Unit 4 Topic 5 Flashcards
What is PESTEL analysis in the context of financial services?
PESTEL analysis is a framework used to analyze the external environment by considering Political, Economic, Social, Technological, Environmental, and Legal factors.
Why is it important for financial service providers to monitor external influences?
Monitoring external influences helps providers anticipate changes, seize opportunities, and mitigate threats that could impact their operations and profitability.
How did the 2007–08 financial crisis change government regulation in the financial sector?
It led to tighter regulations to ensure financial stability, reduce systemic risk, restore public confidence, and prevent future taxpayer-funded bailouts.
What are the main objectives of financial regulation?
To create a stable and sustainable financial system, protect consumers, promote confidence in financial services, and provide information on financial products.
What impact does government ownership of banks have on financial services?
Government ownership, such as in NatWest (formerly RBS), allows the government to influence bank operations, ensuring financial stability and ethical practices.
How does inflation impact financial services?
High inflation reduces the value of savings, discourages lending, and makes borrowing more expensive, while low inflation promotes confidence in financial investments.
What is the relationship between unemployment and financial services?
High unemployment reduces demand for loans and savings products, increases loan defaults, and lowers bank profitability. Low unemployment increases spending and borrowing.
How do interest rates affect financial institutions?
Higher interest rates discourage borrowing but encourage saving, while lower rates stimulate borrowing and spending but reduce savings returns.
How do exchange rate fluctuations impact financial services?
A strong currency benefits importers but harms exporters, influencing demand for banking services such as trade finance and foreign exchange products.
What is financial inclusion?
Financial inclusion ensures that all individuals have access to essential financial services, such as bank accounts and credit, regardless of their income or social status.
How does digital exclusion affect financial services?
People without access to online banking face difficulties managing finances, making payments, and accessing financial products, leading to financial exclusion.
What is the impact of debt on financial services?
High levels of consumer debt increase the risk of loan defaults, reducing bank profitability and leading to tighter lending criteria.
How has the aging population affected financial services?
Older people need more retirement planning, pension products, and financial advice on equity release and investments.
How has technology changed financial services?
Technology has enabled online banking, mobile payments, automated loan approvals, and real-time account management, improving efficiency and customer experience.
What role does data storage and processing play in financial services?
Banks use digital records and automated decision-making for loan approvals, fraud detection, and customer service, reducing costs and increasing accuracy.
What was the purpose of the Banking Act 2009?
It created a framework to resolve failing banks in an orderly manner to protect financial stability and customer deposits.
How did the Financial Services Act 2012 change financial regulation?
It abolished the Financial Services Authority (FSA) and established the Financial Policy Committee (FPC), Prudential Regulation Authority (PRA), and Financial Conduct Authority (FCA).
What is the significance of the Financial Services (Banking Reform) Act 2013?
It introduced the “ring-fencing” of retail banking from investment banking to protect customers’ deposits in the event of financial instability.
