Chapter 1B - UK Financial Services Structure

Question 1

What are the four key components of the UK financial sector?

Answer 1

Financial Infrastructure
Financial Markets
Financial Firms
The Financial Sector Authorities

Question 2

Who overseas payment systems in the UK?

Answer 2

The Bank of England

Question 3

Which company is the main service company for providers of payment systems?

Answer 3

UK Payments Administration Ltd (UKPA)

Question 4

What name is given to the economic regulator for the UK payment systems industry?

Answer 4

Payment Systems Regulator (PSR)

Question 5

What is the UK payment systems industry worth?

Answer 5

£81 trillion

Question 6

What are the 3 statutory objectives of the Payment Services Regulator?

Answer 6

• to ensure that payment systems are developed in the interest of all who use them
• to promote effective competition in the market
• to promote development and innovation of payment systems, especially the infrastructure used to operate them

Question 7

Payment Services Regulator payment systems should be:

5 answers

Answer 7

• accessible
• reliable
• secure
• value for money
• work well for the user

Question 8

What do clearing houses and settlement systems do?

Answer 8

Provide infrastructure for clearing and settlement of securities and derivatives markets.

Question 9

Who is the regulator for recognised investment exchanges?

Answer 9

FCA

Question 10

Who regulates the recognised clearing houses?

Answer 10

Bank of England

Question 11

What does EMIR stand for?

Answer 11

European Market Infrastructure Regulation

Question 12

What are the two kinds of financial market?

Answer 12

On-Exchange and Over-the-Counter (OTC)

Question 13

Who regulates the key exchanges of the UK financial markets?

Answer 13

The FCA

Question 14

Define “Money Market”

Answer 14

A wholesale market for commercial borrowers and lenders

Question 15

Define “Capital Markets”

Answer 15

For trading stocks and shares, fixed interest investments and derivatives (these supply capital for businesses and investments for investors)

Question 16

Define “Commodity Market”

Answer 16

For trading physical goods (oil, steel, food etc.)

Question 17

Define “Foreign Exchange (FX) Markets”

Answer 17

For trading foreign currency

Question 18

Define “Insurance Companies”

Answer 18

For insuring physical assets. These provide capital to secure insurance policies and provide banking and investment management

Question 19

Define “Investment Companies”

Answer 19

These invest surplus funds for longer term gain

Question 20

Define “Life Assurance and Pension Companies”

Answer 20

These invest their assets to meet long-term policyholder obligations

Question 21

Define “Reinsurance Companies”

Answer 21

Companies that provide security to diversify risk from insurance companies

Question 22

Define “Investment Houses”

Answer 22

These issue pooled investments like unit trusts and open-ended investment companies (OEIC’s)

Question 23

What are the 3 core services offered by banks and building societies?

Answer 23

Current Account; Deposit Account; Mortgages and Loans

Question 24

Which is the most flexible sevice offered by banks and building societies?

Answer 24

Current Account

Question 25

Which service is offered by banks and building societies to fund the purchase of property?

Answer 25

Mortgages and Loans

Question 26

What interest is paid on credit balances in a Current Account?

Answer 26

Little to none

Question 27

What name is given to the process of a building society losing its' mutual status in favour of becoming a public corporation?

Answer 27

Demutualisation

Question 28

What indirect services are offered by banks and building societies? (5 answers)

Answer 28

- Portfolio management - Stockbroking services - Wills and executorship - Collective Investment - Insurance and Pensions

Question 29

What are the two types of Portfolio Management services offered?

Answer 29

Discretionary and Advised services

Question 30

What is the difference between Discretionary and Advisory services, in portfolio management?

Answer 30

Discretionary allows all relevant decisions to be made by the bank; Advised offers financial advice on the best decisions to make

Question 31

What does a stockbroking service offer to the customer?

Answer 31

Buy and sell securities, gilts and/or corporate bonds

Question 32

What is a more appropriate and cost-effective alternative for lower levels of Capital Investment?

Answer 32

Collective Investment (unit trusts and OEICs)

Question 33

With regards to financial advice, define "Independent"

Answer 33

Can consider any or all retail investment products and recommend accordingly

Question 34

With regards to financial advice, define "Restricted"

Answer 34

Only able to recommend certain products or companies.

Question 35

What name is given when a bank offers life insurance through another company that specialises in that field?

Answer 35

Bancassurance

Question 36

What does IFA stand for?

Answer 36

Independent Financial Adviser

Question 37

What does RDR stand for?

Answer 37

Retail Distribution Review

Question 38

What are the two ways that life assurance companies can distribute their products?

Answer 38

Intermediaries (Financial Advisers) and their own sales team

Question 39

What is the key USP of a Friendly Society?

Answer 39

They are able to offer tax advantaged products,

Question 40

What act enabled Friendly Societies to apply for corporate status and expand their range of services offered?

Answer 40

Friendly Societies Act 1992

Question 41

What name is given to large companies (M&S, Sainsbury's, Virgin) who have taken to offering financial services?

Answer 41

Multi-Distribution Organisations

Question 42

The abbreviation CAT refers to what?

Answer 42

Charges, Access and Terms