Topic pesë - External Influences on financial services providers and their products Flashcards

1
Q

What topics come under POLITICAl in pestel

A

Competition

Consumer protection

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2
Q

What topics come under ECONOMIC in pestel

A

Changes in interest rate

Inflation rate

Competition

Housing prices

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3
Q

What topics come under SOCIAL in pestel

A

Changing Lifestyles

Unemployments rate

Demographic rates

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4
Q

What topics come under TECHNOLOGICAL in pestel

A

New delivery Methods

New products

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5
Q

What topics come under ENVIRONMENTAL in pestel

A

Sustainability

Green Investment

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6
Q

What topics come under LEGAL in pestel

A

Legislation

Regulation

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7
Q

Why is regulation important

A

Creates a safer system

Promotes confidence in the system

Protects customers from mis-selling

Provides people with information on financial products

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8
Q

What are the justifications for regulation

A

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

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9
Q

What is the cost of regulation to banks

A

Fees paid to FCA and PRA and levies to FOS and FSCS

Systems cost

Trained compliance staff

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10
Q

A provider that complies with what rules is less likely to fail

A

Prudential

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11
Q

What are the benefits to banks for regulation

A

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

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12
Q

recent regulation changes in 2017

A

Pressure to reduce pension regulation from - the Work and Pensions Committee

House of lords said FCA should tackle financial exclusion

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13
Q

\What are regulations to smaller banks

A

Barriers to entry

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14
Q

What happened to regulation in 2014

A

CMA took over the role of the OFT

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15
Q

What does the information commissioner do

A

makes sure the 2018 data protection act is followed

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16
Q

What does the 2018 data protection act do

A

Allows consumers to access public information and that private data is protected

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17
Q

What bank said “build a bank that’s based on doing the right thing
for customers”

A

Virgin money Uk

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17
Q

What are the 2 main banking codes of conduct

A

the Banking Conduct of Business Sourcebook (BCOBS) and the Standards of Lending Practice

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18
Q

What is in the BCOBS

A

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

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19
Q

What is in the standards of lending practice

A

Voluntary and cover the sales of credit

Doesn’t include mortgages

Comprise minimum standards for banks dealing with customers

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20
Q

What bank does the government hold shares in

A

Natwest - over 50% of their shares

Means government is involved in finance through holding shares

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21
Q

If a question mentions the word “real” most of the time whats the answer

A

Inflation

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22
Q

How does inflation effect providers

A

Low rate- People happy to borrow and invest

High rate - Less people want to borrow, want savings to be index-linked

23
Q

What does index-linked means

A

Rises and falls with the rate of inflation

24
Q

What does a higher rate of unemployment do

A

Less borrowing and savings

banks get more bad debt as people cannot pay it off

25
Q

What does a lower rate of unemployment do

A

Encourages consumer culture

Enables people to save without fears of losing money if unemployed

26
Q

How long is chronic unemployment

A

UnemployedWha for more than a year

27
Q

What prices rise for providers when unemployment is low

A

Higher staff wages

28
Q

Is unemployment high or low when inflation is low

A

High

29
Q

What does government do when there is low inflation and high unemployment

A

Reduce interest rates to allow borrowing

30
Q

What type of policy is interest rates

A

Monetary

31
Q

What committee chooses to change interest rates

A

The monetary policy committee (MPC) part of the bank of england

32
Q

Are interest rates rising or falling or stagnant atm

A

rising due to high inflation

33
Q

Main effects of a rising interest rate

A

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

34
Q

What does high interest rates lead eventually too

A

High unemployment

Pound exchange rate going up

35
Q

What exchange rate things do providers now supply

A

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

36
Q

What does the rise in the pound mean for banks

A

Makes imported products cheaper

Means imports from uk more expensive for other countries so will import less

37
Q

What is the eurozone

A

European countries that use the euro

38
Q

What country was close to defaulting on its debt in 2012

A

greece

39
Q

What 4 methods of help to buy are there

A

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

40
Q

How did providers change to deal with volatile stock market

A

Guaranteed products - Endowment policies

Alternate investments - by hedge funds, which invest in different ways

41
Q

What do big mergers make worse

A

Oligopoly’s

42
Q

Who did the government sell the good part of northern rock to

A

Virgin Money

43
Q

Examples of challenger banks

A

Metro

Virgin

Handelsbanken

44
Q

Examples of social exclusion

A

Disability
language problems
Poor english and maths
living in poor areas
poverty
homeless
old
race

45
Q

Ways government help social inclusion

A

money helper - website

Basic bank accounts - Allows formerly indebted people to have a bank account

46
Q

Ways providers help social inclusion

A

Proving products for excluded people

Providing information that everyone can see (Unless your blind, then your’re fucked)

Promote ways of inclusion

47
Q

What must providers balance with a CSR

A

Profits and pushing their CSR

48
Q

Examples of digital inclusion programmes

A

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

49
Q

What is riba

A

Payment of interest

50
Q

Example of a bank with sharia poducts

A

Al Rayan bank

51
Q

What is negative equity

A

When the loan is bigger than the product - eg mortgage is more expensive than the house is worth

52
Q

What did the banking act 2009 do

A

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

53
Q

What did The Financial Services Act 2010 do

A

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

54
Q

What did The Financial Services Act 2012 do

A

Gave bank of england responsibility for protecting financial stability

Abolished FSA ad made FCA and PRA and FPC

55
Q

What did The Financial Services (Banking Reform) Act 2013 do

A

Make the ring-fencing of banks

56
Q

What did the Finance Act 2016 do

A

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