Topic 8

Question 1

Capital

Answer 1

The money or other assets owned by an individual or a business. With a financial services provider, it refers to the funds provided by the shareholders rather than customer deposits.

Question 2

Chancellor of the Exchequer

Answer 2

The British Cabinet minister responsible for financial and economic matters and in charge of the Treasury

Question 3

Citizens advice

Answer 3

A charity providing free, independent, confidential and impartial advice on citizens’ and consumers’ rights and responsibilities

Question 4

Competition and Markets authority

Answer 4

An independent, non ministerial government department which works to promote competition between providers so that customers benefit

Question 5

Consumer credit

Answer 5

This is another term used for borrowing. Taking credit and buying on credit refers to borrowing, but credit into a bank account means paying in.

Question 6

Credit crunch

Answer 6

A reduction in the availability of loans or the tightening of the conditions needed to obtain one. The financial crisis of 2008 happened when financial institutions became reluctant to lend funds to one another.

Question 7

Credit union

Answer 7

A mutual organisation that is owned by its members and provides a range of financial products like savings accounts and loans. The members must have a common bond like working for the same employer or living in the same district.

Question 8

Current account

Answer 8

A bank or building society account where people can store their money in the form of electronic balances and withdraw it to make payments

Question 9

Debit card

Answer 9

A card that can be used to withdraw cash, make payments face to face, online, or over the phone.

Question 10

Deposit

Answer 10

A sum of money placed by a customer with a bank

Question 11

Financial Conduct Authority FCA

Answer 11

One of the two main regulators of financial services in the UK (the other is the PRA)

Question 12

Financial Ombudsman Service FOS

Answer 12

An independent body set up by Parliament that settles customer complaints about providers at no charge to customers

Question 13

Financial Policy Committee FPC

Answer 13

A part of the Bank of England that monitors and responds to risk posed to the entire financial services market. Its focus on the whole market makes it a macro-prudential authority.

Question 14

Financial Services Compensation Scheme FSCS

Answer 14

A compensation scheme that pays compensation to account holders of up to £75,000 if the provider cannot pay the account holders the money they have in their account

Question 15

Independent Commission on Banking ICB

Answer 15

A committee formed in June 2010, in response to the global financial crisis. It considered reforms to the UK banking sector to promote financial stability and also competition.

Question 16

Independent Financial Advisor IFA

Answer 16

A professional who makes financial recommendations to clients based on available products across a wide range of providers.

Question 17

Investment banks

Answer 17

Banks which are involved in trading financial assets such as shares, underwriting issues of shares and advising on mergers and acquisitions. They do not provide services such as current accounts, these are supplied by retail banks.

Question 18

Lending Code

Answer 18

A voluntary code of conduct that sets out good practise for the provision of advice about loans, credit cards, charge cards and current account overdrafts. It assures customers that subscribed providers follow the Code and gives information on the service they should expect.

Question 19

Lidquidity

Answer 19

The assets that a business holds in the form of cash, that can be used to meet immediate demands for payment (Many assets cannot be used this way, for example a company that owns a building or machinery would have to sell them.)

Question 20

Money Advice Service

Answer 20

A consumer information service set up by the government to help people make informed financial decisions.

Question 21

Money Laundering

Answer 21

The process of making dirty money, i.e. gained through illegal means, look clean, as if it has been legitimately acquired

Question 22

Mortgage

Answer 22

A loan usually taken out over a long term, e.g. 25 years, to pay for a property.

Question 23

Office of Fair Trading OFT

Answer 23

The government department that monitored how businesses competed with each other. It was abolished in April 2014 and its responsibilities are now shared between the FCA and the Competition and Markets Authority.

Question 24

Overdraft

Answer 24

A facilitiy that allows an account holder to withdraw more money than they actually have in their account. An authorised one is where a limit is agreed in advice, but unauthorised ones are over this limit and attempted withdrawals may not be done.

Question 25

Payday Loan

Answer 25

A loan designed to be taken out for a very short term, usually with a very high APR.

Question 26

Payment Protection Insurance PPI

Answer 26

An insurance product designed to ensure repayment of loans should a borrower face unexpected events that prevent them from repaying the debt.

Question 27

PIN

Answer 27

A secret personal identification number that verifies a user’s identity to a system, e.g. at the point of sale for debit and credit cards

Question 28

Prudential Regulation Authority PRA

Answer 28

One of the two main regulators of financial services in the UK, the other is the FCA (financial conduct authority)

Question 29

Retail Banks

Answer 29

Banks that deal directly with customers, such as providing current accounts or mortgages.

Question 30

Sub-prime market

Answer 30

Lending to and borrowing by consumers with untested and poor credit histories

Question 31

Transaction

Answer 31

Buying and selling something

Question 32

Treasury

Answer 32

Her Majesty’s HM treasury, the government department responsible for development and implementation of financial and economic policy