Chapter 2 Flashcards
(19 cards)
What does MFI stand for?
Monetary financial institution
What is an MFI?
Another term for DTI
Why are DTIs subjected to stricter regulation than NDTIs?
Monetary function of deposits - affects money supply
Are deposits discretionary or contractual?
Discretionary
Are pension & insurance payments discretionary or contractual?
Contractual
What is a universal bank?
Combines commercial activities with activities of investment bank, securities house & insurance firm
What activities might a universal bank do?
- Portfolio management
- Brokerage of securities
- Underwriting
- Mergers & acquisitions
What are drawbacks of universal banking?
- Mis-selling investment products to get commission fees e.g. PPI
- Risky proprietary trading & market-making
What are benefits of universal banking?
- Economies of scale & scope
- Smoothed performance is good for financial stability
What are a bank’s core actitvities?
- Payment services
- Deposits & loans
- Trade finance / cross-border services
- Other financial services
What is a payment system?
Any organised arrangement for transferring value between participants
What are types of payments?
- Cheques
- Bank transfers
- Card payments
What are the advantages of cashless payments for customers?
- Cheaper, faster, more secure
- Easier to track payments
- Easier to build credit history
What are the disadvantages of cashless payments for customers?
- Bad spending habits
- Privacy issues
- Fraud risk
What are the advantages of cashless payments for society?
- Environmentally friendly
- Reduction in crime & tax avoidance
- Supports economic activity
- Increases financial inclusion for some
What are the disadvantages of cashless payments for society?
- IT risks & cyber-attacks
- Harms communities / high streets
- Lack of coordination -> inefficiencies
- Reduces financial inclusion for some
What are the main types of deposit & lending services?
- Current accounts
- Time / savings deposits
- Consumer loans & mortgages
What is fintech?
Any innovative use of technology in financial services
What are the three levels of fintech?
- Fintech activities e.g. asset management
- Enabling technologies e.g. cloud computing
- Policy enablers e.g. data protection
