module five Flashcards
Systemic regulation
safety and soundness of financial system covering all public policy regulations designed to minimise risks. Bank runs happen when a large number of people make panic withdrawals as they fear they will run out of money.
Prudential regulation
consumer protection relating to the monitoring and supervision of financial institutions with attention paid to asset quality and capital adequacy which is a measure of a bank’s ability to pay its debts.
Conduct of business regulation
focuses on how banks conduct their business. Purpose is to protect customers from harm, preserve and enhance integrity.
Central bank
a financial institution responsible for overseeing monetary system with the key functions of: Control issue of notes and coins, Control amount of credit money created by banks, Have control over non-bank financial intermediaries, Use monetary policy to control credit expansion, Oversee financial sector to prevent crises, Act as lender of last resort to protect depositors, Act as governments banker, Act as official agent to the government
UK financial regulation framework
1st April 2012 - financial services act - contained the UK governments reforms of the UK financial services regulatory structure and created a new regulatory framework. Gives bank of England macro-prudential responsibility for oversight of financial system.
Prudential regulation authority
Requires financial firms to hold sufficient capital and have risk controls in place with the three objectives of: Promoting safety of firms it regulates, Contributing to securing appropriate degree of protection, Facilitate effective competition between firms
Financial conduct authority
Responsible for authorising, supervising and taking action against those undertaking financial services activities. Its objective is to ensure the relevant markets function well and it protects customers and financial markets and also promotes competition.
Financial ombudsman service
settles complaints with financial services firms
Financial services compensation scheme
handles claims for compensation from consumers when firms cant
Payment systems regulator
independent economic regulator for payment systems
Pensions regulator
protects pensions making sure employers, trustees, specialists and advisors fulfil their duties
Serious fraud office
investigates and prosecutes fraud, bribery and corruption
National crime agency
law enforcement agency with responsibility for intelligence and operational response to serious organised crime
Money advice service
provides free financial information and education
Department for business, energy and industrial strategy
aims to build an economy for people to work and businesses to invest, innovate and grow.
UK competition network
alliance of regulators promoting competition in interest of consumers
UK regulators network
initiative to enhance collaboration on issues of shared relevance to bring regulators together
Financial ombudsman service responsibilities
investigate fairly listening to both sides, give an answer quickly (within 90 days), explain things clearly
Financial services compensation scheme
Offers compensation to depositors and holders of insurance policies. Provides services for: Consumer - provides protection when firms fail, reassuring people and enabling them to buy regulated financial products confidently, Customers - helps people by offering a claims services that’s fast and easy to use, Industry - operates as efficiently as possible contributing to prevention of future failure recovering as much as possible from failed firms to offset costs of compensation, Regulators - ready to respond to major firm failures and crises working with regulatory family supporting orderly resolution of failing firms.
Financial safety net
a comprehensive system enhancing and ensuring a countries financial stability consisting of: Regulation and supervision (ensures countries financial stability due to impact bank failure can have), Lender of last resort (central bank will provide funds to banks in financial difficulty), Deposit insurance schemes ( a guarantee for the amount deposited by savers will be paid if a bank fails), Bank insolvency/resolution laws (legal provisions that regulate conditions for handling of bank failures), Cooperation and resolution processes (safety net in case of crisis depending on efficient communication and cooperation)
Structural reform
Government developed legislation requiring banks to separate provision of core retail services from other activities like investment and international banking
Structural reform aim
protect UK retail banking from shocks in global financial markets designed to increase the stability of the financial system and prevent costs of failing banks
structural reform requirements
protect UK retail banking from shocks in global financial markets designed to increase the stability of the financial system and prevent costs of failing banks