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Libf UNIT 4 > topic tre - Sustainability in the financial services sector > Flashcards

topic tre - Sustainability in the financial services sector Flashcards

1
Q

What is sustainability in the financial sector

A

The systems that have been set up, can be maintained in the future

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2
Q

What time frame does sustainability effect

A

Long - Term

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3
Q

What are the main 3 sustainability’s needed

A

Economic
Social
Environmental

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4
Q

What are the 2 ways environmental sustainability can reduce human impact

A
  • By means of good environmental
    management EG Pollution and water
    management
  • by means of good demand management Eg effectively managing human consumption of things
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5
Q

What is argued that societies now need to do

A

Maintain production and consumption on a sustainable level, rather than maximizing profits

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6
Q

What is social sustainability

A

It is about creating a community that fosters well-being, peace , security and justice

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7
Q

Examples of social sustainability

A

Accessible education

reducing the gap between rich and the poor

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8
Q

Put simple what is financial sustainability

A

One that will not fail

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9
Q

What caused the great depression (1929)

A

People were buying a bunch or shares causing them to rise, eventually this bubble popped and caused the stock prices to collapse

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10
Q

What is vital to a country’s economics

A

That the financial system doesn’t fail

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11
Q

What would happen if banks all started to fail

A

Unable to give salaries

The government would stop receiving taxes

Customers would lose the money in the bank (Unless FSCS protected)

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12
Q

When is a period officially a recession

A

When GDP falls over 2 quarters

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13
Q

How does a recession effect government funding

A

Fewer workers so less income tax

Fewer people are spending so less VAT

Firms making less so less cooperation taxes

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14
Q

What is systematic risk

A

Refers to risk that affects the financial system as a whole

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15
Q

What are large important banking firms known as

A

Systematically important financial institutions

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16
Q

Why would it be bad if a large bank collapsed

A

Other banks dependant on them would lose that, therefore not having the money to pay others and creates a domino effect

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17
Q

When is systematic risk at it’s highest

A

When there’s large banks

There’s large banks working very closely with each other, if one collapses the other would too

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18
Q

What is financial contagion

A

The problems of one bank, then spreading to other banks

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19
Q

If countries financial confidence was lost what would happen

A

Internationally banks wouldn’t get along leading to countries going into a recession

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20
Q

Example of the UK government having to take action on a bank

A

Northern Rock 2007

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21
Q

How much money did the government spend in 2009 bailing out banks

A

94Bn

22
Q

What is the opposite of too big to fail

A

Too big to save

23
Q

What is moral hazard ownership

A

If banks know they are too big to fail and will get bailed out, their owners will run more risky operations

24
Q

What did the banking act 2009 allow the government to do with failing institutions

A

Allows the institution to be sold to a private buyer

Transfers the bank into the BOE until it’s saved

Putting the bank into public ownership

Applying to make the bank insolvent

25
Q

What factors do the government keep in mind while bailing out a bank

A

To make sustainability in the financial sector

To enhance public confidence

to protect depositors

To protect public funds

To avoid interfering with property rights

26
Q

What are the main regulations for banks

A

Banks must hold more capital by issuing more shares

banks must hold more liquid assets

banks must rely more heavily on customer deposits

banks must reduce their leverage

banks must tighten up their lending criteria

27
Q

What are the objectives of the Financial Policy committee (FPC)

A

Identify, monitor and take action to remove or reduce systematic risk

Support the economic policy of the government

28
Q

What are the objectives of the Prudential Regulation Authority (PRA0

A

Promote the safety and soundness of firms

Contribute to securing an appropriate degree of protection for insurance policy holders

Facilitate effective competition between firms

29
Q

What are the objectives of the Financial Conduct Authority

A

Secure an appropriate degree of protection for consumers

protect and enhance the integrity of the UK financial system

Promote effective competition in the interests of consumers

30
Q

How should a provider act the be sustainable

A

Run prudentially

31
Q

What main 2 regulations should providers follow

A

Prudential management of it’s balance sheet

Principles and rules governing how it deals with customers, eg Customers are treated fairly

32
Q

What is a reason to become a Shareholder

A

So you can live of it’s income

Invested in your pension scheme

33
Q

What are speculators

A

People who buy and sell shares to create profit

34
Q

What benefits do directors get

A

High salaries

Bonuses

Fringe Benefits

35
Q

What is a directors role

A

They map out the path the company takes

Determine their business model

36
Q

What did the Financial services act 2013 do to directors

A

Made it an offence for a director or senior employee of a bank take a risk that they know could end in systematic failure

37
Q

What is an employees role in sustainability

A

Keeping correct practices - EG If a customers want a larger loan they cannot afford, steer them towards a smaller loan

38
Q

What is a sustainable financial product

A

A product that is designed to meet the long-term requirements of those who buy them

39
Q

Example of a sustainable financial product

A

Mortgage - Long term, small interest loan

40
Q

Example of a sustainable product that can be used unsustainably

A

A credit card - People can max out multiple and then only pay back the minimum every month

41
Q

What is the most important factor in a product portfolio

A

Balance

42
Q

What is it sensible to do when buying different insurances

A

Buy from different providers so if one defaults you don’t lose everything

43
Q

Was is responsible spending defined as

A

Borrowing only as much as they can pay back over the time period

44
Q

What did the mortgage market review from the fca say

A

It is the lenders job to decide whether someone can afford their loan or not

Lenders can offer interest only mortgages, but they say to see proof of a sufficient way they will pay it off

45
Q

What must borrowers look at while assessing whether someone can afford a loan

A

Checking their income with their employer

Checking their regular expenditure

Checking they can pay if interest rates rises

Not lending to a high risk customer

46
Q

What does the FCA keep in mind with consumer protection

A

Different degrees of risk in certain transactions

The different degrees of experience and expertise

The need for timely provision of accurate information

47
Q

What penalties can the FCA do

A

Withdraw a firms authorisation

suspending firms

fining firms

applying to the courts for injunctions and orders

48
Q

What did the FOS do to PPI sellers

A

Make they pay big money back to the people who were mis sold it

49
Q

What are the equator principles

A

Ethical benchmarks for banks to follow when taking decisions to finance infrastructure like dams

50
Q

What are the 4 levels of sustainability

A

Sustainability of the system as a whole

Sustainability of individual providers

Sustainability of individual products

Sustainability of individual customers

Libf UNIT 4 (18 decks)

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