Bank of England by Karen https://padlet.com/karen_mcwalter/plcq0iu5vtn8 4.4 Financial Markets en-us 2016-06-14 15:48:16 UTC 2016-06-30 19:02:19 UTC hello@padlet.com Team 1 karen_mcwalter https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114626700 www.bankofengland.co.uk/education/Documents/resources/financialsystem/yourmoney.pdf

Team 1 are to use Your Money and the Financial System to
analyse the importance of a stable financial system:
a What was the ratio between the volume of British bank lending and the size of
the UK economy in 2007?
b Cross-price elasticity of demand - What effect did low interest rates have on
demand for risky investments?
c What are the three roles of a healthy and stable financial system?
d What does a bank use it’s capital for?
e What does a bank use it’s liquid assets for?
f The importance of Capital – what may happen if borrowers can’t afford loan
repayments?
g The importance of liquidity – what may happen if a bank runs short of cash?
h What is the difference between the roles of the Financial Policy Committee and
the Monetary Policy Committee?]]> 2016-06-14 15:49:31 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114626700 Team 2 karen_mcwalter https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114626761 www.bankofengland.co.uk/education/Documents/resources/financialsystem/yourmoney.pdf

Team 2 are to use Your Money and the Financial System to discover
how the 2008 crisis changed financial regulation in the UK:
a During the 2008 crisis, who was responsible for regulation of the UK financial
system as a whole?
b What is the role of the Special Resolution Unit formed in 2009?
c What three authorities were added in 2013?
d What is the purpose of a Direction issued by the FPC?
e What must the PRA or FCA do if they decide not to comply with a comply-orexplain
Recommendation?
f How many firms does the PRA oversee, and on whose behalf does it do so?
g If a bank looks likely to fail, what will the PRA do?
h Lender of the last Resort - What is the purpose of ‘liquidity insurance’ loans for
commercial banks? What security must the banks provide, and what will they
pay for the loan?]]> 2016-06-14 15:50:11 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114626761 Team 3 karen_mcwalter https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114626812 www.bankofengland.co.uk/education/Pages/resources/games/storms.aspx

Team 3 are to use the Interactive Timeline to discover:
a Why the Bank was founded in 1694?
b What happened to inflation and economic growth in Britain during World Wars
1 and 2?
c 3 examples of the Bank stepping in to help avoid financial crises – one from the
period 1700-1799, one from 1800-1899 and one from 1900-1999.
d For each of these crises, why did the Bank intervene?
e What would have happened if it had not done so?
f 2007 – how did the Bank intervene with Northern Rock?
g 2008 – what was the Bank’s covert action with HBOS and RBS, and how was
this help repaid in 2009?
h Following the emergency Special Resolution Unit in 2009, what followed in 2013?]]> 2016-06-14 15:50:43 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114626812 Bonus Point karen_mcwalter https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114627084 A bonus point to anyone who can find out where Adam Smith
first applied his famous theory of Specialisation and Division of
Labour]]> 2016-06-14 15:52:57 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114627084 Team 1 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114700977  A) By 2007 lending by British banks had grown to five times the size of the UK economy. 5:1

B)
Economic conditions with low interest rates led to investors to search for higher returns on riskier investments, like mortgage lending to the rapidly-growing US housing markets.
BOOST DEMAND

G)

If banks unexpectedly run short of cash and liquid assets, the bank of England is able to lend money on a temporary basis to preserve the stability of the financial system. 
 No cash back from loans and deposits.]]> 2016-06-15 09:04:24 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114700977 a) Bank of England:  England had no choice but to build a powerful navy. No public funds were available, and the credit of William III's government was so low in London that it was impossible for it to borrow the £1,200,000, that the government wanted. To induce subscription to the loan, the subscribers were to be incorporated by the name of the Governor and Company of the Bank of England. https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701012 2016-06-15 09:04:41 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701012 Team 1 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701214 E) A bank's liquid assets include the cash in its tills, it's deposits at the BoE and holdings of safe assets. They hold the liquid assets to meet the withdrawals by depositors and investors]]> 2016-06-15 09:07:01 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701214 Team 1 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701245 C) A healthy and stable financial system provides three key services to the economy which are that it makes payments from one person or business to another, also, it supplies finance to businesses and households. It also allows us to ensure against risk. 

D) A bank uses its capital and liabilities to make loans to households, businesses and other banks. These loans are recorded on the balance sheet as a bank’s assets. Any money not lent out by a bank is held as liquid assets like cash.]]> 2016-06-15 09:07:27 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701245 b) During the first World War, although indirect taxes raised some money, the government turned to direct taxes - on property and income - on a far greater scale. In 1913, income tax was only paid by 2% of the population. During the war, another 2.4 million people would end up being eligible so by 1918, 8% were paying income tax. This limited economic growth. Also, the Bank of England was able to increase availability of money by printing it, even though this eventually lead to inflation. Thus, there was low economic growth. https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701388
By the third quarter of 1940 the volume of British exports was down 37% compared to 1935. Although the British Government had committed itself to nearly $10,000 million of orders from America, Britain's gold and dollar reserves were near exhaustion. After World War II, the British economy had again lost huge amounts of absolute wealth. Its economy was driven entirely for the needs of war and took some time to be reorganised for peaceful production. Thus, inflation was high.
]]> 2016-06-15 09:09:09 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701388 Team 3  karenhj https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701426 2016-06-15 09:09:32 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701426 Team 2 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701727 A) No one did. Until 2013 the Prudential Regulation Authority was responsible for the regulation of the UK financial system.
B) The Special Resolution Unit formed in 2009 was created at the Bank of England to manage the failure of troubled banks to protect other parts of the financial system.
C) A package of major reforms were created in 2013, the independent Financial Policy Committee  at the Bank of England and two new financial regulators: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
D) The purpose of a Direction issued by the FPC to the Prudential Regulation Authority is to make banks, building societies and large investment firms:
- raise or lower the total amount of capital on their balance sheets;
- adjust the amount of capital for unexpected losses on specific types of loans for e.g. the property market.
E) The FCS can make a recommendation to anyone, they are required to explain publicly their reasons for not doing so. 
F) The PRA oversea 1,700 firms - banks, building societies, credit unions, insurers and major investment firms. The PRA is a subsidiary of the Bank of England.
G) If the bank is likely to fail, and the worst happens, the PRA works with the Bank of England's Special Resolution Unit to ensure that a bank can fail without disrupting the supply of key financial services and avoid moral hazard.
H) If a bank has run short of cash and liquid assets they can get a temporary loan from the bank of England which allows it to pay all of the withdrawals by its depositors and investors.


]]> 2016-06-15 09:12:49 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701727 Team 3 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701762 g) The Bank of England lent more than £60 billion to HBOS and RBS as they were on the brink of failure. They also  acquired shares to ensure solvency and viability. In early 2009 the emergency loans provided were fully repaid back to the Bank of England

h) In 2013, major reforms followed which created a Financial Policy Committee at the Bank that was designed to keep risks in check across the financial system. There were also 2 new financial regulators that were created, these were: The Prudential Regulation Authority and the Financial Conduct Authority.]]> 2016-06-15 09:13:09 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114701762 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114702085 f) Capital includes shareholders money and reserved profits from the past. It is important because if borrowers can't afford loan repayments capital can act as a shock absorber to pay for the unexpected losses it makes on risky loans]]> 2016-06-15 09:15:41 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114702085 karenhj https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114702407 c)   In 1797, the bank intervened in this financial crises because the banks reserves of gold decreased so they were unable to make payments in gold so they had to increase the use of paper currency.

BANK OF ENGLAND SUSPENDS PAYMENTS IN GOLD

bank charter act -finally freed-up the ability for many new Joint Stock basis Companies to be formed without the need for Royal Charter. These boomed initially outside London then in and around London itself. 

last private bank notes are issued 


]]> 2016-06-15 09:17:54 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114702407 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114702998
H) MPC's roles include: Setting inflation target, interest rates, exchange rates and controlling money supply.

FPC's roles include:
Provide direction for the PRA & FCA,
Recommendations to anyone e.g. HM treasury, make a comply and Explain recommendations to PRA & FCA,
(Spot and fix financial threats to the financial system as a whole)

]]> 2016-06-15 09:23:18 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114702998 Team 3 https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114703153 e) In 1797, the bank intervened in this financial crises because the banks reserves of gold decreased so they were unable to make payments in gold so they had to increase the use of paper currency.




]]> 2016-06-15 09:24:24 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114703153 ww1 economy contructed and had high inflation  karenhj https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114705280 2016-06-15 09:47:46 UTC https://padlet.com/karen_mcwalter/plcq0iu5vtn8/wish/114705280