topic five- unit four finance

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what is the financial services act 2010?
legislation focusing on need for bansk to have a plan in place to deal with situations when they get into financial difficulty
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what is the financial servicves act 2012?
main act of parliament governing regulation of financial services industry
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what is deleveraging?
reducing amount of debt in relation to assets
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what is financial inclusion
delivery of affordable financial services to all sections of society
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what is the financial services (banking reform) act 2013?
legislation that introduced retail ring fencing for banks and the cap on payday lenders
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what does the extent to whcih PESTEL affects a provider depend on?
.
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what is the "light touch" approach to political agenda?
when financial regulation isnt strict enough and rules arent always enforced
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what is an example of light touch approach in terms of banking regulation?
banks had low capital levels and there was a general and vague rule of liquidity
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what are the main reasons for financial regulation?
so customers are well informed about products, so customers are protected from fraud and misselling and so customers feel confident in banking system
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what are the wider reasons for financial regulation?
providers must have confidence in one another due to extensive interaction and the UK financial sector contributes a great deal to the economy
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how can providers pass on costs associated with tighter regulation?
slightly higher interest rates, insurance premiums or management fees
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what is the direct cost of regulation to providers?
direct fee to PRA and FCA and levies (indirect tax) to FOS and FSCS
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what are 2 examples of additional expenses to providers?
creditworthiness checks and investgating where large numbers of money come from to comply with money laundering regulations
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what is meant by banks must keep enough liquid assets to control the risk associate with loan defaults?
having enough cash to honour withdrawal requests
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what is the main guarantee of the FCA of regulations that is proportionality?
that the cost of implementing regulation won't exceed the benefit to providers
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what are the main benefits of complying with regulation?
less likely to collapse, look more ethical and fairness in competition
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what are the 2 main drawbacks of compliance with regulation?
barriers to entry and uncertainty amongst providers
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what is traditional banking culture?
individual customers valued by bank managers, relationships built up over time and customer loyalty valued
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what are the two main codes of banking practice?
the banking conduct of business sourcebook and the standards of lending practice
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what are the benefits of low levels of inflation to banks?
people are happy to invest and there's healthy demand for lending- boosts banks' business
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what are the problems with high levels of inflation to banks?
less certainty about future, less willing to borrow and look for riskier investments to keep ahead of inflation
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what's the impact of high unemployment on banks?
less money being spent and lower demand for loans along with lower amount being saved means banks have less on both sides of balance sheets. also more defaults
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what's the impact of low unemployment on banks?
locks people into high spending lifestyle which encourages consumer culture and also people encouraged to save money
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what's the impact of chronic unemployment on banks?
people to have to rely on state benefits and can't afford to buy financial products. need current accounts for payment
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what's the relationship between inflation and unemployment?
inflation is higher during a period of high economic growth i.e. when unemployment's low
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what's the impact of rising interest rates on banks?
existing borrowers paying more- more defaults and potential borrower put off- reduces profits
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what's the impact of falling interest rates on banks?
businesses and people will borrow more and savers will get more return
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what's the impact of a rise in sterling on banks?
imported products are cheaper- imports firms need more payment services, foreign currency loans and trade insurance
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what's the impact of a fall in sterling on banks?
exported products are less expensive and more competitive in foreign markets
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what's the impact of a rise in property prices on banks?
people will borrow against resulting equity in houses to finance their wants and needs
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what's the impact of a fall in property prices on banks?
people unable to keep up repayments on mortgages- falling into arrears and defaulting
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what's the impact of a recovery of the stock market on banks?
economic boom follows and financial instruments such as shares reach very high prices
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what's the impact of an increase in competition on banks?
makes banks more wary and forces them to manage risks better
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what's a buy back guarantee in relation to exchange rate services?
purchasers can buy any unspent currency at the same rate they bought it and are protected against adverse currency movements
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what is financial inclusion?
a component of social inclusion
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what is social inclusion?
refers to a situation where all members of society can participate fully in society and have equal access to services and facilities
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what is digital exclusion?
refers to someone's inability to particpate in a computer based society
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how can govt tackle issues of social and financial exclusion?
MAS which provides clear advice on how to manage money and making basic bank accounst available
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how can financial providers support financial inclusion?
providing products aimed at financially excluded e.g. low cost, providing easy to understand info and education for financially excluded to help them understand what products can help them
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how are cultural trends and multi-culturalism impacting on providers?
have to adapt products, marketing and delivery. some banks provide accounts and loans especially for religions and ethnic minority groups
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what is the impact of people living longer on pension products?
pension products are more expensive
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Card 2

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what is the financial servicves act 2012?

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main act of parliament governing regulation of financial services industry

Card 3

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what is deleveraging?

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Card 4

Front

what is financial inclusion

Back

Preview of the front of card 4

Card 5

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what is the financial services (banking reform) act 2013?

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