Topic pesë - External Influences on financial services providers and their products Flashcards
What topics come under POLITICAl in pestel
Competition
Consumer protection
What topics come under ECONOMIC in pestel
Changes in interest rate
Inflation rate
Competition
Housing prices
What topics come under SOCIAL in pestel
Changing Lifestyles
Unemployments rate
Demographic rates
What topics come under TECHNOLOGICAL in pestel
New delivery Methods
New products
What topics come under ENVIRONMENTAL in pestel
Sustainability
Green Investment
What topics come under LEGAL in pestel
Legislation
Regulation
Why is regulation important
Creates a safer system
Promotes confidence in the system
Protects customers from mis-selling
Provides people with information on financial products
What are the justifications for regulation
Financial institutions must have confidence in each other - Eg Insurance companies hold money in banks
The UK economy has a high export rate, so that cannot fail
Allows more confidence for people to leave money so the state doesn’t pay as much sick or injury pay
What is the cost of regulation to banks
Fees paid to FCA and PRA and levies to FOS and FSCS
Systems cost
Trained compliance staff
A provider that complies with what rules is less likely to fail
Prudential
What are the benefits to banks for regulation
Less likely to collapse
makes the provider look ethical
creates law-abiding providers
All on equal terms as all have same regulations
Benefits bigger banks though
recent regulation changes in 2017
Pressure to reduce pension regulation from - the Work and Pensions Committee
House of lords said FCA should tackle financial exclusion
\What are regulations to smaller banks
Barriers to entry
What happened to regulation in 2014
CMA took over the role of the OFT
What does the information commissioner do
makes sure the 2018 data protection act is followed
What does the 2018 data protection act do
Allows consumers to access public information and that private data is protected
What bank said “build a bank that’s based on doing the right thing
for customers”
Virgin money Uk
What are the 2 main banking codes of conduct
the Banking Conduct of Business Sourcebook (BCOBS) and the Standards of Lending Practice
What is in the BCOBS
Statutory banking conduct regime
Provides rules for banks that have deposits with individuals and small businesses
rules:
Must communicate to customers
requirement to provide a prompt after-sales service
right for customer to cancel a product after purchase
What is in the standards of lending practice
Voluntary and cover the sales of credit
Doesn’t include mortgages
Comprise minimum standards for banks dealing with customers
What bank does the government hold shares in
Natwest - over 50% of their shares
Means government is involved in finance through holding shares
If a question mentions the word “real” most of the time whats the answer
Inflation
How does inflation effect providers
Low rate- People happy to borrow and invest
High rate - Less people want to borrow, want savings to be index-linked
What does index-linked means
Rises and falls with the rate of inflation
What does a higher rate of unemployment do
Less borrowing and savings
banks get more bad debt as people cannot pay it off
What does a lower rate of unemployment do
Encourages consumer culture
Enables people to save without fears of losing money if unemployed
How long is chronic unemployment
UnemployedWha for more than a year
What prices rise for providers when unemployment is low
Higher staff wages
Is unemployment high or low when inflation is low
High
What does government do when there is low inflation and high unemployment
Reduce interest rates to allow borrowing
What type of policy is interest rates
Monetary
What committee chooses to change interest rates
The monetary policy committee (MPC) part of the bank of england
Are interest rates rising or falling or stagnant atm
rising due to high inflation
Main effects of a rising interest rate
Borrowers will have to pay more back if not fixed
Less people will borrow
Businesses will borrow less and put investment plans on hold
less money spent in the economy
Savers will deposit more money
A rise in the exchange rate of the pound
What does high interest rates lead eventually too
High unemployment
Pound exchange rate going up
What exchange rate things do providers now supply
Foreign exchange services
Buy Back guarantees for currency
Credit and cash cards that will be excepted abroad
Products that help businesses if exchange rates fall on them
What does the rise in the pound mean for banks
Makes imported products cheaper
Means imports from uk more expensive for other countries so will import less
What is the eurozone
European countries that use the euro
What country was close to defaulting on its debt in 2012
greece
What 4 methods of help to buy are there
Mortgage guarantee - government pays 15% of deposit, person pays 5%, provider has to loan 95%
Equity loan - Borrower makes 5% deposit, gov makes 20% deposit, meaning provider only lends 75%
ISA - Up until 2019 the gov, and saving for a first house gov would boost saving by 25% up to 3K
Shared Ownership - You buy a share of your house and rent the rest
How did providers change to deal with volatile stock market
Guaranteed products - Endowment policies
Alternate investments - by hedge funds, which invest in different ways
What do big mergers make worse
Oligopoly’s
Who did the government sell the good part of northern rock to
Virgin Money
Examples of challenger banks
Metro
Virgin
Handelsbanken
Examples of social exclusion
Disability
language problems
Poor english and maths
living in poor areas
poverty
homeless
old
race
Ways government help social inclusion
money helper - website
Basic bank accounts - Allows formerly indebted people to have a bank account
Ways providers help social inclusion
Proving products for excluded people
Providing information that everyone can see (Unless your blind, then your’re fucked)
Promote ways of inclusion
What must providers balance with a CSR
Profits and pushing their CSR
Examples of digital inclusion programmes
Housebound people can use web calls
Disabled people have methods to access info
online banking is 24/7
People with no people skills can go through the process online rather than in person
What is riba
Payment of interest
Example of a bank with sharia poducts
Al Rayan bank
What is negative equity
When the loan is bigger than the product - eg mortgage is more expensive than the house is worth
What did the banking act 2009 do
Gives the ability to regulatory authorities to wind up a bank in an orderly way to stop a collapse
Increased the role of the bank of england by creating a permanent Special Resolution Regime to deal with banks and building societys
What did The Financial Services Act 2010 do
requires a bank to have a recovery and resolution plan in case it gets into trouble
outlines customer protection and the liability of the FSCS
What did The Financial Services Act 2012 do
Gave bank of england responsibility for protecting financial stability
Abolished FSA ad made FCA and PRA and FPC
What did The Financial Services (Banking Reform) Act 2013 do
Make the ring-fencing of banks
What did the Finance Act 2016 do
introduced changes to several taxes
Made terminal illness payments more easy to get
Introduced an apprentice tax levy so company’s get money off their taxes if they hire apprentices
