Financial Services Industry

Chapter 1

2 questions

Knowledge | Skills | Conduct

2. Role of the Financial Services Industry
Three core functions
• Investment chain
• Risk
• Payment systems

Knowledge | Skills | Conduct

3. Financial Markets

Equity
Insurance
markets

Bond
Derivatives
markets

Foreign
exchange

Knowledge | Skills | Conduct

3. Foreign Exchange

FX Trading Centres (2016)

Others
23% UK
Hong Kong 37%
6%

Singapore USA
7% 19%
Japan
8%

Source: Bank for International Settlements

Knowledge | Skills | Conduct

4. Industry Participants
Investment banks
• Finance-rising
• Trading and broking
• Treasury dealing
• Investment management

Custodian banks
• Safekeeping
• Settlement
• Cash management
• Asset servicing
• Foreign exchange
• Statements and reports

Knowledge | Skills | Conduct

4. Industry Participants
Retail banks
• Deposit taking and lending
• Payment and money transfer
• Branch network

Saving institutions
• Mutual
- Credit Union (North America)
- Building Society (UK/Australia)
- Cajas (Spain)

Insurance companies
• Protection

Knowledge | Skills | Conduct

4. Industry Participants
Retirement schemes
• Final salary
• Defined contribution schemes

Fund managers
• Institutional
• Private client
• Hedge funds

Stockbrokers
• Execution
• Advise

Knowledge | Skills | Conduct

4. Industry Participants
Private banks
• HNWI

Sovereign wealth funds (SWFs)

• State-owned investment fund
• Balance of payment surplus

Trade bodies
• ICMA
• ISDA

Third-party administrators
• Outsourcing

Knowledge | Skills | Conduct

4. Industry Participants
Peer-to-Peer/Crowdfunding
• Cutting out the ‘traditional’ middleman
• Interest not always paid from time of deposit
• Immediate withdrawals are not always possible
• Risk vs. Reward

Knowledge | Skills | Conduct