Lesson 1 - Introducing the financial services industry Flashcards
What is money?
- Stops bartering
- Medium of exchange
- Portable
- Has to be enough of it
- Divisible into small units
What is intermediation?
Pulling together everyone who has money (surplus) with people who do not have money (deficit).
What is disintermediation?
Organisations that cut out the middle man (banks). For example angels.
Name 6 roles of the bank of England
- They issue money.
- Bankers to the government.
- Bankers to the banks.
- Adviser to the government.
- Lender of last resort.
- Deals with the foreign exchange market.
- Maintains economic stability.
What is a proprietary organisation.
Most companies are limited companies, owned by shareholders who have the right to share in the distribution.
What is a mutual organisation?
Owned by its members so doesn’t have shareholders. The most common types are building societies and credt unions.
What is the difference between retail and wholesale banking?
Size is the main difference - Wholesale transactions are generally much larger than retail ones.
Retail is typiclly individuals and smal businesses.
Wholesale services are provided to large companies, the government and other financial institutuions.
What does Libor stand for and what does it mean?
London interbank offered rate.
Was a reference rate for the majority of corporate rending. The libor rates were fixed daily and varied in maturity from overnight through to one year. It was calculated using the information submitted by major banks in London regarding the interest rates they were paying to borrow from other banks.
What is Sonia and what does it mean?
Sterling overnight index average.
Introduced because banks were inflating or deflating the rates under Libor so changed to Sonia which is based on actual transactions.
Taxation:
How many days do you need to be in the uk to be automatically down as a tax payer?
183 days
What is meant by the term double taxation agreement
Double taxation agreements exist with most developed countries on:
If earned income is collected in that country but not the uk.
If unearned income is waived in that country but collected in the uk.
What are the key factors of domicile and taxation?
- Effects liability to inheritance tax.
- If deemed domiciled at deaththe estate and all asests IHT is charged.
- Most peoples domicile is determined on birth.
- It is possible to change domicile by going to live in anew country and permanantely severing all connections with the uk.
- To be deemed domicile in the uk a person would need to have spent 15 of the last 20 years in the UK.
What is non dom and what impact does it have.
If you live in the uk but their father or themselves were born abroad and indicate that they will return to their mother country one day can opt for non dom status.
This means that earnings and assets from abroad cannot be taxed in the uk.
Name 5 incomes assessable to tax
- Salaries/wagess from employment.
- Profits from a trade or professions.
- Certain benefits in kind.
- Certain pension/ retirement benefits.
- Gratuities
- Bank or building society interest
- Dividends
- Income from gilts
- Land/property rents
Name some income not assessable to tax.
- The first 30k redundancy
- Interest on national savings certificates
- Income from ISAs JIJISA’s
- Proceeds of a qualifying life policy
- Gambling winnings
- War widows pensions
- Certain welfare benefits.
