Unit 4 Topic 1

Question 1

Who are the competition and markets authority?

Answer 1

The body responsible for strengthening business competition and preventing and reducing anti-competitive activities.

Question 2

Who are ‘counterparties’?

Answer 2

People and organisations who lend money to and borrow from financial intermediaries.

Question 3

What type of financial institution is this referring to?
A mutual organisation that provides a range of financial products to members. Members must all share a common bond.

Answer 3

Credit Union

Question 4

What process is this referring to? The process of selling off parts of a company to make it smaller.

Answer 4

Divestment

Question 5

Can you name an example of divestment? (should be in textbook)

Answer 5

The Lloyds sell-off that created new TSB branches

Question 6

Who are the Financial Conduct Authority?

Answer 6

The organisation that regulates financial firms providing services to consumers, and maintains the integrity of the UK’s financial markets

Question 7

What is this referring to?
A financial institution that facilitates the process of lending and
borrowing, by taking deposits from those with a surplus and lending
those funds out to those who need to borrow.

Answer 7

Financial intermediary

Question 8

What is financial intermediation?

Answer 8

The process of taking in deposits from those with a surplus and lending
those funds out to those who need to borrow

Question 9

What is the Financial Ombudsmen Service?

Answer 9

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

Question 10

What part of the Bank of England is this referring to?
Monitors and responds to risk posed to
the entire financial services market. Its focus on the whole market makes
it a macro-prudential authority.

Answer 10

Financial Policy Committee

Question 11

What is the Financial Services Compensation Scheme?

Answer 11

A compensation scheme that pays compensation to account holders of up
to a certain amount per provider if the provider goes into default

Question 12

What type of financial institution is this referring to?
A mutual organisation that offers its members a wide range of financial
products, which can include savings, investments, insurance, pensions
and annuities.

Answer 12

Friendly society

Question 13

Which government department is this referring to?

Answer 13

The government department responsible for
development and implementation of financial and economic policy

Question 14

What is an Independent financial adviser?

Answer 14

A professional who makes financial recommendations to clients, based on
products offered by a wide range of providers

Question 15

What type of bank is this referring to?
Banks that raise funds on the financial markets, rather than accepting
deposits as a retail bank does. They use these funds to provide special
services to large corporations and to governments. Also known as
wholesale banks.

Answer 15

Investment banks

Question 16

What is this referring to?
An insurance marketplace where members (corporations and individuals)
employ underwriters to come together and accept insurance risk, dividing
it out between the members.

Answer 16

Lloyd’s insurance market

Question 17

What are Long-term capital markets?

Answer 17

Financial markets where long-term debt and shares in the bank are bought and sold. This provides a source of funding for banks.

Question 18

What is monetary policy?

Answer 18

The manipulation of interest rates to maintain low inflation

Question 19

What is meant by a ‘mutual’ organisation?

Answer 19

An organisation owned by its customers, who are also its members, rather than by shareholders

Question 20

Define ‘oligopoly’

Answer 20

A market dominated by a few large firms

Question 21

What is this referring to?
Online firms that provide instant, very short-term (ie for a few days or
weeks), unsecured cash advances of small amounts to customers who
need cash immediately, and who are in employment and have payroll
records.

Answer 21

Payday loan companies

Question 22

What are Peer-to-peer lenders?

Answer 22

Online marketplaces that enable people to lend to and borrow from each
other without using a traditional financial institution such as a bank or
building society

Question 23

What is the key difference between and independent financial adviser and a restricted financial adviser?

Answer 23

Independent financial advisers can give advice about a range of financial products and services across various markets.

Restricted financial advisers can only recommend certain types of product from one or a limited number of providers.

Question 24

What are retail banks?

Answer 24

Deal directly with consumers

Question 25

What is this referring to?
Separating the deposit-taking part of a bank or building society from the
rest of its business so that, in the event of financial difficulties, the ring-
fenced deposits of retail customers cannot be used to pay the debts of
the more risky investment section of the bank.

Answer 25

Retail ring-fencing

Question 26

What are short-term money markets?

Answer 26

Financial markets where banks borrow over short periods, especially from the interbank market, where banks with short-term surpluses lend to banks with short-term deficits

Question 27

What is a market segment?

Answer 27

A group of consumers who share similar characteristics who are likely to respond to marketing in the same way

Question 28

Name 3 types of financial products building societies specialize in

Answer 28

Savings accounts
Mortgages
Loans

Question 29

Name the 4 main activities of financial institutions

Answer 29

Accepting deposits
Lending money
Managing assets
Providing investment services

Question 30

Name the 4 main services provided to small and medium sized businesses by retail banks

Answer 30

Money transmission
Savings and Investment
Lending
Insurance

Question 31

Name two smaller retail banks operating in the UK

Answer 31

Co-operatives Banking Group
Virgin Bank Ltd
M&S Bank
Tesco Bank

Question 32

Name the top 5 building societies in the Uk

Answer 32

Nationwide
Coventry
Yorkshire
Skipton
Leeds

Question 33

Name 3 functions of the bank of England

Answer 33

Achieving monetary stability
Achieving financial stability
Issuing UK bank notes

Question 34

What are 4 ways in which banks obtain funds?

Answer 34

Lending money
Trading on financial markets
Purchasing physical assets
Paying operational costs