Section 5 - The financial sector

Nikolas Reece
Flashcards by Nikolas Reece, updated 8 months ago
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2016 CSEC Economics (Section 5 - Financial Sector) Flashcards on Section 5 - The financial sector, created by Nikolas Reece on 04/29/2016.
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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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