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1、Financial Sector:An Introduction,授课教师：黄勇 博士,Introduction,1.本课程的Outcomes:Financial Institutions Capital Markets Money Markets,2.本课程的Assessment Information:One formative Assessment A case study Six restricted response questions should be completed in not more than two hours.will be permitted to bring
2、notes,Section 1,1.Economic agents(finance):Surplus units Deficit units A bank:financial intermediaryto achieve a double coincidence of wants,Financial institution acting as principal,not as a agent example of a unit trust Relationship of a contract nature,2.Two kinds of financial intermediary:Direct
3、 lending:coping with the problem of liquidity Secondary market Deposit-taker,Indirect lending:not offering the liquidity,e.g.pension fundssolve the problem of matching surplus and deficit units,Matching problems(P.25):Maturity Amount Risk Location,3.Function of financial intermediary maturity transf
4、ormation aggregation of small deposits risk transformation,Section 2 Importance of money,1.The concept of money Cash:bank notes,coinsadvantage of casha quick and convenient methoddisadvantage of cash(P.36)Chequehandling cost,Credit card:MasterCard,VISA debit card:Maestro,Delta Quasi-cash:tokens,vouc
5、hers,coupons,Bank giro credit:for a one-off paymentStanding order:for fixed regular paymentstypically used to pay rent,mortgage,etc.Direct debit:for varying amount paymentsused to make recurring payments for credit card or utility bills,Postal order/money order:is a payment order for a pre-specified
6、 amount of money Store cardsare subject to interest charges,2.History of money Definition of money(P.39)shells:Polynesian salt:Romans tobacco:prisonersDefinition of legal tender(P.42),3.Barter:a society without cash examples of barter today difficulties of barter,4.Qualities of money general accepta
7、bility durability divisibility portability scarcity recognisability homogeneity,5.Functions of money medium of exchange a unit of account a store of value a standard of deferred payment a means of unilateral transactions a means of influencing economic activity,6.Other definitions of money convertib
8、le and inconvertible money primary and secondary money quasi-money govt.definitions of money,Section 3:The Bank of England,3.1 brief history goldsmith bankers receipts/promissory notes loaned funds to govt.establishment in 1694,William Paterson a loan of 1,200,000 to govt.at a rate of 8%joint-stock
9、bank-PLC the status of govt.s banker and debt manager,3.2 the nature of BOE a joint stock company limited liability banker to other banks the Bank Charter Act 1844 1998 Act,3.3 purposes of BOE maintaining the integrity and value of the currency related activities price stability and monetary policy
10、Monetary Policy Committee:MPC,maintaining the stability of the financial system domestically and internationally relationship between BOE and FSA FSC LOLR seeking to ensure the effectiveness of UKs financial services,3.4 governance of BOE The Court(governing body)NedCo MPC Audit committee Governors
11、Committee Management Committee,Organization of the BOE monetary analysis and statistics：Monetary and Financial Statistics Division financial market operations financial stability coordination unit to Europe,3.5 functions of BOE banker to government Exchequer Account temporary finance monetary policy
12、 fiscal policy,banker to the banks high street banks/clearing banks/building societies cash reserves operational balances non-operational balances special deposits,note issue fiduciary money management of national debt disadvantages of too large gilts DMO Treasury bills and gilt-edged securities,PSN
13、CR meets the deficit three resources operating office:DMO,CGO monetary policy implementation LOLR international relations,managing the EEA to stabilize the value of sterling private banking:customers accounts opened before 1946,and staff members accounts open mkt operations to meet interest rate dec
14、ision supervision of the financial system Financial Services and Market Act 2000 payment and settlement systems,3.6 Balance Sheet liabilities of the issue department assets of the issue department note issue liabilities of banking department,Section 4 UK High Street Banks,4.1 primary and secondary b
15、anks retail bank and wholesale bank primary bank:take part in UK payments mechanism clearing banks secondary banks other accepting institutions other financial institutions,English banks in 17th century,a large number of small private banks in 20th century,several major banks Scottish banks relation
16、s with Italian merchants and moneylenders more trading with European nations than English merchants,the Bank of Scotland the Royal Bank of Scotland 1845 Banknote Act(Scotland)the savings bank movement during 18th century,minimum deposit of an account was 10,out of reach of poorer the first savings b
17、ank by Henry Duncan post office savings system in UK,1817 Act:deposits would be invested in public sector;no manager benefit Trustee Savings Bank Association,they are strictly controlled by government innovation during 1960s:issuing first cheque accounts;unit trusts;offering loans to other banks rad
18、ical proposals of Page Report,Alliance and Leicester Girobank operating through post office counter system accounts maintained in a central office a float of money cannot cover the cost of operations,NSB formerly established as POSB two main principles a government dept.accountable to the Treasury t
19、wo accounts:ordinary and investment cash-ISA:having tax benefits the importance of national savings,Section 5 Functions of Retail Banks,5.1 functions of retail banks note issue authorization circulation of 3m granted to Bank of Scotland note issue above 3m were backed by gold,but now backed by Bank
20、of England note Scottish banks swap notes,accept deposits cheque deposits other sight deposits time deposits Negotiable CDs agents for payments APACS BACS,grant loans credit cards drafts/travellers cheques,Section 6 Merchant Banks,6.1 secondary banking irrelevant of payment system Disposing of large
21、r value transactions with large businesses dealing with large numbers of overseas residents deposits for a fixed period of time,syndicate bank:spreading the risk loans not exceeding capital and reserves matching assets and deposits,6.2 Merchant banks merchant acceptance houses bill of exchange:drawe
22、r drawee(acceptor)three options on the bill,other functions of merchant banks accept deposits providing finance through acceptance credits advising on new share issues and acting as underwriter providing financial advice and investment management,6.3 British overseas banks Banking services for expat
23、riate British traders and settlers in 19th century London based,overseas business Standard Chartered Bank consortium banks niche banking,Section 7 Building Society,7.1 a brief history mutual societies financing the building of their own homes in 18th century operation of building society from termin
24、ating society to permanent society reduction in numbers during 20th century,7.2 reasons for the reduction terminating societies financial difficulties less competence amalgamation increased administration cost converting to LLC,7.3 legislation 1962 Act 1986 Act 1997 Act 2000 Act,7.4 products and ser
25、vices access,notice and term savings accounts overdrafts,credits,unsecured loan house purchase services money transmission services fx,insurance,stockbroking,unit trusts,pensions,ISAs agencies for receipts and payments,7.5 principle of remaining solvent a wide range of financing sources CDs deposits
26、 bonds PIBS,7.6 Credit unionsdefinition:mutual savings and loan societies membership:same as BS,but a 5000-membership limit operating rules,7.7 financial houses hire purchase:instalment credit ownership of the goods advantages and disadvantages of HP lower interest rate,even free interest Ownership
27、of the goods rests with HP,a wide sources of funds issuing new shares reserves of undistributed profits bank overdrafts discounting the bills of exchange deposits on money mkt CDs,sight and term deposits from public,other services:condition sales credit sales agreement revolving loans Loans leasing
28、factoring,Section 8 Pension Funds,8.1 Definition the income:contributions and earnings expenditure:payments and administration charges two main types:insured schemes self administrated,8.2 schemes offered by employers non-contributory schemes contributory schemes defined benefit schemes(final salary
29、 schemes)defined contributions(money purchase schemes),AVCs contribution:up to 15%of annual salary tax concessions FSAVCs,8.3 personal pension schemes pension plans designed for individuals benefits rely solely on contribution tax relief stakeholder pension,8.4 state pension schemes a brief history
30、Basic State Pension SERPS Second state pension,Section 9 Insurance Company,9.1 the functions of insurance collecting the premiums to protect against financial loss when a specified event occurring within a specified time The premiums create a pool of funds Insurance companies invest these funds in m
31、any ways,Two main functions:the spread of risks between economic entities,general insurance the spread of risks over a period of time,life insurance,9.2 products defined by the function it performs insurance of the person insurance of the property insurance of the liability insurance of the rights,9
32、.3 products defined by the area of business marine insurance life assurance fire insurance accident insurance,9.4 Lloyds of London from a coffee house to the First Committee of Lloyds from individual members with unlimited liability to syndicates benefiting from limited liability,Section 10 Collecti
33、ve Investments,10.1 Investment trusts close-ended funds,10.2 unit trusts open-ended funds independence of trustees and management company the role of fund managersvalue of a unit bid and offer(market maker),income of a trust:initial charges annual management fees two types of units income units accu
34、mulation units,10.3 OEICs a hybrid between investment trusts and unit trusts quoted on LSE,Section 11 Capital markets,11.1 primary and secondary mkt primary mkt:where new securities are issued in return for capital direct financing government securities companies stocks and shares the role of mercha
35、nt bank,advantages and disadvantages of a quotation requirements for quotation,the secondary mkt:stock exchange and AIM the function of LSE the big bang(27 Oct.1986),11.2 Functions of members of LSE Types of member firms brokers/dealers market makers IDBs SEMBs,AIM over-the-counter gilt-edged market
36、,11.3 New issues offer for sale offer for subscription placing introduction,11.4 securities traded on LSE ordinary shares preference shares debentures convertible secrities,Section 12 Money Markets,12.1 definition dealing in large amounts of money on a very short time settlement basis money is lent
37、and borrowed for short time short term securities are traded,12.2 discount marketthe role of discount houses functions of discount houses taking very short-term deposits from banks discounting commercial bills of exchange underwriting the weekly tender for treasury bills as market makers of short-te
38、rm financial instruments,discount houses and BOE providing the banks with called money to meet the operational balances the banks must maintain with the Bank of England the rate of interest on called money can be adjusted daily,discount houses and bill finance bill of exchange bank bills eligible bi
39、lls other bills accepted by companies:fine trade bills,discount houses and government finance direct finance by holding short term gilt underwriting the weekly Treasury bills Treasury bills,Euro-Treasury bills discount houses as market makers:Treasury bills,commercial bills,CDs,Parallel markets interbank market intercompany market local authority market Negotiable CDs sterling commercial paper market,Section 13 Options,Futures,
