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Description
Flashcards by Nikolas Reece, updated more than 1 year ago
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Created by Nikolas Reece
almost 8 years ago
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| Question | Answer |
| Functions of the financial sector inc postlude | - Depositors can earn interest - provide a source of funds for households, firms and government - Facilitates the exchange of shares - compensation against risks (insurance) |
| Central Bank Function: Oversee the financial sector | All commercial banks and financial institutions must follow the rules and guidelines as set by the CB or face sanctions. |
| Central Bank Function: Implement monetary policies | monetary policies are rules which are set out by the government regarding factors such as interest rates and the money supply. |
| Central Bank Function: Producing and issuing domestic currency | It has the sole rights to issue notes and coins for the country. |
| Central Bank Function: the lender of last resort | the central bank must always be prepared to help commercial banks and other financial institutions by lending them money. |
| Central Bank Function: It manages foreign exchange reserves | It ensures that the country always has sufficient foreign exchange reserves in order to make payments for imports |
| Central Bank Function:: It manages the national debt | it ensures that the debt of the government is at a manageable level which will not have sever impact on the economy |
| Commercial Banks | a bank which offers financial services to the general public |
| commercial bank services: Safekeeping & Security | for items other than cash, eg jewelery, valuables are kept in safety deposit boxes. |
| commercial bank services: offer various payment services | such as debit cards, credit cards, standing orders, chequing services |
| commercial bank services: trading foreign currency | banks issue travelers cheques, and buy and sell foreign currency with the public |
| commercial bank services: distribute notes and coins in local currency | distribute notes and coins to local businesses for float or for individual use |
| share market (stock market) | is a market for the trading of company stocks or shares. The Stock Exchange of Trinidad and Tobago |
| dividends | Shareholders receive ‘profits’ called dividends from their shares. |
| stock broker | a licensed individual who acts as an agent for clients, buying and selling shares in the market on the client’s behalf. |
| credit union | a cooperative financial institution that is owned and controlled by its members whereas commercial banks are owned by its shareholders. |
| development bank | an institution set up to facilitate growth and production in a particular sector in the economy |
| insurance | a financial service which seeks to reduce the financial ‘setbacks’ which may be incurred as a result of loss of life, property, injury, health issues |
| insurance premium | Customers pay a regular amount called a ‘premium’ to the insurance company for this insurance coverage |
| building societies | A financial institution that offers financial services, especially mortgage lending, so its members can build their homes |
| mutual fund | a collective investment (product) company. The fund pools money from many investors and invests their money in a range of securities |
| investment trust company | A trust company accepts deposits from the public |
| financial instruments (securities) | tradable assets which represent some monetary value to its owner. |
| debt security | a financial instrument which represents a loan to an individual, a business or the government. |
| equity securities | a financial instrument which represents part ownership of a company (shares) |
| treasury bills | debt securities (loan) issued by the government which are repaid to the owers of the security in a short-term (91 or 182 days) |
| treasury bonds | debt securities (loan) issued by the government which are repaid to the owers of the security on a long-term basis. |
| corporate bond | long term debt securities issued by companies or corporations |
| municipal bond | debt securities issued by a municipality or other governmental institution (other than the central government) eg WASA or T&TEC Bond. |
| the informal sector | Economic activities that are not officially recorded or regulated and which take place outside the formal norms of business transactions eg 'pulling bull' aka PH drivers |
| advantages of the informal sector | provides jobs and reduces unemployment creates an additional source of finance |
| disadvantages of the informal sector | loss of tax revenue to government often low paying jobs difficult to regulate |
| Sou sou | an informal arrangement where a small group of people contribute an equal fixed sum each week or month on payday to a common fund called a pot |
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