companies either have to accept lower prices (lower dividends) or increase price to consumer
what does technological factors include
matters such as automation, the rate of technological change and the influence of technology on outsourcing decisions
what processes are good for automation
ruled based jobs that require no judgement or discretion
what can automation show
any deterioration in accounts before it happens, when loans fall into arrears
what are the 2 key results of automation
increased speed and efficiency
less face to face advice and sales
providers can use it to get a clear picture of needs, wants and habits, why is this to consumer advantage
will be offered products that closely match their need and wants
what is digital divide
separates those of poor computer literacy/ access
what % of UK have not accessed/used the internet
13%
what are financial providers being encouraged to do
make their products environmentally friendly
what are banks encouraged to do
make favourable loans to companies that invest in developing green technology and not to those who are unsustainable
what are insurance companies encouraged to do
charge lower premiums for fuel efficient cars
what are green washing policies
masking products with green window dressing, when in truth they only pay a lip service to environmental issues
what changes are referred to in economic factors
interest (inflation, house prices, savings and investments)
economic activity, government spending and unemployment
global economy and exchange rates
what is the basic economy theory
if too much spending, consumer demand is higher than supply, so prices rise to take advantage, widespread action = inflation
what is the Monetary Policy Committees objective
to reduce consumer spending - which reduces demand and then prices
what does the higher cost of mortgages result in
reduced demand for property, as cannot afford it, resulting in falling house prices