DipFS Unit 3 key terms

Key terms from Topic 6

Bank liquidity

The amount of cash banks are required to hold in relation to the amount they
have in customer deposits.

Bank rate

The interest rate that the Bank of England uses when it lends money to other
banks. Financial services providers take account of the Bank rate when they
decide how to set interest rates on their own products.

Commodity

Goods that share the same characteristics wherever they are produced and
whoever produces them unlike a manufactured product, where different
manufacturers can add specific features. Examples include raw materials such
as iron ore, gold and silver, or agricultural produce such as wheat and rice.

Corporate bond

A product that companies can use to borrow money over periods of five years
or more. The company offers a number of bonds for sale; buyers can then sell
the bonds on to other investors if they wish. A key difference between bonds
and shares is that bondholders do not own a share in the company.

Corporate social
responsibility

Any action or project in which a company goes beyond the interests of its
shareholders and senior management in order to benefit other stakeholder
groups, normally with either a social or an environmental purpose. Also
known as citizenship or sustainable responsible business.

Creditor

Person or organisation to which a debtor owes money.

Debtor

A person who owes money.

Emerging market

A nation in the process of rapid economic growth and involvement in

international trade.

Ethical brand

A brand that emphasises issues such as its sustainable, socially responsible

approach to production and marketing this might include limiting the impact
on the environment or not exploiting workers. In financial services terms it
can mean a product that is not targeted at unsuitable customers.

European
Commission

The executive body of the European Union responsible for proposing

legislation, implementing decisions, upholding the Unions treaties and dayto-day running of the EU.

Exchange rates

The price of one currency in terms of another; eg it enables people to

calculate how many US dollars can be purchased with one pound sterling.

Gilts

A bond issued by the UK government it is a way for the government to

borrow money. Most gilts are issued with a redemption date, ie the date at
which the government agrees to buy them back. Between their issue and the
redemption date the gilts can be traded.

Global warming

A gradual increase in the overall temperature of the earths atmosphere,

thought to be caused by humans.

Globalisation

The integration of economies, industries, markets, cultures and policy-making

around the world.

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DipFS Unit 3 key terms

Gross domestic
product

The total value of goods produced and services provided in a country during
one year.

Inflation

A general rise in prices, which means that the purchasing power of money
falls.

Interest rates

The amount, expressed as a percentage, that a financial services provider

charges a borrower when it lends money, or pays to a saver.

International
Monetary Fund

An international body of 188 countries that aims to promote international cooperation on exchange rates and other economic matters.

Monetary Policy
Committee

The Bank of England committee responsible for keeping inflation under

control by the manipulation of interest rates.

Offshoring

The practice of moving some of a companys operational functions to

overseas locations.

Outsourcing

The process of one provider paying another to carry out certain functions that
it would normally do itself.

Productivity

How much is produced for a given effort or amount of input. For example,
productivity increases if one worker produces 10% more goods in a week.

Project Merlin

The project that resulted in an agreement between the government and the
main banks to pay lower bonuses to their employees and make more money
available for business loans.

Protectionism

Government policies designed to protect its own countrys businesses and

workforce. For example, imposing taxes on goods made overseas might mean
that goods produced in the home country are less expensive and so
consumers will be encouraged to buy home-produced goods rather than
imported ones.

Public sector debt

The amount the government has to borrow to bridge the gap between the
income it receives (eg from taxation) and the amount it spends (eg on services
such as the NHS).

Recession

A period of at least six months in which the amount of goods and services the
country is producing is shrinking.

Reshoring

The term given to bringing back functions that were once offshored.

Sub-prime
mortgage

A type of mortgage that is normally taken out by those with low credit ratings
and is therefore more likely than the average mortgage not to be repaid.

Too big to fail

A phrase used frequently during the 2008 financial crisis. It expresses the
idea that the consequences of one or more of the big banks failing would be
so economically disastrous that no government could allow it to happen.

Toxic debt

Debt that has a low chance of being repaid with interest.

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