topic 5

Question 1

Bank rate

Answer 1

The interest rate that the Bank of England uses when it lends money to other banks. Financial services providers take account of the Bank rate when they decide how to set interest rates on their own products

Question 2

Banking Act 2009

Answer 2

This Act provides a set of tools to allow the regulatory authorities to resolve (ie wind up) a bank or building society that is in financial difficulty in an orderly way, and so to reduce the impact of a bank failure on financial stability and bank customers

Question 3

Challenger banks

Answer 3

Any new bank that challenges the ‘big four’. For example, Virgin Money, Metro Bank, Monzo Bank and Starling Bank

Question 4

Consumer protection

Answer 4

Designing products and services with customers’ needs in mind, rather than making maximum profits the absolute priority. It also involves ensuring that customers are not sold products that are unsuitable for them, and that they are treated fairly

Question 5

Corporate social
responsibility (CSR)

Answer 5

Any action or project in which a company goes beyond the interests of its shareholders and senior management in order to benefit other stakeholder groups, normally with either a social or an environmental purpose. Also known as citizenship or sustainable responsible business

Question 6

Deleveraging

Answer 6

Reducing the amount of debt in relation to assets. In personal terms, this might mean paying off loans, credit cards, etc

Question 7

Digital exclusion

Answer 7

An aspect of financial exclusion – the inability to take part in the computer based society

Question 8

Financial exclusion

Answer 8

The inability to get access to even the most basic financial services and products

Question 9

Financial inclusion

Answer 9

The delivery of financial services at affordable cost to all sections of society,including the most disadvantaged

Question 10

Financial Services (Banking Reform) Act 2013

Answer 10

Legislation that introduced retail ring-fencing for banks and the cap on payday lenders.

Question 11

Financial Services Act 2010

Answer 11

Legislation that focuses on the need for banks to have a plan in place to deal with situations where they get into financial difficulty

Question 12

Financial Services
Act 2012

Answer 12

The main Act of Parliament governing the regulation of the financial services industry

Question 13

FTSE 100

Answer 13

The Financial Times Stock Exchange Index, known as the ‘footsie’. It is an index of the share price of the 100 companies with the highest ‘market capitalisation’ (total value of issued shares) listed on the London Stock
Exchange.

Question 14

General Data Protection Regulation

Answer 14

European Union legislation implemented on 25 May 2018. In the UK, its provisions supersede those of the Data Protection Act 1998 with the creation of the Data Protection Act 2018

Question 15

Help to Buy scheme

Answer 15

A government-backed initiative set up to help home-hunters purchase a property with as little as a 5% deposit

Question 16

Loan forbearance

Answer 16

When a lender does not seek to repossess a property as soon as the borrower misses a few monthly payments, instead allowing the customer to stop paying or make reduced payments for a set period

Question 17

Money laundering

Answer 17

The process of making ‘dirty’ money (money gained from criminal activities) ‘clean’ – ie making it look as though it has been acquired legitimately

Question 18

Mortgage equity withdrawal

Answer 18

Additional borrowing based on the difference between the value of a house and the outstanding mortgage (ie if the house is valued at more than the amount the owner has to repay on the mortgage)

Question 19

National Employment
Savings Trust (NEST)

Answer 19

A pension scheme run by a public organisation, which aims to ensure that the majority of workers are enrolled in an occupational pension

Question 20

PESTEL analysis

Answer 20

A tool used to analyse how six key areas (Political, Economic, Social, Technological, Environmental and Legal) in the external environment might
affect individual and corporate financial decisions

Question 21

Profit margin

Answer 21

The amount by which income from sales exceeds costs

Question 22

Social inclusion

Answer 22

Ensuring all individuals and groups in society can benefit from certain rights and entitlements, such as employment, adequate housing, healthcare, education and training.

Question 23

Which area of PESTEL analyses new delivery methods and new products?

Answer 23

Technological

Question 24

Individuals are directly exposed to movements in the stock market if they have invested in:

Answer 24

shares

Question 25

Prior to the financial crisis of 2007, the UK attracted international banks because it was seen to have a:

Answer 25

light touch approach to regulation

Question 26

The role of the Information Commissioner is to enforce the

Answer 26

Data Protection Act / UK General Data Protection Regulation

Question 27

A factor that could make a financial services product unsuitable for a particular client is their:

Answer 27

age

Question 28

Complying with regulation can be:

Answer 28

a barrier to new providers entering the banking industry

Question 29

The Standards of Lending Practice form:

Answer 29

a voluntary banking code that covers the sale of credit excluding mortgages

Question 30

The relationship between interest rates and business investment can correctly be described as:

Answer 30

when interest rates fall, business investment rises

Question 31

‘Responsible lending’ means that:

Answer 31

banks must ensure borrowers can show that their income is high enough to make mortgage payments as well as other bills

Question 32

the government sold the whole of Northern Rock to Virgin Money.

Answer 32

false

Question 33

A social programme must be balanced against a provider’s obligation to earn a good return for its shareholders or members

Answer 33

True