Other Financial Institutions in the Financial Sector

The video tutorial explores various financial institutions within the financial sector, including banks, insurance companies, hedge funds, pension funds, crowdfunding platforms, building societies, private equity firms, and the shadow banking sector. It highlights the roles and functions of these institutions, discusses the PPI scandal, and explains the concept of portfolio balancing. The shadow banking sector is examined in detail, emphasizing its risks and impact on the 2008 financial crisis. The tutorial concludes with a summary of the key points discussed.

What is the primary function of insurance companies in the financial sector?

• To provide loans to individuals

• To offer protection against potential losses

• To regulate financial markets

• To manage investment portfolios

What was the main issue with Payment Protection Insurance (PPI) during the financial crisis?

• Individuals were pressured into buying it unnecessarily

• It was mandatory for all loans

• It was too expensive for most people

• It provided inadequate coverage

How do hedge funds aim to generate returns?

• By focusing on one sector

• By investing in a single asset

• By avoiding high-risk investments

• By balancing a diverse portfolio

What is the role of pension funds in the financial sector?

• To generate retirement income

• To manage government bonds

• To provide short-term loans

• To insure against business losses

What is a key characteristic of a building society?

• Depositors become shareholders

• It is a type of insurance company

• It focuses on international investments

• It operates like a hedge fund

What is the main goal of private equity firms?

• To provide short-term loans

• To dilute private equity by investing large sums

• To invest in public equity markets

• To insure against financial losses

What distinguishes the shadow banking sector from traditional banks?

• It operates without a banking license

• It is heavily regulated

• It focuses on retail banking

• It only deals with government bonds

What is a major risk associated with the shadow banking sector?

• Strict regulatory compliance

• Low credit risk

• High liquidity and solvency risks

• High levels of government intervention

How does the broad measure of the shadow banking sector differ from the narrow measure?

• It focuses only on developed countries

• It excludes China

• It is more accurate

• It includes a wider range of countries

What impact did the shadow banking sector have on the 2008 financial crisis?

• It exacerbated the crisis

• It had no impact

• It mitigated the crisis

• It provided stability