Libf Unit 4 Topic 1

Question 1

Competition and markets authority (CMA)

Answer 1

The body responsible for strengthening business competition and preventing and reducing anti-competitive activities

Question 2

What are counterparties?

Answer 2

People and organisations (eg companies) who lend money to and borrow from financial intermediaries (financial institutions such as banks)

Question 3

Credit union

Answer 3

A mutual organisation- owned by its members
Provides a range of financial products to members- savings accounts and personal loans
Members must share a common bond

Question 4

Divestment

Answer 4

Selling parts of a company to make it smaller

Question 5

Financial conduct authority

Answer 5

Regulates financial firms providing services to customers
Maintains the integrity of the UK’s financial markets

Question 6

Financial intermediary

Answer 6

A financial institution facilitates process of lending and borrowing
Does this by taking deposits from those w a surplus and lending to those who need to borrow

Question 7

Financial ombudsman service (FOS)

Answer 7

An independent body set up by parliament
Settles customer complaints about providers
No charge

Question 8

Financial policy committee (FPC)

Answer 8

Part of the Bank of England
Monitors and responds to risk posed to the entire financial services market
Macro prudential authority

Question 9

Financial services compensation scheme (FSCS)

Answer 9

Compensation scheme
Pays compensation to account holders of up to certain amount if provider goes into default

Question 10

Friendly society

Answer 10

A mutual organisation that offers its members a wide range of financial products
- savings, investments, insurance, pensions and annuities

Question 11

Independent financial adviser (IFA)

Answer 11

A professional who makes financial recommendations to clients based on products offered by a wide range of providers

Question 12

Investment banks

Answer 12

• raise funds on the financial markets
• use these funds to provide special service to large corporations and governments

Question 13

Lloyds insurance market

Answer 13

Members (corporations and individuals) employ underwriters to come together and accept insurance risk, diving it out between the members

Question 14

Long term capital markets

Answer 14

Financial services where long term debt and shares in the bank are brought and sold. This provides a funding for banks

Question 15

Monetary policy

Answer 15

The manipulation of interest rates to maintain low inflation

Question 16

Monetary policy committee

Answer 16

Bank of England responsible for keeping inflation under control

Question 17

Mutual organisation

Answer 17

An organisation owned by its customers, who are also its members, not shareholders

Question 18

Oligopoly

Answer 18

A market dominated by a few large firms, eg the financial services sector

Question 19

Payday loan companies

Answer 19

Online firms that provide instant, very short term (few days or weeks) unsecured cash advances of small amounts to customers who need cash immediately and who are in unemployment and have payroll records.

Question 20

Peer-to -peer lenders

Answer 20

Online marketplaces that enable people to lend and to borrow from eachother without using traditional financial institutions such as a bank or building society

Question 21

Prudential regulation authority

Answer 21

One of the two main regulators of financial services in the uk (the other being the FCA)

Question 22

What is ring fencing

Answer 22

Ring fencing refers to isolating certain assets, profits or business from others to protect them from risk, legal liabilities or for regulatory compliance. It’s like putting a protective barrier around treasure to keep it safe from threats.