Definitions
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Answer
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Responsible for managing the monetary system in an economy.
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A Central Bank
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Refers to actions taken by the government to manipulate interest rates, the supply of money, and the exchange rate to achieve its macroeconomic objectives.
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Monetary Policy
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A group of nine experts in monetary issues who meet monthly to make a decision of the UK's bank rate.
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The Monetary Policy Committee (MPC)
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An organisation with 188 member countries that aims to encourage global monetary cooperation, secure financial stability and promote international trade.
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The International Monetary Fund
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Actions undertaken by central banks to provide or withdraw liquidity from one or more commercial banks.
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Open Market Operations
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Comprises the banknotes in circulation along with the balances or reserves held by commercial bank and building societies at the Bank of England.
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Central Bank Money
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Debt issued by the Bank of England on behalf of the UK government. These normally receive a fixed interest payment and have a lifespan in excess of one year.
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Government Bonds
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A sale and repurchase transaction of a financial asset between one or more commercial banks and the Bank of England.
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A Repo
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A form of monetary policy where a central bank creates new money electronically to buy financial assets.
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Quantitative Easing (QE)
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The process through which the Bank of England intervenes to manage the failure of a financial institution.
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Resolution
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The organisation responsible for the regulation and supervision of financial institutions in the UK.
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The Prudential Regulation Authority
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Operates to mitigate systemic risk.
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Macroprudential Regulation
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The finance raised through issuing shares and retaining earnings from previous trading periods.
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Capital
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The creation and sale of financial products, such as bonds, backed by the income generated by an asset, such as mortgages or car loans.
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Securitisation
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Exists whenever either the seller or buyer of a product has more information than the other party to the transaction.
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Asymmetric Information
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Comprises a bank's common equity and its disclosed retained profit.
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Core Tier One Capital
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The amount of profit kept by the bank and not paid out to shareholders in the form of dividends.
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Retained Profit
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A financial institution whose distress or failure would cause significant disruption to the international financial system and global economic activity.
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A Global Systemically Important Bank (G-SIB)
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Exists when one person or organisation takes greater risks because third parties carry the burden of those risks.
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Moral Hazard
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Refers to that part of the economy concerned with producing goods and services.
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The Real Economy
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