Topic 5 Flashcards
THE EXTERNAL ENVIRONMENT AND PESTEL ANALYSIS
- PESTAL analysis
What is PESTEL analysis
PESTEL analysis is a framework used to assess the external environment of a business by examining six key factors:
1. Political
2. Economic
3. Social
4. Technological
5. Environmental
6. Legal
These factors influence the performance, market position, and decision-making of financial services providers.
What political factors impact financial service providers?
Answer:
• Competition regulations – Governments regulate market competition to prevent monopolies.
• Consumer protection laws – Rules ensuring financial services providers treat customers fairly, protecting them from exploitation
What economic factors affect financial services?
Answer:
• Interest rate changes – Affect the cost of borrowing and returns on savings.
• Inflation rates – Influence consumer spending and investment.
• Competition – The level of competition in financial markets impacts service quality and pricing.
• Housing market trends – Mortgage rates and housing prices impact banking services.
What social trends affect financial services providers?
Answer:
• Changing lifestyles – Growth in digital banking and online transactions.
• Unemployment rates – Higher unemployment reduces demand for loans and mortgages.
• Demographic trends – Aging populations may impact pension and insurance services
How does technology influence financial services?
Answer:
• New delivery methods – Online banking, mobile apps, and fintech innovations improve accessibility.
• New products – AI-driven financial advice, blockchain, and digital currencies revolutionize the sector
How do environmental concerns affect financial service providers?
Answer:
• Sustainability – Companies face pressure to adopt eco-friendly practices.
• Green investment – Growth in ethical banking and green bonds to fund environmentally friendly projects
What legal regulations impact financial services providers?
Answer:
• Legislation – Banking laws set standards for financial transactions and customer protection.
• Regulations – Compliance with financial regulations (e.g., anti-money laundering laws) ensures transparency and security
Why is PESTEL analysis crucial for financial services providers?
Answer:
• Helps providers anticipate changes in the market.
• Ensures compliance with legal and regulatory requirements.
• Guides strategic planning to stay competitive.
• Identifies risks and opportunities in the external environment.
THE POLITICAL ENVIRONMENTAL
What does the term “political environment” refer to in the financial services sector?
refers to government policy related to financial services, including the extent of government intervention in the financial system. It influences how financial providers sell their products
Key factors include:
• Government policy and the political agenda
• Regulation
• Consumer protection
• The government as a shareholder
- the political agenda
How did financial regulation operate before the 2007-08 financial crisis?
Answer:
• Regulations were looser, allowing financial institutions more freedom.
• The “light touch” regulatory approach attracted international banks.
• Banks set their own rules without strict enforcement.
• Capital requirements were low, increasing financial risks.
• There was only a vague rule on liquidity, meaning banks were not required to hold enough cash for withdrawals
What were the consequences of the 2007-08 financial crisis?
Answer:
• Threatened the financial system’s survival, causing a global economic recession.
• Several financial institutions failed.
• The public sector (taxpayers) had to bail out banks, costing huge amounts of money.
• Public confidence in banks collapsed, damaging their reputation
How did the UK government respond to the financial crisis?
Answer:
• Focused on securing financial stability.
• Aimed to reduce systemic risk, preventing future crises.
• Ensured the public sector would never again have to bail out banks.
• Restored public confidence in the banking system.
• Helped repair the reputations of banks and financial institutions
- tighter financial regulation
What was the purpose of tighter financial regulation after the crisis?
Answer:
• Increased oversight of financial institutions to prevent reckless behavior.
• Strengthened consumer protection laws.
• Ensured banks held enough capital and liquidity to meet withdrawal demands.
• Restored trust in financial services providers by making them more accountable
Why is government intervention in financial services important?
Answer:
• Prevents instability in the financial system.
• Ensures fair treatment of consumers.
• Protects the economy from financial crises.
• Helps financial institutions operate ethically and responsibly.
What is financial regulation?
refers to the system of rules under which financial services providers operate and the supervision of their actions
What are the four key reasons why financial regulation is necessary?
A:
1. Creates a safer, more stable, and sustainable financial system.
2. Promotes confidence in the financial system.
3. Protects consumers from mis-selling and financial fraud.
4. Provides people with information on financial products
Why is it important for financial institutions to have confidence in one another?
A: Financial institutions interact extensively. For example, investment companies place clients’ money with banks, and life insurance companies invest customer premiums. If institutions do not trust one another, the financial system could collapse
How does the UK financial system contribute to the economy?
A: The UK financial sector sells products abroad, supporting jobs in the UK. If international confidence in the UK financial services industry were to collapse, the economy would suffer
How does a well-regulated financial system reduce the burden on the state?
A: Consumers who trust financial products may use them for income if they become sick or retire, reducing reliance on state welfare programs
What role do financial regulators play in ensuring financial stability?
A: Financial regulators authorize and monitor firms that provide financial services, ensuring they follow regulations that maintain market confidence and consumer protection
How has financial regulation changed since the financial crisis?
A: Rules have been widened and tightened, with continuous updates to improve financial stability and prevent future crises
What balance must be maintained in financial regulation?
A:
• Regulation should be strict enough to reduce the risk of financial crises.
• It should not be so intrusive that it stifles innovation and competitiveness
What is an example of recent changes in financial regulation?
A:
• Stricter rules now require banks to consider affordability when approving loan applications.
• This helps ensure responsible lending and prevents excessive debt burdens on consumers
Why is financial regulation considered a fact of life for financial services providers?
A:
• It is necessary for market stability and consumer protection.
• Financial firms must operate within regulatory frameworks.
• Compliance ensures confidence in the financial system and economic stability
- costs
What is the impact of financial regulation on providers?
A: Financial regulation imposes a large cost on providers, which can be:
• Absorbed by the provider (reducing profit)
• Passed on to customers through higher interest rates, insurance premiums, or management fees
What are the direct regulatory costs that authorised firms must pay?
A:
• Fees to the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
• Levies to the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS)
How does compliance with regulations increase business expenses for banks?
A:
• More detailed and time-consuming procedures (e.g., credit checks, customer notifications, deposit source verification)
• Adherence to anti-money laundering rules
• Potential redesign of IT systems to ensure compliance
• Increased staff time and training
What is money laundering, and why do banks need to check large deposits?
A:
• refers to criminals using financial products to conceal illegally obtained funds.
• If banks fail to check the source of large cash deposits, criminals may convert stolen cash into legitimate bank balances
Why do banks need to redesign computer systems and train staff?
A:
• IT systems may need to be (re)designed to implement new compliance procedures.
• Staff must be trained (and retrained) as regulations change to ensure adherence to laws
What are the human resource costs associated with financial regulation?
A:
• Hiring of qualified compliance staff
• Ongoing training and retraining as regulations change
• Development and implementation of continuous training programs
How do system costs arise from financial regulation?
A:
• Changes in regulations require updates to manuals and IT-based systems.
• New compliance measures often lead to system modifications
How do prudential regulations affect a bank’s operations?
A:
• Banks must control risks to prevent loan value losses.
• They must maintain enough liquid assets and capital.
• They are required to keep a portion of funds in liquid form (cash or easily convertible assets) to meet withdrawal requests
What is the opportunity cost imposed by prudential regulations?
A:
• A portion of the bank’s funds must be kept in liquid form instead of being used for long-term loans.
• Long-term loans are often more profitable, meaning the bank loses potential higher earnings
- benefits
Why is regulation important for financial providers?
A: Regulation ensures providers comply with prudential rules, making them safer and less likely to collapse. It enhances sustainability and allows banks with good reputations to borrow money more cheaply due to higher credit ratings
How does compliance with regulation improve a provider’s reputation?
A: Compliance makes providers appear more ethical and trustworthy, attracting individual and small business customers. Even if done out of obligation, promoting customer interests improves credibility
How does regulation help create a law-abiding culture within a firm?
A: Regulation fosters a culture of ethical and lawful behavior, reducing the likelihood of rule breaches, which could lead to fines and negative publicity
What financial benefit does ethical behavior provide to financial providers?
A: Ethical behavior reduces the risk of civil lawsuits, which can be costly. For example, banks involved in manipulating the LIBOR rate faced significant legal consequences and financial damages
How does regulation contribute to fair competition among providers?
A: It ensures all financial providers follow the same rules, preventing unethical firms from gaining an unfair advantage over those with more prudent business practices
How can regulation disadvantage smaller providers?
A: Compliance costs can act as a barrier to entry for new firms, benefiting large, established banks while making it harder for smaller providers to compete
What pressure did the UK government face regarding regulation in 2017?
A: There was pressure to reduce regulatory oversight, especially concerning The Pensions Regulator. However, the Work and Pensions Committee advocated for more regulation
What did a House of Lords committee propose regarding the FCA in 2017?
A: The committee suggested broadening the FCA’s remit to prioritize tackling financial exclusion
How does compliance help customers in financial services?
A: Ensuring customers fully understand the products and services they apply for is a key aspect of regulatory compliance
- complexity and uncertainty
Why is financial regulation complex?
A: Financial regulation covers a wide range of businesses and products, meaning rules must account for many possibilities. They are often updated, creating challenges for staff ensuring compliance
What are the two main costs associated with financial regulation?
A:
1. Direct financial costs – Expenses related to ensuring compliance.
2. Indirect costs – Stress on employees and the impact on staff motivation
Why is it better to improve the quality of regulations rather than increase their quantity?
A: Too many regulations can burden businesses unnecessarily. Improving regulation quality ensures effectiveness without excessive compliance costs
What two main roles do regulators play?
A:
1. Enforcing existing rules – Ensuring businesses comply with current regulations.
2. Monitoring market developments – Adapting regulations to new institutions, products, and market trends
What regulatory changes were made to payday lenders?
A:
• Financial Services (Banking Reform) Act 2013 required cost caps on borrowing.
• FCA set a limit on the total cost of loans, including arrangement fees, penalty fees, and interest.
• New rules on advertising restrictions and tighter affordability checks were introduced
How does the regulatory environment change over time?
A:
• New regulators may replace old ones.
• Existing regulators adjust their operational methods.
• New rules are introduced for emerging situations.
• New enforcement procedures are implemented
How does regulatory uncertainty affect businesses?
A:
• Firms become uncertain about future regulation changes.
• Planning for the future becomes difficult.
• Banks may avoid launching new products due to fear of regulatory reactions
Why can regulation be seen as a threat rather than a benefit?
A: If businesses avoid innovation due to uncertainty about how regulators will react, regulation hinders growth rather than fostering stability
How do the costs of compliance compare to the costs of non-compliance?
A: Compliance is expensive, but non-compliance can lead to even greater financial penalties and legal consequences
- barriers to entry
Why do smaller banks struggle with the costs of regulation?
A: A high proportion of regulatory costs are fixed, meaning they must be paid regardless of business volume. Smaller banks find it harder to absorb these costs compared to larger banks, which can pass them on to customers or accept lower profits
What are the key requirements for a new firm to obtain authorisation from the regulator?
A:
1. Solvency – Sufficient capital and liquid assets to operate and pay obligations.
2. Competence – Proper business procedures, trained staff, and adequate transaction records.
3. Monitoring – Undergo a long and expensive approval process
How do regulatory procedures affect new firms entering the market?
A: The complexity and cost of obtaining authorisation make it harder for new entrants to establish themselves, despite financial authorities wanting to promote competition
How has the FCA responded to challenges faced by new financial providers?
A: The FCA has introduced measures to allow new providers to obtain authorisation at an earlier stage of their development (FCA, 2020)
-consumer protection
Which bodies are responsible for consumer protection in financial services?
A:
1. Financial Conduct Authority (FCA) – Conduct of business regulation.
2. Competition and Markets Authority (CMA) – Took over roles from the Office of Fair Trading (OFT) and the Competition Commission in April 2014.
3. Financial Ombudsman Service (FOS) – Handles consumer complaints.
4. Financial Services Compensation Scheme (FSCS) – Protects consumers in case of financial institution failure
What role does the Information Commissioner play in financial services?
A:
• Enforces the Data Protection Act 2018, ensuring personal data is protected.
• Oversees UK General Data Protection Regulation (UK GDPR), which:
• Strengthens processing requirements for organisations handling personal data.
• Gives individuals rights to access and erase their stored data
How do consumer protection regulations affect financial service providers?
A:
• Providers must adhere to the principle of ‘treating customers fairly’.
• This creates a duty of care for financial institutions.
• Compliance with these rules impacts both costs and benefits of regulation
- changing the banking culture
What is the purpose of consumer protection regulation in banking?
A: It ensures that financial service providers prioritize customer needs when designing products and do not sell unsuitable products based on financial status, age, or legal status
What responsibility does consumer protection regulation place on financial service providers?
A: They must act in the best interests of customers, ensuring products are appropriate for individual circumstances rather than focusing solely on sales and profits
How was the traditional banking culture described?
A: It involved personalized relationships where bank managers knew customers personally and understood their financial needs
How did the banking culture change before the 2007-08 financial crisis?
A: Banks began seeing customers as sources of income rather than individuals needing financial services, leading to aggressive sales techniques
How was bank staff performance measured before the financial crisis?
A: By the number of new contracts signed rather than customer satisfaction
What was a major consequence of the shift in banking culture?
A: Aggressive sales techniques led to the mis-selling of financial products.
How have scandals such as mis-selling affected banks?
A: Banks have faced compensation payouts and fines, prompting a shift back to customer-focused banking
How are banks addressing the bad publicity from past scandals?
A: By taking financial responsibility for mis-selling and making leadership changes
Why can’t banking culture change overnight?
A: Cultural shifts take time to implement effectively within large organizations
What role do new chief executive officers (CEOs) play in cultural change?
A: They aim to lead by example and foster a customer-centric banking culture
- codes of conduct
What are the two main banking codes of practice?
A: The Banking Conduct of Business Sourcebook (BCOBS) and the Standards of Lending Practice
What is the main purpose of the BCOBS and the Standards of Lending Practice?
A: To ensure high standards of consumer protection in banking
What does the Banking Conduct of Business Sourcebook (BCOBS) cover?
A: It provides mandatory rules and guidance for banks that accept deposits from individuals and small businesses
What are the key requirements banks must follow under BCOBS?
A: - Provide clear and accurate information to customers.
• Offer prompt, efficient, and fair after-sales service.
• Allow customers the right to cancel a product after purchase
What is the nature of the Standards of Lending Practice?
A: It is voluntary and covers the sale of credit (such as overdrafts, personal loans, and credit cards) but does not cover mortgages
What are some minimum standards set by the Standards of Lending Practice?
A: - Advertising must be fair, clear, and not misleading.
• Customers must receive clear product information, including interest rates and charges.
• Regular statements must be provided.
• Customers must be informed about any changes in terms and conditions
What responsibilities do financial providers have under the Standards of Lending Practice?
A: - Lend money responsibly.
• Act quickly and sympathetically when customers face difficulties.
• Keep personal information private and confidential
How does the UK government act as a shareholder in the banking sector?
A: It owns more than 50% of NatWest (formerly RBS) share capital, though shares are being sold to private investors
What action did the UK government take in 2008 regarding bank shares?
A: It purchased shares in banks to inject cash and prevent them from failing during the financial crisis
How does government ownership affect NatWest compared to private banks?
A: The government has more influence over NatWest’s operations than it does over banks that are fully privately owned
THE ECONOMIC ENVIRONMENT
- inflation and unemployment
Inflation
What is the economic environment in which financial services providers operate?
A: The economic environment consists of economic variables that impact financial services providers, influencing their success or failure
How do changes in economic variables affect financial services providers?
A: Changes in economic variables such as inflation and unemployment influence financial services by affecting demand for loans, savings, and investments
What is inflation?
A: Inflation refers to the rate at which general prices in a country rise. If incomes do not increase at the same rate, people’s real standard of living falls
How does inflation create uncertainty?
A: Inflation affects the value of money, real return from savings, and the cost of borrowing, making it difficult for businesses and individuals to plan for the future
How does high inflation affect a country’s exports?
A: High inflation makes a country’s goods more expensive, reducing competitiveness in international markets where other countries have lower inflation rates
How does inflation impact financial service providers?
A: Inflation affects the demand for lending, savings, and investment products, depending on whether inflation is high or low
What happens when inflation is relatively low (e.g., 2%)?
A:
• People feel secure about the future value of assets.
• Firms expect demand to rise gradually.
• Investment and lending demand remain strong, benefiting banks
What happens when inflation is relatively high (e.g., 5%)?
A:
• People and businesses are less willing to borrow.
• Investors seek inflation-protected investments.
• Banks create inflation-indexed savings accounts to preserve real value
How does unemployment influence inflation?
A:
• Higher unemployment generally leads to lower demand for services/products, reducing inflation.
• Lower unemployment can lead to increased spending and higher inflation
What are some factors that contribute to inflation?
A: Increases in the prices of gas, electricity, and food can lead to higher inflation
Employment and unemployment
What does the rate of employment indicate about a country’s economy?
A: It shows the speed at which the economy is growing
How is economic activity usually expressed?
A: In terms of the unemployment rate, which measures the number of people out of work
What are the effects of high unemployment on spending and savings?
A: Less money is spent, demand for loans decreases, and savings decline
How does high unemployment affect banks?
A: It impacts both sides of their balance sheets, increasing bad debts as people struggle to repay loans
Why do bad debts increase during high unemployment?
A: People who lose jobs are more likely to default on their loans
How does low unemployment influence consumer behavior?
A: It encourages a high-consuming lifestyle and a ‘consumer culture.
Why does low unemployment lead to more confidence?
A: People feel financially secure, reducing fears about the future
What is chronic unemployment?
A: It refers to people being unemployed for more than a year
How does chronic unemployment affect financial markets?
A: Long-term unemployed individuals rely on state benefits and have little demand for financial products
Why can’t the long-term unemployed borrow money easily?
A: They lack financial stability and resources to buy consumer products or insurance policies
How does high unemployment impact even those who have jobs?
A: It creates financial uncertainty, leading people to prioritize protection products like insurance
What types of financial products do people seek during uncertainty?
A: - Insurance for debt repayment in case of job loss
• Low-risk savings products for emergency funds
How has employment changed in modern times?
A: Few people have a ‘job for life,’ and many switch employers frequently
What financial challenges do people face when frequently changing jobs?
A: They may not qualify for traditional benefits like pensions and sick pay, requiring them to buy financial products independently
What financial product is needed for a mobile workforce?
A: Mobile pension schemes that employees can carry between jobs
How does high employment affect staffing costs?
A: Salaries rise, increasing staff costs and reducing company profits unless controlled
Why is recruitment difficult during high employment?
A: There are fewer unemployed people available for hire
How does high employment benefit companies despite higher staffing costs?
A: Economic growth allows companies to pay higher salaries and bonuses
How does high unemployment affect wages?
A: It slows wage growth and may even cause wages to fall
Why doesn’t a large labor supply necessarily benefit employers?
A: Many available workers may lack the required skills and qualifications
How do companies reduce costs during a recession?
A: By making staff redundant, reducing the wage bill
What are the negative consequences of redundancy?
A: - Redundancy payments
• Adverse publicity
• Loss of valuable skills in the workforce
What problem may businesses face after a recession?
A: Skilled staff may no longer be available when demand for labor increases again
inflation and unemployment linked
How are inflation and unemployment related according to economic theory?
A: Inflation is typically higher during periods of high economic activity and growth when unemployment is low. Conversely, lower inflation is linked to higher unemployment
What role does the Bank of England play in managing inflation and unemployment?
A: It uses interest rates to control economic activity and balance inflation with unemployment levels
What happens when inflation is low and unemployment is high?
A: Spending is low because people have less disposable income
How does the government respond to low spending and high unemployment?
A: It reduces interest rates to boost spending and encourage businesses to borrow and invest
How do lower interest rates affect borrowing?
A: Borrowing becomes cheaper, making it more attractive for businesses and individuals to take loans
What is the direct effect of increased borrowing?
A: Spending increases as businesses and consumers have more money to invest and buy goods
How does increased spending affect businesses?
A: Businesses experience higher demand for goods and services, prompting them to hire more workers
What happens to unemployment as businesses hire more workers?
A: Unemployment falls because more people are in work
How does falling unemployment influence prices?
A: As more people have jobs and income, demand rises, leading to an increase in prices
What is the final stage of this economic cycle?
A: Inflation rises due to increased consumer spending and business growth
Summary of the economic cycle
- Low inflation & high unemployment → Low spending
- Government reduces interest rates → Cheaper borrowing
- Cheaper borrowing → Increased spending
- Increased spending → Businesses hire more workers
- More workers employed → Unemployment falls
- Lower unemployment → Prices rise
- Higher prices → Inflation rises
- exchange rates
What is an exchange rate?
A: An exchange rate is the price of one currency in terms of another. For example, the conversion rate of pound sterling (£) to euro (€) or US dollar ($)
What factors influence changes in exchange rates?
A: Changes in exchange rates are influenced by:
• Interest rates among the currencies involved
• Levels of imports and exports between countries
How do exchange rate changes impact banks?
A: Banks are affected by exchange rate fluctuations because they conduct business in foreign markets. They may make profits or losses on currency trades depending on market movements
How do exchange rates affect international business transactions?
A: Businesses often deal in multiple currencies. For example, a UK manufacturer may:
• Buy raw materials from France (paying in euros)
• Export products to the US (getting paid in US dollars)
• Pay UK-based costs (e.g., wages, rent) in pounds sterling
What financial services are provided due to exchange rate fluctuations?
A: Financial providers offer:
• Foreign exchange services – for individuals buying holiday money
• Buy-back guarantees – allowing people to sell unspent currency at the same rate they purchased it
• Credit and cash cards – usable abroad, including at cash machines
• Exchange rate risk management products – helping businesses mitigate risks from currency fluctuations
How do exchange rate movements impact businesses and banks?
A:
1. If sterling rises:
• Imported products become cheaper
• Importers need more payment services, foreign currency loans, and trade insurance
2. If sterling rises:
• Exported products become more expensive and less competitive
• Exporters perform poorly, reducing demand for banking services
Why is the euro important despite the UK leaving the EU?
A:
• The euro is a major international currency
• Many UK businesses deal in euros for trade and financial transactions
• The UK remains a global financial center, and banks offer services for multiple currencies, including the euro
- Housing market (ppt)
- it is central to the UK’s economy and is an important indicator to economic activity
- changing property prices mean people will have to change deposits, monthly mortgage repayments which will effect other goods and services they can buy
- effects products such as home insurance, loans for furniture and PPI. After the financial crisis, people defaulted on their repayments and house prices fell
- banks were under pressure to not repossess their houses but to give them a forbearance period
- since the crisis, the government have brought in nee regulations to practice ‘responsible lending’. For this, borrowers must show that their income is sufficient to meet repayments
How do changes in house prices impact financial products?
A: Fluctuations in house prices influence demand for mortgages, personal loans, home insurance, and payment protection insurance, affecting profits and staffing needs in financial institutions
What happened to the housing market before the 2007-08 financial crisis?
A: The housing market boomed due to high demand, which increased house prices. Many people borrowed against the rising equity in their homes using mortgage equity withdrawal
What happened to the housing market after the 2007-08 financial crisis?
A: House prices fell, and many homeowners struggled to repay mortgages, leading to arrears and defaults. Banks practiced loan forbearance, delaying repossessions to give borrowers more time to pay
What is loan forbearance?
A: A practice where banks allow borrowers who miss payments extra time before repossessing their homes. It helped reduce defaults during the financial crisis
How did interest rates affect mortgage defaults?
A: Defaults were lower than expected due to low interest rates and loan forbearance. However, when interest rates rise, mortgage defaults are expected to increase
How did lending policies contribute to the financial crisis?
A: Slack lending policies allowed banks to grant large mortgages to borrowers who could not afford them. This led to defaults and contributed to the crisis
What changes were made to lending policies after the financial crisis?
A: New regulations enforced responsible lending, requiring borrowers to prove they could afford mortgage repayments after covering other bills
How did house prices behave after the crisis?
A: Despite economic recession and lower demand, house prices did not fall much further and have been rising in recent years
What factors contributed to rising house prices post-crisis?
A: Government schemes aimed at helping people, especially first-time buyers, purchase homes more easily
- help to buy 1
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- stock market movements (ppt)
- many people’s wealth are effected by the stock market, this is because people’s pensions are indirectly effected to the stock markets.
- in 2000, the stock market fell rapidly and decline for several years after
- this was beneficial to people’s knowledge about risk involved in the stock market, but lost faith in stock related products
- stock market movements continued
Banks and building societies saw a rise in deposits after the crash as it was more secure to invest their money into the bank rather than the stock market. Providers responded by:
- guarantee investment products that promise a certain return after a certain amount of years
- alternative investment products
The stock market crash recovered with an economic boom soon after
- stock market movements
How do stock market movements affect people?
A: They influence the wealth of individuals and businesses, even those who don’t invest directly, as pension products are linked to stock markets
What was the general trend of the UK stock market in the late 20th century?
A: It experienced rising trends with occasional declines until 2000, when global markets fell dramatically
What was a major consequence of the 2000 market decline?
A: Many people lost faith in stock market investments and sought safer alternatives
How did banks and building societies react to people withdrawing from stock investments?
A: They developed safer financial products such as:
• Guaranteed products (e.g., endowment policies) with set returns.
• Alternative investments (e.g., hedge funds) offering positive returns even in declining markets (though not guaranteed)
How did the stock market recover after crashes?
A: After the 2000 crash, markets eventually rebounded, followed by another financial crisis in 2007-08 that severely impacted global banks
What was the significance of the FTSE 100 index in 2015?
A: It reached 6,832 on January 23, 2015, raising concerns of another potential crash
Q: What lesson was learned from past crashes?
A: Investors were advised to diversify and ensure they had knowledge before investing in stocks
How did COVID-19 affect the FTSE 100 in 2020?
A: The index dropped to 6,460, marking its worst performance since 2008. The UK’s GDP fell by 2.6% in November 2020 due to restrictions
- competition (ppt)
- competitive environments have a significant effect on providers
- a market in which one firm dominates is known as a ‘monopoly’ and when a few institutions dominate, this is known as an ‘oligopoly’
- the financial regulatory authorities are now promoting the importance of competition as it forces banks to manage their risk better
- during the financial crisis, smaller banks and building societies were taken over by larger firms who were look to expand
- northern rock went into public ownership but still sold off the good parts of the bank to virgin money
- this is only temporary until they return into a private sector where investors will be asked to buy shares in them
- competition
How does competition affect financial service providers?
A: Competition influences the products designed by providers, the prices at which they are sold, and the methods of promotion and delivery
How do changes in the competitive environment impact financial providers?
A: - Mergers between large banks reduce the number of competitors, impacting how remaining banks operate.
• An oligopoly can form, where a few large banks dominate, closely monitoring each other’s policies
What is an oligopoly, and how does it affect banks?
A: An oligopoly is a market structure where a few large providers dominate. In banking, this leads to fierce competition, with each provider closely watching the policies of others
Why do UK financial regulatory authorities promote competition?
A: They believe competition makes banks more cautious and improves risk management
What was one result of the financial crisis on banks and building societies?
A: - The number of banks and building societies fell.
• Weaker providers were acquired by stronger banks looking to expand.
• Some mergers occurred due to the belief that larger banks are more stable
What action did the UK government take regarding Northern Rock?
A: - The government bought part of Northern Rock and was eventually repaid nearly £50 billion.
• The ‘good’ part of the bank was sold to Virgin Money.
• The government retains a large controlling stake in NatWest (formerly RBS)
What are ‘challenger banks,’ and why does the government support them?
A: - Challenger banks are new entrants in retail banking that compete with dominant large banks.
• The government encourages them to increase competition.
• Examples: Metro Bank, Virgin Money, Handelsbanken (Swedish bank)
THE SOCIAL ENVIRONMENT
- financial inclusion
Financial inclusion and social inclusion
How do social factors affect financial service providers?
A: Social factors influence both the demand for financial products and how they should be delivered. These include cultural aspects, demographics, employment changes, and home ownership trends, all of which have financial consequences
What is financial inclusion, and how is it related to social inclusion?
A: - Financial inclusion is a part of social inclusion.
• Social inclusion means all members of society can participate in community life, influence decisions, and access necessary support and services.
• Financial inclusion ensures people have access to banking, credit, and other financial services
What factors can lead to social exclusion?
A: - Disability
• Language difficulties
• Poor literacy and numeracy skills
• Living in deprived areas
• Poverty and homelessness
• Old age
• Discrimination
Why is homelessness a form of financial exclusion?
A: - Without a permanent address, it is difficult to open a bank account.
• Lack of a bank account prevents homeless individuals from receiving state benefits or managing finances effectively
The social environment (ppt)
- the lifestyle changes and social trends effect the providers or financial services.
- ‘social factors’ include a variety of cultural aspects as well as the social effects of changes in demographics, employment and home ownership.
Financial and social inclusion (ppt)
- financial inclusion is a component of social inclusion
- ‘ social inclusion’ refers to all members of society being able to participate fully in community life, influence decisions that effect them and they can take some responsibility for what goes on in their community. As well as access information, services and facilities that they need.
- however, people are socially excluded as well as financially because of factors such as disabilities, poor literacy, language difficulties and old age.
Dealing with financial exclusion (ppt)
- somebody who is financially excluded is that they don’t have a current account. Meaning that they are unable to access savings accounts, loans, insurance - and are unable to be paid straight into a bank
Dealing with financial exclusion continued (ppt)
Products aimed at social and financial inclusion:
- MAS provides info on how to manage money
- basic bank account is for everyone which can’t get them into debt. Although somebody with this account are unlikely to get other products it does fulfil a social purpose
- working towards financial inclusion can be part of a banks CSR policy
- dealing with financial exclusion
What is financial exclusion?
A: Financial exclusion is the inability to access even the most basic financial services. This may happen because individuals are not aware of financial products, believe they will not be accepted, or their situation prevents them from accessing financial services
What is the most obvious sign that someone is financially excluded?
A: Not having a bank current account. Without a current account, individuals cannot access other financial services such as savings accounts, personal loans, insurance policies, or receive wages directly from an employer
What government initiatives exist to promote financial inclusion?
A:
1. MoneyHelper – Provides clear advice on money management.
2. Basic Bank Account – Offered by all banks to provide simple and cheap banking services without allowing overdraft debt
What is a basic bank account, and why is it important?
A: A basic bank account is a government-required account that all banks must offer, allowing financially excluded individuals to access simple banking services. While banks would not typically provide these accounts voluntarily due to limited cross-selling opportunities, they serve an important social purpose by enabling access to a wider range of financial services
How can financial service providers support financial inclusion?
A:
1. Providing low-cost, low-deposit products – Examples include basic savings accounts with no minimum deposit.
2. Making product information accessible – Ensuring descriptions are available in multiple languages or Braille.
3. Educating financially excluded people – Sending representatives to community centers and schools to explain financial products
How does financial inclusion fit into a financial provider’s CSR policy?
A: Financial inclusion aligns with CSR by ensuring ethical business practices that consider all stakeholders, not just shareholders. It helps enhance a provider’s reputation and contributes to financial and social sustainability
Why might financial providers be reluctant to support financial inclusion? Name them
Profitability concerns
Higher costs
Limited cross - selling opportunities
Why might financial providers be reluctant to support financial inclusion?
A:
1. Profitability concerns – Financially excluded individuals are not considered profitable customers since their transactions generate little income.
2. Higher costs – Small transactions cost banks more than the income they bring in.
3. Limited cross-selling opportunities – Excluded individuals are usually on low incomes, making them unlikely to take loans or insurance
How do financial providers balance financial inclusion with the need to make a profit?
A: They must weigh their obligation to shareholders (profit-making) against their CSR responsibilities. While financial inclusion programs may be costly, they can improve a provider’s reputation and contribute to long-term sustainability.
- digital exclusion (ppt)
- Refers to somebodies inability to participate in computer based society
Digital inclusion help address financial exclusion by:
- housebound people able to deal with finances online
- disabled people can use software online
- unsocial hours allows them to carry out transactions
- digital exclusion
What is the purpose of general consumer financial education available on the internet?
A: It explains how financial systems work and helps individuals decide which products and services they need.
How can people with low incomes access online financial services despite not owning equipment?
A: Libraries and community centers offer free internet access, and most banks provide mobile banking for those with mobile phones.
What is digital exclusion?
A: It refers to the inability to participate in a computer-based society, often due to lack of access to technology or skills.
Which groups are most likely to experience digital exclusion?
A: Older individuals who grew up without computers and low-income individuals without access to devices like computers, tablets, or smartphones.
How do digital inclusion programmes help reduce financial exclusion?
A: They provide access to online financial services for housebound, disabled, shift workers, and those uncomfortable with in-person interactions.
How does online access benefit housebound people?
A: It allows them to manage their financial needs online without visiting a bank branch.
What tools help disabled people, like the visually impaired, access online financial information?
A: Screen readers and voice synthesizers.
Why is online banking advantageous for shift workers?
A: It enables them to conduct transactions 24/7, outside traditional working hours.
How does online access help individuals intimidated by financial providers?
A: They can research products and providers at their own pace without sales pressure.
What is one method to reduce digital exclusion among older people?
A: Computer classes specifically tailored for older adults.
- cultural trends
What is meant by “culture” and “cultural trends”?
A:
- Culture: The attitudes and behaviors characteristic of a social group or organization, shaped by their values and beliefs.
- Cultural Trends: Shifts in these attitudes/behaviors over time, influencing needs, wants, and financial behavior.
How does culture influence an individual’s financial decisions?
A:
- Affects their needs, wants, and aspirations (e.g., saving vs. spending habits).
- Shapes financial behavior (e.g., trust in banks, preference for cash vs. digital payments).
Why must financial services providers understand cultural trends?
A:
- To tailor products/services to different groups (e.g., halal banking for Muslims).
- To anticipate shifts in demand (e.g., ESG investing due to growing environmental awareness).
How might culture differ between generations in financial behaviour?
A:
- Older generations: Prefer face-to-face banking, distrust digital tools.
- Younger generations: Demand mobile banking, crypto options, and flexible loans.
- multiculturalism (ppt)
• People living in the UK have family elsewhere in the world and their attitudes, values and beliefs are often different from other peoples. This means that financial providers have to adapt their products.
• Large sections of the UK population have family origins elsewhere in the world. Their values, attitudes and beliefs may be very different from those of people with other cultural backgrounds, and so financial services providers must adapt their products, their marketing and their delivery to suit a range of cultural values.
• Some banks provide accounts and loans specifically for religious and ethnic minority groups. The Islamic Bank of Britain, for example, offers its customers savings and loans products that comply with Sharia law, under which the payment of interest is strictly forbidden.
•Multiculturalism affects providers as employers because they need to adapt their work practices to accommodate the traditions of different cultures and religions. For example, Muslim staff may need to be free on a Friday to attend prayers and some may require space to pray while at work.
• Employing a diverse workforce is beneficial to a bank because it will allows it to understand and supply services to meet the needs of customers from the wide range of groups that comprise the UK’s multi-ethnic culture.
- multiculturalism
What does “multiculturalism” mean in the context of UK financial services?
A:
- The UK population includes diverse cultural/ethnic groups with distinct values, attitudes, and beliefs.
- Financial providers must adapt products, marketing, and delivery to meet these varied needs.
Key Example:
- Al Rayan Bank offers Sharia-compliant products (no interest/Riba) for Muslim customers.
How do Sharia-compliant financial products work?
A:
- Prohibit interest (Riba) — profits are generated through asset-sharing or fees.
- Example: Islamic banks offer savings/loans tied to real assets (e.g., property) instead of interest-bearing accounts
How does multiculturalism affect financial services providers as employers?
A:
- Must accommodate cultural/religious practices (e.g., Friday prayers for Muslim staff, prayer spaces).
- Benefit: Diverse workforce improves understanding of customer needs across ethnic groups.
Why is a diverse workforce advantageous for banks?
A:
- Market Insight: Staff from varied backgrounds help tailor services (e.g., multilingual support).
- Inclusivity: Builds trust with minority communities (e.g., halal mortgages for Muslims).
Name a UK bank that caters to multicultural needs and how.
A:
- Al Rayan Bank: Offers Sharia-compliant savings/loans (profit-sharing instead of interest).
What is Riba?
A:
- The Islamic prohibition against charging or paying interest, central to Sharia-compliant finance
- different age groups (ppt)
• Young people have different needs from middle-aged and elderly people, and they also have different values. The staff employed by providers will usually span the range of working ages and can help the provider to understand the customer needs of each age group.
• At a management level, the provider needs to consider how these different needs can be met by means of appropriate products. A growing number of older people in the UK are approaching retirement or are already retired.
- These people need help in planning their pensions and in boosting their income after retirement. some may be able to withdraw equity in their property to help to fund a particular expense and many providers offer equity release schemes to enable people to unlock the cash tied up in a house.
• Others may want to invest in accounts that are intended for those saving over the long term.
Specialist funds take savers’ deposits, and invest the money in equities and bonds. The value of the investment therefore depends on movements in the stock markets and can fall, as well as rise. Since this is a riskier way of saving, the potential yield can be high, but it is also possible for investors to lose capital value, or to earn little or no return.
- different age groups
Why do different age groups have different financial needs and values?
A: Different age groups have varying financial needs and values due to their life stages. Young people, middle-aged individuals, and elderly people require different financial products and services. Providers employ staff across different age groups to better understand and address these diverse needs
Why is it important for providers to consider different needs at a management level?
A: At a management level, providers must ensure that financial products cater to the specific needs of different age groups. This helps them offer appropriate solutions that align with customers’ financial goals at various life stages
What financial challenges do older people in the UK face as they approach retirement?
A: Older people in the UK often need help planning their pensions and boosting their income after retirement. They may seek financial advice on managing their savings and investments to ensure financial stability
How can older people access cash from their property?
A: Older individuals can withdraw equity from their property through equity release schemes. These schemes enable homeowners to unlock the cash tied up in their house, which can help fund particular expenses
What are investment options for older people saving for the long term?
A: Older people may invest in accounts intended for long-term savings. Specialist funds take depositors’ savings and invest them in equities and bonds to generate returns over time
What determines the value of long-term investments?
A: The value of long-term investments depends on stock market movements. If the market rises, investments increase in value; if it falls, investments lose value
What are the risks and benefits of investing in equities and bonds?
A: Investing in equities and bonds carries risks and potential rewards. While the potential yield can be high, investors may also lose capital value or earn little to no return if the market performs poorly.
How do financial providers assist older individuals with retirement planning?
A: Providers offer advice on how to plan for and manage income in retirement. This includes guidance on equity release, pension planning, and investment strategies to maintain financial security
- debt (ppt)
• In the last two decades, many people have suffered a fall in their real income; the only way in which many were able to buy new and attractive consumer goods and services was to borrow.
• In the years leading up to the financial crisis of 2007-08, financial institutions did not impose strict lending conditions and many people got into debt through the use of multiple products such as mortgages, personal loans, credit cards and overdrafts.
- In many cases, the amount that these people owed was more than they could afford to repay. When the financial crisis led to a recession, many people lost their jobs and many were subsequently unable to meet their debt repayments.
• Some people have managed to reduce the amount that they owe, in a process known as ‘deleveraging’, but many still need to borrow to make ends meet at the end of each month. Because banks are now less willing to lend, some customers are turning to payday loan companies and other lenders that charge high interest rates, and are getting into further debt as a result.
• The implications for mainstream lenders are that customers might then be unable to repay debts owed to them because their overall debt burden is so high. Providers will then have to write off large amounts of lending and this will affect their profits.
- debt
How has debt impacted people’s financial situation in the last two decades?
A: Many people have suffered a fall in real income and relied on borrowing to afford consumer goods and services
What factors contributed to the increase in debt before the 2007-08 financial crisis?
A: Financial institutions did not impose strict lending conditions, leading people to accumulate debt through mortgages, personal loans, credit cards, and overdrafts, often beyond their repayment ability
What happened when the financial crisis led to a recession?
A: Many people lost their jobs and were unable to meet their debt repayments, exacerbating financial instability
What is ‘deleveraging’?
A: It is the process where individuals reduce the amount of debt they owe
Despite deleveraging, why do many people still need to borrow money?
A: Many individuals still struggle to make ends meet each month and require additional borrowing
Why are people turning to payday loan companies and other alternative lenders?
A: Banks are now less willing to lend, leading people to seek loans from alternative lenders that charge high interest rates
What is the risk of borrowing from payday loan companies and high-interest lenders?
A: Borrowers often accumulate further debt due to the high interest rates, making their financial situation worse
What are the implications of high personal debt for mainstream lenders?
A: Customers with high debt burdens may become unable to repay loans, forcing providers to write off large amounts of lending, which negatively affects their profits.
- pensions (ppt)
- pensions are living longer and this is pushing up the cost of retirement
- people are told not to rely on state pension and should have an occupational pension or pay into a private pension scheme however many people have ignored this advice which has been made worse by employers switching from final salary pension to money purchase schemes
- pensions
What measure did the government introduce to address the pension crisis?
A: The government introduced auto-enrolment, making it mandatory for all employers to offer a basic workplace pension scheme
- the housing situation
Question: Why is home ownership significant in UK culture, and how does it compare to other European countries?
- Home ownership is deeply embedded in UK culture, with many people expecting to buy their homes.
- This contrasts with some European countries where families often rent property throughout their lives.
- Owning a home is seen as advantageous because it allows individuals to eventually own a valuable asset and pay off their mortgage before retirement, avoiding housing costs during pension years.
*Question:** What are the key advantages of owning a home with a
- Asset Accumulation: The borrower eventually owns the property, a significant asset.
- Long-Term Planning: Mortgages are typically paid off before retirement, reducing financial burden later.
- Rent Offset: Mortgage payments replace rent, and if property values rise, the owner benefits from increased equity.
Question:** What are the risks or disadvantages of owning a home with a mortgage?
- Repayment Risk: If borrowers cannot keep up with repayments, they may lose their home and initial deposit.
- Negative Equity: If property values fall below the remaining mortgage amount, the borrower cannot sell or move without incurring losses.
- Market Volatility: Property prices can fluctuate (e.g., during the 2007–08 crisis), impacting financial stability.
Question:** What is negative equity, and why is it problematic?
- Definition: When a property’s value falls below the outstanding mortgage amount.
-
Consequences:
- Borrowers cannot sell or move without covering the shortfall.
- Traps owners in their current property until prices recover.
*Question:** How have UK property prices and first-time buyer demographics changed in recent years?
- Price Trends: Fell during the 2007–08 crisis but have risen since, with regional disparities (some areas rising faster).
-
First-Time Buyers:
- Average age increased from 28 (2002) to 32 (2020/21).
- Rising prices make it harder for young people to enter the market.
- Government schemes (e.g., Help to Buy) aim to revive mortgage demand.
Question:** What role has the UK government played in addressing housing challenges?
- Help to Buy: A scheme to support first-time buyers by making mortgages more accessible.
- Impact: Reversed some of the decline in mortgage demand, particularly among younger buyers.
THE TECHNOLOGICAL ENVIRONMENT
(ppt)
- when someone applies for a loan, the manager no longer has to make an unaided decision because of computer programmes. The programme comprises a set of rules to point towards a decision whether or not to improve the loan
- technological development allow customers to manage their accounts online. It also caused some people the loss of jobs however has created other jobs.
THE TECHNOLOGICAL ENVIRONMENT
What is the technological environment in financial services, and why is it important?
Answer: The technological environment in financial services refers to the increasing use of technology to operate and deliver products. It is important because:
• It provides new ways of operating and delivering financial services.
• Technological shifts affect costs and service quality.
• It leads to product innovation
- data storage and processing
How do banks use technology for data storage and decision-making?
Answer:
• Banks store customer data in computers.
• Computer programs make automated decisions based on this data.
• When a customer applies for a loan, a set of programmed rules determines loan approval.
• The system assesses the affordability of the loan and repayment likelihood.
• This ensures consistency, streamlines processes, saves time, and reduces costs
What are the benefits of mobile banking for customers?
Answer:
• Customers can manage accounts online, transfer money, make payments, and receive e-statements.
• Account information updates in real time, 24/7.
• Customers can connect to their accounts via smartphones.
• Features include alerts for low balances or overdrafts
How does mobile banking benefit financial service providers?
Answer:
• Increases efficiency in managing customer accounts.
• Helps providers meet regulatory requirements, such as ‘responsible lending.
How has technology affected employment in the financial sector?
Answer:
• Some jobs have been lost as computers replace human decision-making.
• New jobs have been created for installing, operating, and maintaining computerized systems
THE LEGAL ENVIRONMENT (ppt)
The financial sector has to comply with different legislation concerning:
- tax
- discrimination
- consumer issues
- employment
- healthy and safety
- Banking Act 2009 (ppt)
- allows regulatory authorities to resolve a distressed bank/building society in an orderly way
- educes the impact of a bank failure on financial stability and bank customer
- increased BOE responsibilities , power and roles by creating a permanent Special Resolution Regime (SRR)
- partially amended by the Financial Services Act 2012
THE LEGAL ENVIRONMENT
Why is the legal environment important in financial services?
Answer:
The financial services sector must comply with laws on:
• Companies
• Tax
• Discrimination
• Consumer issues
• Employment
• Health and safety
Additionally, there are specific financial laws and EU regulations that financial institutions must follow.
New Acts of Parliament were introduced after the 2007-08 financial crisis to address financial stability and regulation
- The Banking Act 2009
What is the purpose of the Banking Act 2009?
Answer:
• Provides regulatory authorities with tools to resolve distressed banks or building societies in an orderly way.
• Aims to reduce the impact of bank failures on financial stability and customers.
• Strengthens the role of the Bank of England by giving it more powers to manage failing financial institutions.
What is the Special Resolution Regime (SRR) introduced by the Banking Act 2009?
Answer:
• A permanent system created to deal with failing banks and building societies.
• Allows the Bank of England to step in and manage failing financial institutions to prevent economic disruption.
• Ensures a more structured and controlled approach to handling financial crises.
How has the Banking Act 2009 changed over time?
Answer:
• It was partially amended by the Financial Services Act 2012, which introduced further reforms to strengthen financial stability.
How was the Banking Act 2009 used in July 2009?
Answer:
• The Bank of England used its new powers to manage the collapse of Dunfermline Building Society.
• The social housing lending business was transferred to Nationwide Building Society, which was chosen as the preferred bidder.
• This demonstrated the effectiveness of the Act in stabilizing financial institutions
- the financial services act 2010 (ppt)
2010:
- required that banks have a recovery solution plan in case it gets into trouble.
- contains consumer protection measures and defines liability of the FSCS in the event of a bank failure
- the financial services act 2012 (ppt)
2012:
Amended the BOE Act 1998, Financial Services Act 2000 and the Banking Act 2009
Main provisions
- gave BOE responsibility for protecting financial stability
- abolished the FSA and created the FPC, PRA and FCA
- laid down regulations about London interbank offered rate (LIBOR) after the scandal
- financial services (banking reform) Act 2013 (ppt)
• Provides ring fencing of retail banking activities
- ring fencing retail banking is a particular protection of a certain
service for example banks keep there deposits separate from there
investments so if there investment fail then there deposits wont be
affected.
• Means that the side who take deposits will stay separate from the
investment side of the bank
• If the bank makes losses, it will not be able to take money form the
ring fenced area to subsides its loss making arm
Finance Act 2016
Question: What was the scope of the Finance Act 2016?
The Act introduced changes to:
- Income tax, personal/savings allowances, and pension tax rules.
- Corporation tax, capital gains tax (CGT), and inheritance tax (IHT) rates.
- Benefits-in-kind accounting, the “wear and tear” allowance, and the apprenticeship levy.
Question: How did the Finance Act 2016 modify pension rules for terminally ill individuals?
- Serious Ill-Health Lump Sum: Allowed individuals with terminal illnesses to withdraw their pension lump sum more flexibly.
- Purpose: To provide financial support during critical health situations.
Question:** What was the apprenticeship levy, and how did it work?
- Purpose: Fund millions of new apprenticeships.
-
Mechanism:
- Employers taxed a percentage of their pay bill.
- Funds could be offset to hire apprentices.
- Impact: Encouraged workforce training while redistributing costs to large employers.
Question: What reforms were made to benefits-in-kind and the “wear and tear” allowance?
- Benefits-in-Kind: Stricter accounting rules to ensure accurate taxation of non-cash employee benefits.
- Wear and Tear Allowance: Reformed to better reflect actual costs of property maintenance (replaced the flat-rate system).
Question:** Which taxes saw rate changes under the Finance Act 2016?
- Corporation Tax: Reduced to incentivize business investment.
- Capital Gains Tax (CGT): Adjusted rates (varies by asset type/income bracket).
- Inheritance Tax (IHT): Thresholds or rates revised (specifics depend on estate value).
Question:** What were the key aims of the Finance Act 2016?
- Simplify Taxation: Streamline rules (e.g., benefits-in-kind, allowances).
- Support Vulnerable Groups: E.g., terminally ill pension access.
- Economic Stimulus: Via apprenticeship funding and corporate tax cuts.
MC QUESTIONS
which area of PESTLE analyses lifestyle, employment, unemployment and demographic trends?
Social
Political
Technological
Legal
Social
Individuals are directly exposed to movements in the stock market if they have invested in:
Unit trusts
OIECs
Gold
Shares
Shares
Prior to the financial crisis of 2007, the UK attracted international banks because it was seen to have a:
A. Balances approach to regulation
B. Heavy-handed approach to regulation
C. Light touch approach to regulation
D. There was no regulation
C
The role of the Information Commissioner is to enforce the:
A. Consumer credit act
B. Data protection act/general data protection regulation
C. Finance Act
D, consumer protection regulations
B
A factor that could make a financial services unsuitable for a particular client is their:
Gender
Age
Race
Political view point
Age
Complying with regulation can be:
A. An incentive for new providers to enter the banking industry
B. More difficult for banks than building societies
C. A barrier to new providers entering the banking industry
D. More difficult for building societies than for banks
C
The standards of lending practice form:
A. A voluntary banking code that covers the sale of credit excluding mortgages
B. A voluntary banking code that covers the sale of credit including mortgages
C. A compulsory banking code that covers the sale of credit excluding mortgages
D. A compulsory banking code that covers the sale of credit including mortgages
A
- The relationship between interest rates and business investment can correctly be described as:
A. When interest rates rise, business investment rises
B. When interest rates fall, business investment fall
C. When interest rates fall, business investment rises
D. When interest rates fall, business investment stays the same
C
- Mortgage equality withdrawal describes the situation where banks:
A. Tighten up their mortgage lending policies resulting in fewer equity loans being allowed
B. Allow customers to take out unsecured loans based on the value of equity in their property
C. Tighten up their mortgage lending policies resulting in more equity loans being allowed
D. Allow customers to take out secured loans based on the value of equity in their property
D
The gov so,d the whole of Northen Rock to Virgin Money
True
False
True
A social programme must be balanced against a provider’s obligation to earn a good return for its shareholders or members
True
False
True
The encouragement given to people to participate financially in a computer-based society is known as:
Cultural inclusion
Digital inclusion
Technological inclusion
24-hour inclusion
Digital inclusion
