Unit 4 Topic 3 Flashcards
What is the most widely accepted definition of sustainable development?
“sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (Brundtland Commission, 1987)
What are the three main pillars of sustainability?
Environmental Sustainability
Social Sustainability
Economic Sustainability
What is the difference between needs and wants in terms of sustainability?
Needs are essential for survival, while wants are non-essential desires. Sustainable living requires prioritizing needs over excessive consumption of wants.
What does financial stability mean in the context of financial services?
It refers to maintaining a stable and functional financial system that can support economic activities over the long term.
How can financial service providers contribute to environmental stability?
By investing in environmentally friendly companies and managing their own resource consumption.
Why is economic sustainability important for financial services?
It helps maintain a stable economy by ensuring responsible lending, avoiding unsustainable debt, and regulating markets.
How can financial institutions promote social sustainability?
Through corporate social responsibility (CSR), fair trade practices, and policies that support financial inclusion.
Briefly explain the financial crisis of 07/08
The global financial system suffered from excessive debt levels, leading to bank failures, government bailouts, and a global recession.
What is systematic risk in financial services?
The risk that the failure of one financial institution could trigger failures across the entire financial system.
Why was Lehman Brothers’ failure significant?
It triggered a chain reaction of financial failures due to interconnected debts, leading to a global financial crisis.
What actions can governments take in a financial crisis?
Bailouts, nationalization of banks, regulation reforms, and liquidity support.
What is the “too big to fail” concept?
The idea that some financial institutions are so large and interconnected that their failure would be catastrophic for the economy.
What is bank resolution?
A process that ensures failing banks are dealt with in a way that minimizes harm to the financial system and economy.
What is provider sustainability in financial services?
Ensuring financial institutions operate in a way that is stable, ethical, and risk-aware for long-term success.
How can banks ensure their sustainability?
By maintaining prudent risk management, complying with regulations, and promoting responsible lending.
What role do shareholders play in financial sustainability?
They influence company policies through investments and expectations of long-term profitability.
What is a sustainable financial product?
A product that meets long-term customer needs while remaining profitable and ethical for the provider.
Why are mortgages generally considered sustainable?
They are long-term, low-interest loans secured by property, benefiting both lenders and borrowers.
What made subprime mortgages unsustainable?
They were given to borrowers with low creditworthiness, leading to high default rates and the 2007–08 crisis.
What is responsible borrowing?
Borrowing only as much as one can afford to repay, considering future financial stability.
How can consumers build a sustainable financial portfolio?
By balancing saving and borrowing, managing risks, and diversifying financial products.
What is the impact of payday loans on financial sustainability?
Payday loans have high interest rates, leading to unsustainable debt cycles for borrowers.
What is the Mortgage Market Review (MMR)?
A set of regulations ensuring responsible mortgage lending practices.
How does the Financial Conduct Authority (FCA) protect consumers?
By enforcing regulations, ensuring fair treatment, and penalizing misconduct.
