ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -The new rules mean large UK banks must separate personal banking services such as current and savings accounts, from risks in other parts of the business such as complex wholesale and investment banking. This is called ring-fencing.
Detailed explanation-2: -One of the key requirements of ring-fencing is that the legal entity within a banking group that provides core retail activities cannot also provide other activities such as investment and international banking. Such activities are referred to as ‘prohibited’ or ‘excluded’ activities.
Detailed explanation-3: -A ring-fence is a virtual barrier that segregates a portion of an individual’s or company’s financial assets from the rest. This may be done to reserve money for a specific purpose, to reduce taxes on the individual or company, or to protect the assets from losses incurred by riskier operations.
Detailed explanation-4: -With the ring-fence in place, the retail side of the bank is now sheltered from the full force of the shock. So your access to savings, loans, and your ability to pay with debit and credit cards is protected.