topic one- unit four finance

define bank
large PLCs owned by shareholders
1 of 76
define challneger banks
relatively small retail banks set up with intention of competing for business with large, long established banks
2 of 76
define building societies
smaller than banks, mutual organisations
3 of 76
define credit union
cooperatives that are part of an international mutual movement
4 of 76
define insurance companies
companies that provide and sell insurance
5 of 76
define friendly societies
mutual organisations providing sickness benefits, life assurance and pensions
6 of 76
define investment fund managers such as pension funds
specialise in investing people's pension funds- deal in financial markets nto make best return and build up funds
7 of 76
define PLC/ propriety organisation
owned by shareholders and aims to make profit
8 of 76
name 2 banks which the UK govt is a shareholder
RBS nad the "bad" park of Northern Rock
9 of 76
define mutual organisation
owned by their memebers (savers and borrowers)
10 of 76
what financial products do building societies specialise in?
mortgage loans and current and savings accounts
11 of 76
how does a small provider depend on services provided by a larger provider?
depend on them for payment clearing services
12 of 76
what is financial intermediation?
when organisations take in money and use it to provide financial services and make profit/surplus
13 of 76
how can financial institutions contribute to a sustainable financial services system?
design and sell products that suit customers' circumstances and treat them fairly e.g. responsible lending
14 of 76
what is responsible lending?
checking customers' credit scores to ensure they are able to repay and can afford borrowing
15 of 76
what is a retail bank?
they provide services to individuals and small/medium sized businesses
16 of 76
how is an investment bank different from a retail bank?
retail banks provide service for customers, investment ones are riskier and aim to make profit
17 of 76
what are investment banks commonly known as?
wholesale banks
18 of 76
what is a universial bank?
large banks that carry out investment and retail
19 of 76
what is retail ring fencing?
seperation of certain retail activities of banks from investment part
20 of 76
what are the 4 main services provided by retail banks?
money transmission, savings and investments, lending and insurance
21 of 76
what are the 5 multinational retail banks operating in the UK?
RBS, Lloyds Banking Group, Barclays, HSBC and Standard Chartered
22 of 76
what percentage of RBS shares are owned by the government?
23 of 76
which bank was once one of the "big five"
24 of 76
how do investment banks raise funds if they don't accept deposits?
by issuing shares and bonds on markets
25 of 76
what special services do investment banks provide to large corporations and governments?
advice on mergers and takeovers
26 of 76
what do building societies do with profits made?
retain it within for benfit of customers
27 of 76
why is the cooperative bank described as a "troubled mutual"?
accepted £1bn from hedge-funders in return for 70% ownership
28 of 76
how does the Lloyds insurance market work?
based in london and made up of groups of members who employ specialists (underwriters) to accept insurance risk and divide it among them.
29 of 76
what is the common bond criteria of a Credit Union?
live in a certain area or work for a certain employer or type of employer
30 of 76
what are the 2 main products offered by a credit union?
savings accounts and loans
31 of 76
what are 3 examples of how credit unions behave ethically?
promoting economic and social wellbeing of members, promoting responsible lending/borrowing and promoting thrift by encouraging members to save as well as borrow
32 of 76
what is the basic philosophy of a friendly society?
for people to group together to contribute to a mutual fund and receive benefits in times of need
33 of 76
what's the difference between an independent financial adviser and a restricted one?
independent are able to promote any product whereas restricted are restricted to rnage of products offered by company theyre employed by
34 of 76
what is meant by the bank of England is a nationalised institution?
it has public ownership
35 of 76
how does the BoE achieve monetary stability?
BoE's monetary policy committee carries out govt's monetary policy. aim is to achieve stable prices, confidence in the currency and economic growth without inflation
36 of 76
how does the BoE achieve financial stability?
has a new FPC and PRA responsible for regulating financial system
37 of 76
how does the BoE act as a banker to the banks?
large banks hold accounts at the bank and clear everyday payments and receipts at the bank
38 of 76
how does the BoE issue UK bank notes?
only institution in UK allowed by law to issue banknotes that are legal tender
39 of 76
what are the 2 main objectives of the financial policy committee?
1. identifying, monitoring and taking action to remove or reduce systemic risk to protect resilience of UK financial system and 2. supporting economic policy of govt
40 of 76
who ensures markets work well so consumers get a fair deal?
41 of 76
who detects and prevents money laundering?
42 of 76
who promotes the saftey and soundness of financial services by requiring them to behave prudently?
43 of 76
who grants a licence to businesses to offer goods and services on credit or that lend money via overdrafts and credit cards?
44 of 76
what are the 3 main roles of CMA?
45 of 76
what are the 2 main limits to the amounts of compensation that may be paid by FSCS?
46 of 76
what the 3 trade associations in the financial services sector?
British Banker's Association, Building Societies Association and Association of British Insurers
47 of 76
what is the role of UK financial Investments (UKFI)?
it manages the shareholdings of the govt and its only shareholder is HM Treasury
48 of 76
what is the difference between the good and bad banks in northern rock?
good- pre existing savings accounts and best pre existing mortgages (continuing to receive payments). bad- mortgage accounts on which customers had arrears on or had defaulted
49 of 76
who does the govt still own?
the bad part of northern rock and part of RBS
50 of 76
what is an oligopoly?
when market is dominated by a few large firms
51 of 76
what is increased concentration?
when there's more megers and acquisitions. means increased market share for banks and eliminates competition
52 of 76
what is divestment?
being required to sell branches and assets and downsize
53 of 76
what are 2 main benefits of ring fencing?
1. if insolvency happens banks will be able to still provide core activities and 2. retail depositors' money won't be used to pay debts of riskier investment section
54 of 76
what is the surplus sector?
people in positive financial situation- need to save
55 of 76
what is the deficit sector?
people in negative financial situations- need to borrow to fund deficit
56 of 76
what is the balanced sector?
people whose income and outgoings are equal- need payment services
57 of 76
what is a financial interdiary?
borrow money from surplus sector i.e. savers and lend it to deficit sector i.e. borrowers
58 of 76
what is the personal sector?
individuals who save small amounts in variety of accounts, save long term in pensions and insurance for retirements and borrow for buying house
59 of 76
what is the retail sector?
includes personal sector with addition of small and medium sized businesses
60 of 76
what is the corporate/commercial sector?
larger businesses amd comapnies that deposit larger amounts for varying periods and use fund management services
61 of 76
what is the public sector?
govt and other public bodies that receive and pay money via bank accounts. borrow money from public and via stock market to fund deficits
62 of 76
what is the financial sector?
dealings among financial institutions
63 of 76
what are customer deposits?
amounst of money customers keep in current and savings accounts- steady core of funding
64 of 76
what are short term money markets?
banks borrow over short periods of months, weeks or days in money markets
65 of 76
what are bonds?
long term debts that a bank issues and people who buy the bonds are, in effect, lending money to banks
66 of 76
what are equities?
shares issued by banks and shareholders are part owners of banks
67 of 76
what is the sale of assets?
some banks occasionally raise money by selling off parts of businesses
68 of 76
how do banks use lending?
banks make loans over small, medium and long term periods to individuals and businesses to enable them to finance expenditure and cover cash shortages
69 of 76
how do banks use trading?
investment sections of banks use funds to buy and sell securities in global financial market to make gains on differences
70 of 76
how do banks use purchasing?
purchasing buildings and computer systems
71 of 76
how do banks use operational costs?
staff salaries and administration costs
72 of 76
what is peer to peer lending?
online market places that put borrowers in touch with lenders directly, bypassing the banking system
73 of 76
how is risk reduced with peer to peer lending if depositors aren't offered protection under FSCS?
regulated by FCA from april 2014 and risk is reduced by strict credit scoring and diversification
74 of 76
what are 2 examples of peer to peer lending?
zopa and funding circle
75 of 76
what are 4 drawbacks of payday loans for borrowers?
extremely high interest rates, adverse credit score stays on record 6 years, aggressive tactics for repayments and high default fees each time a repayment's late
76 of 76

Other cards in this set

Card 2


define challneger banks


relatively small retail banks set up with intention of competing for business with large, long established banks

Card 3


define building societies


Preview of the front of card 3

Card 4


define credit union


Preview of the front of card 4

Card 5


define insurance companies


Preview of the front of card 5
View more cards


No comments have yet been made

Similar All resources:

See all All resources »See all financial studies resources »