UNIT III

THE UK FINANCIAL SYSTEM AND FINANCIAL INTERMEDIARIES

After studying this unit you should be able to:

• Understand the the role of financial system in the economy.

• Explain the key terms related to banking and finance.

• Identify the key components of the financial system.

• Recognize the role of financial intermediaries.

BEFOFE YOU READ

Discuss the following questions.

1. What do you know about the financial system of the uk?

2. Does it differ from that of other European countries?

Text A

The financial system is central to the functioning of the economy and modern life. The system handles millions of regular transactions - spending in the shops, paying bills, wages and savings - every day. Financial institutions, such as banks, manage vast sums of money on behalf of individuals and businesses. Financial markets facilitate trade across the world on a minute-by-minute basis - everything from company shares and commodities like oil, to complex financial instruments and, of course, money itself. And large IT systems facilitate payments between financial institutions, companies and individuals.

One of the main purposes of the financial system is to bring together savers and investors, and so put money to work. One person's savings are the finance for another person's investment - for example, household savings are invested by pension funds in shares issued by companies to expand their business.

For the financial system to function properly, people need to have confidence that it is safe and stable. The Bank of England's aim is to contribute to maintaining financial stability in the UK as an essential ingredient for a healthy and successful economy.

The UK financial system comprises the economic activities of the banks, investment firms, insurance companies and brokers, and other financial institutions in the domestic and international markets. Management and oversight of this system are provided primarily by HM Treasury, Bank of England (BoE), and Financial Services Authority (FSA).

The Treasury is responsible for the overall financial system regulation and legislation. It provides accountings and advice to Parliament for the management of serious problems in the financial system and any measures used to resolve them. In addition, HM Treasury sells government debt through the sale of gilts, Treasury bills and bonds.

The BoE is responsible for the stability of the financial and monetary systems. As the central bank, BoE stands at the heart of the payments system and has a broad overview of the system as a whole. It acts in the markets to deal with fluctuations in liquidity as part of its monetary policy and sets the bank lending rate. Previously, BoE was responsible for selling the government debt to the private sector.

Each year the Chancellor of the Exchequer sets an overall inflation target for the economy and BoE determines interest rates to meet that target, i.e. the rate at which it lends to banks and other financial institutions. Higher rates tend to decrease spending and lower inflation; whereas lower rates increase spending and raise inflation pressures. BoE has a difficult course to manage the economic impact of any changes, however minor, to interest rates.

The BoE also oversees the financial system infrastructure, including payments systems whether based in the UK or abroad. It advises the Chancellor on any major problem arising in these systems. It is also a key player in developing and improving the infrastructure and strengthening the financial system to help reduce systemic risk. BoE advises on the impacts to UK financial stability of developments in the domestic and international markets as well as assesses the impact of events in the financial sector on the monetary system.

The FSA authorizes and supervises banks, investment firms, insurance companies and brokers, and other financial entities. It is responsible for the supervision of financial markets, securities listings and of clearing and settlement systems. The FSA conducts operations in response to problem cases affecting firms, markets and clearing and settlements systems within its responsibilities. It also regulates policy in these areas and advises on the regulatory implications of developments and initiatives in both domestic and international markets.

The Treasury regulates the financial system, the BoE maintains the stability of the financial and monetary systems, and the FSA oversees the many financial institutions. Together these institutions act as Parliament’s watchdogs as well as inform and advise HM Government to establish policy and regulate the financial systems.

Ex.1. Find in the text English equivalents to the following words and word combinations.

Здійснювати мільйони постійних ділових операцій; великі суми грошей; від імені фізичних осіб та підприємств; сировина; допомагати здійсненню платежів; розширювати підприємство; підтримувати фінансову стабільність; внутрішній та міжнародні ринки; надавати дорадчі послуги та вести рахунки; позичкова ставка; планові показники інфляції; оцінювати вплив на монетарну (грошову) систему; давати дозвіл та контролювати діяльність банків; система безготівкових форм оплати через банк; у межах повноважень; підтримувати стабільність фінансової та грошової системи; здійснювати нагляд за фінансовими установами.

Ex.2. Understanding details

Mark the sentences T (true) or F (false) according to the information in the text. Find and read out the part of the text, which gives the correct information.

1. The role of the financial system is limited to the operations on the money market.

2. One of the main tasks of the financial system is to work as an intermediary between savers and borrowers.

3. HM Treasury is the department responsible for formulating and implementing the UK Government's financial and economic policy.

4. The Chancellor of the Exchequer sets interest rates an overall inflation target for the economy.

5. The BoE has purposes and objectives similar to the other central banks.

6. One of the key objectives of the FSA is to promote efficient, orderly and fair financial markets.

7. HM Treasury, the Bank of England, and the Financial Services Authority work separately to ensure the smooth, efficient and effective running of the UK's financial sector.

Ex. 3. Complete the following sentences using your own words:

1. One of the main purposes of the financial system is …

2. The main components of the financial system of the UK are …

3. For the financial system to function properly …

4. The HMTreasury is responsible for …

5. The role of the Bank of England in the financial system of theUK is …

6. The responcibilities of the FSA are …

Ex. 4. Answer the following questions in your own words.

1. What is the role of the financial system in the economy?

2. What are the main components of the system?

3. What is the purpose of the financial system?

4. Who provides management and supervision of the system?

5. What are the responsibilities of the HM Treasury, the Bank of England and FSA?

Ex.5. Task 1. Read the following passage, translate the terms related to finance into Ukrainian and try to remember them.

Key Components of the Financial System

The purpose of this excerpt is to provide you with the terms you need to understand the modern financial system. First, you should be familiar with the three major components of the financial system of the United Kingdom

1. Financial assets.

2. Financial institutions.

3. The Bank of England and other financial regulators.

Here we stop at the concept of financial assets.

Financial Assets

An asset is anything of value owned by a person or a firm. A financial asset is a financial claim, which means that if you own a financial asset, you have a claim on someone else to pay you money. For instance, a bank current account is a financial asset because it represents a claim you have against a bank to pay you an amount of money equal to the money value of your account. Economists divide financial assets into those that are securities and those that aren’t. A security is tradable, which means that it can be bought and sold in a financial market. Financial markets are places or channels for buying and selling securities, such as the London Stock Exchange. If you own a share of stock in any company, you own a security because you can sell that share in the stock market. If you have a current account at Abbey National Bank or Barclays Bank, you can’t sell it. So, your checking account is an asset but not a security. There are many financial assets, but the following are five key categories of assets:

1. Money

2. Stocks

3. Bonds

4. Foreign exchange

5. Securitized loans

We now briefly discuss these five key assets.

Money. Although we typically think of “money” as coins and paper currency, even the narrowest government definition of money includes funds in checking accounts. In fact, economists have a very general definition of money: Money is anything that people are willing to accept in payment for goods and services or to pay off debts. The money supply is the total quantity of money in the economy. Money plays an important role in the economy, and there is some debate among economists concerning the best way to measure it.

Stocks. Stocks, also called equities, are financial securities that represent partial ownership of a corporation. As an owner of a share of stock in a corporation, you have a legal claim to a share of the corporation’s assets and to a share of its profits, if there are any. Firms keep some of their profits as retained earnings and pay the remainder to shareholders in the form of dividends.

Bonds. When you buy a bond issued by a corporation or a government, you are lending the corporation or the government a fixed amount of money. The interest rate is the cost of borrowing funds (or the payment for lending funds), usually expressed as a percentage of the amount borrowed.

Foreign Exchange. Many goods and services purchased in a country are produced outside that country. Similarly, many investors buy financial assets issued by foreign governments and firms. To buy foreign goods and services or foreign assets, a domestic business or a domestic investor must first exchange domestic currency for foreign currency. Foreign exchange refers to units of foreign currency. The most important buyers and sellers of foreign exchange are large banks. Banks engage in foreign currency transactions on behalf of investors who want to buy foreign financial assets. Banks also engage in foreign currency transactions on behalf of firms that want to import or export goods and services or to invest in physical assets, such as factories, in foreign countries.

Securitized Loans. If you lack the money to pay the full price of a car or house in cash, you can apply for a loan at a bank. Similarly, if a developer wants to build a new office building or shopping mall, the developer can also take out a loan with a bank. Until about 30 years ago, banks made loans with the intention of making profits by collecting interest payments on a loan until the loan was paid off. It wasn’t possible to sell most loans in financial markets, so loans were financial assets but not securities. Then, markets for many types of loans were created. Loans that banks could sell on financial markets became securities, so the process of converting loans into securities is known as securitization.

Note that what a saver views as a financial asset a borrower views as a financial liability. A financial liability is a financial claim owed by a person or a firm. For example, if you take out a car loan from a bank, the loan is an asset from the viewpoint of the bank because it represents a promise by you to make a certain payment to the bank every month until the loan is paid off. But the loan is a liability to you, the borrower, because you owe the bank the payments specified in the loan.

Task 2. Complete the following sentences using the terms explained in the text and translate the completed sentences into Ukrainian.

1. The company will pay a … of 10cents per share.

2. The firm has … of $18.4 billion.

3. Financial markets reacted positively to the cut in ….

4. Government … are usually considered to be a safe investment.

5. The central bank cut inflatio0n from 12,5% to 10,3% by tightening ….

6. The vehicle is recorded as an … in the company accounts.

7. We need to make sure we have enough money set aside to meet future ….

8. Controls on … limit the amount of money you can take out of the country.

9. Different … are traded daily at the London Stock Exchange.

10. Smaller companies have found it difficult to borrow … to invest in assets.

Ex.6 Read the text, suggest an appropriate title, then prepare a 100- word presentation.

Economists believe there are three key services that the financial system provides to savers and borrowers: risk sharing, liquidity, and information. Financial services firms provide these services in different ways, which makes different financial assets and financial liabilities more or less attractive to individual savers and borrowers.We can look briefly at each of these three key services.

Risk Sharing Risk is the chance that the value of financial assets will change relative to what you expect. One advantage of using the financial system to match individual savers and borrowers is that it allows the sharing of risk. For example, if you buy a share of Any company for £200, that share may be worth £100 or £300 in one year’s time, depending on how profitable the company is. Most individual savers seek a steady return on their assets rather than erratic swings between high and low earnings. One way to improve the chances of a steady return is by holding a portfolio of assets. Although during any particular period one asset or set of assets may perform well and another not so well, overall the returns tend to average out. This splitting of wealth into many assets is known as diversification. The financial system provides risk sharing by allowing savers to hold many assets. The ability of the financial system to provide risk sharing makes savers more willing to buy stocks, bonds, and other financial assets. This willingness, in turn, increases the ability of borrowers to raise funds in the financial system.

Liquidity The second service that the financial system offers savers and borrowers is liquidity, which is the ease with which an asset can be exchanged for money. Savers view the liquidity of financial assets as a benefit. When they need their assets for consumption or investment, they want to be able to sell them easily. More liquid assets can be quickly and easily exchanged for money, while less liquid—or illiquid— assets can be exchanged for money only after a delay or by incurring costs. For instance, if you want to buy groceries or clothes, you can easily do so with bank notesor by using a debit card linked to your current account. Selling your car, however, takes more time because personal property is illiquid. To sell your car, you may incur the costs of advertising or have to accept a relatively low price from a used car dealer. By holding financial claims on a factory—such as stocks or bonds issued by the firm that owns the factory—individual investors have more liquid savings than they would if they owned the machines in the factory. Investors could convert the stocks or bonds into money much more easily than they could convert a specialized machine into money. In general, we can say that assets created by the financial system, such as stocks, bonds, or current accounts, are more liquid than are physical assets, such as cars, machinery, or real estate. Similarly, if you lend £100,000 directly to a small business, you probably can’t resell the loan, so your investment would be illiquid. If, however, you deposit the £100,000 in a bank, which then makes the loan to the business, your deposit is a much more liquid asset than the loan would be. Financial markets and intermediaries help make financial assets more liquid. For instance, investors can easily sell their holdings of government securities and the stocks and bonds of large corporations, making those assets very liquid. As we noted earlier, during the past two decades, the financial system has increased the liquidity of many other assets besides stocks and bonds. The process of securitization has made it possible to buy and sell securities based on loans. As a result, mortgages and other loans have become more desirable assets for savers to hold. Savers are willing to accept lower interest rates on assets with greater liquidity, which reduces the costs of borrowing for many households and firms. One measure of the efficiency of the financial system is the extent to which it can transform illiquid assets into the liquid assets that savers want to buy.

Information A third service of the financial system is the collection and communication of information, or facts about borrowers and expectations of returns on financial assets. Your local bank is a warehouse of information. It collects information on borrowers to forecast their likelihood of repaying loans. Borrowers fill out detailed loan applications, and the bank’s loan officers determine how well each borrower is doing financially. Because the bank specializes in collecting and processing information, its costs for information gathering are lower than yours would be if you tried to gather information on a pool of borrowers. The profits the bank earns on its loans are partly compensation to it for investing in information gathering.

Ex.7. Find synonyms and opposites to the words in the table

	Synonym		Opposite
spending
facilitate
Individual (n)
to expand
properly
confidence
Stable (adj)
confidence
essential
comprise
domestic
To be responsible
To purchase
To lend
To decrease
to establish
Major
To improve
Return (n)

Ex.8. Read the text about HM Treasury and dwell upon its role, aims and main responsibilities.

Her Majesty's Treasury (commonly known as HM Treasury) is the United Kingdom's economics and finance ministry. The Chancellor of the Exchequer is the most senior minister at HM Treasury and acts as the nation’s primary finance minister.

HM Treasury is the department responsible for formulating and implementing the UK Government's financial and economic policy. The Treasury's overall aim is to raise the rate of sustainable growth, and achieve rising prosperity, through creating economic and employment opportunities for all. Financial instability would adversely affect this aim.

The Treasury chairs the Standing Committee on Financial Stability, but it does not have operational responsibility for the FSA or the Bank. The Treasury’s interests in work on financial contingencies include:

• The economic disruption that would arise from financial instability.

• The cost, risk and benefit of a financial support operation involving provision of public capital or liquidity (sometimes termed a "lender of last resort" operation).

• Consideration of whether change in the law or in institutional structures may be appropriate.

• Ensuring the Financial Authorities' work links with Government's wider framework for building resilience and dealing with contingencies.

In a contingency, the Treasury’s main role is to ensure that ministers are kept informed of developments so as to be able to take key decisions without delay.  In addition, the Treasury is responsible for ensuring coherence between measures taken in the financial sector and the operation of public sector continuity arrangements more generally.

HM Treasury has specific responsibility for:

• Liaising with other UK Government Departments and authorities, including the Cabinet Office Briefing Room (COBR) and law enforcement agencies.

• Liaising with the Debt Management Office, particularly on the state of the gilts market.

In 2008, the Treasury had to come to terms with the largest banking crisis for several decades. Liaising with the Debt Management Office, particularly on the state of the gilts Ministers and officials worked through the night on several occasions to nationalise British banks and to protect the fragile economy. Now that the Treasury has emerged from recession, the department is focusing on rebuilding the UK economy and reforming regulation to reduce the chance of another downturn in the future.

Ex. 9 Task1. Read the text about The Financial Services Authority (FSA) and say what are the main functions and responsibilities of the body, dwell upon its main objectives and history of creation.

The Financial Services Authority (FSA) is an independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000.

It regulates the financial services industry in the UK. The FSA receives no government funding – it is funded entirely by the firms it regulates. However, the FSA is accountable to the Treasury and, through them, Parliament.

The history of the FSA began when The Chancellor of the Exchequer announced the reform of financial services regulation in the UK and the creation of a new regulator on 20 May 1997.

The Chancellor announced his decision to merge banking supervision and investment services regulation into the Securities and Investments Board (SIB). The SIB formally changed its name to the Financial Services Authority in October 1997.

The first stage of the reform of financial services regulation was completed in June 1998, when responsibility for banking supervision was transferred to the FSA from the Bank of England. In May 2000 the FSA took over the role of UK Listing Authority from the London Stock Exchange. The Financial Services and Markets Act, which received Royal Assent in June 2000 and was implemented on 1 December 2001, transferred to the FSA the responsibilities of several other organisations:

• Building Societies Commission

• Friendly Societies Commission

• Investment Management Regulatory Organisation

• Personal Investment Authority

• Register of Friendly Societies

• Securities and Futures Authority

In addition, the legislation gives the FSA some new responsibilities – in particular taking action to prevent market abuse.

In October 2004, following a decision by the Treasury, the FSA took on responsibility for mortgage regulation. In January 2005, to implement the Insurance Mediation Directive and in accordance with a Government announcement in 2004 it took on regulation of general insurance business.

In June 2010, the Chancellor announced the government’s intention to replace the FSA as a single financial services regulator with two new successor bodies, and restructure the UK’s financial regulatory framework. The FSA has been given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives given in The Financial Services and Markets Act 2000 (FSMA). They are:

• market confidence – maintaining confidence in the UK financial system;

• financial stability - contributing to the protection and enhancement of stability of the UK financial system

• consumer protection - securing the appropriate degree of protection for consumers; and

• the reduction of financial crime - reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime.

In meeting these, the FSA is also obliged to have regard to the Principles of Good Regulation.

Task 2. Read the information about the Principles of Good Regulation followed by the FSA and match these principles to the steps the organisation makes/takes to meet them. One choice is not given. Make up your own mind what could be done in this area.

PRINCIPLES OF GOOD REGULATION

In discharging its functions under the Financial Services and Markets Act 2000 (FSMA), the FSA is required to have regard to the following additional matters, which it refers to as 'principles of good regulation'.

1. Efficiency and economy

The need to use the resources in the most efficient and economic way.

2. Role of management

The responsibilities of those who manage the affairs of authorised persons.

3. Proportionality

The burdens or restrictions the FSA imposes on the industry should be proportionate to the benefits that are expected to result from those burdens or restrictions.

4. Innovation

The desirability of facilitating innovation in connection with regulated activities.

5. International character

The international character of financial services and markets and the desirability of maintaining the competitive position of the UK.

6. Competition

The need to minimise the adverse effects on competition that may arise from the FSA’s activities and the desirability of facilitating competition between the firms it regulates.

7. Public awareness

The desirability of enhancing the understanding and knowledge of members of the public of financial matters (including the UK financial system).

Actions to be taken

1. A firm’s senior management is responsible for its activities and for ensuring that its business complies with regulatory requirements. This principle is designed to secure an adequate but proportionate level of regulatory intervention by holding senior management responsible for risk management and controls within firms. Accordingly, firms must take reasonable care to make it clear who has what responsibility and to ensure that the affairs of the firm can be adequately monitored and controlled.

2. These two principles cover avoiding unnecessary regulatory barriers to entry or business expansion. Competition and innovation considerations play a key role in our cost-benefit analysis work. Under the Financial Services and Markets Act, the Treasury, the Office of Fair Trading and the Competition Commission all have a role to play in reviewing the impact of the rules and practices on competition.

3. The non-executive committee of the FSA’s board is required, among other things, to oversee its allocation of resources and to report to the Treasury every year. The Treasury is able to commission value-for-money reviews of the FSA’s operations. These are important controls over its efficiency and economy.

4. This involves, for example allowing scope, where appropriate, for different means of compliance so as not to unduly restrict market participants from launching new financial products and services.

5. The FSA takes into account the international aspects of much financial business and the competitive position of the UK. This involves cooperating with overseas regulators, both to agree international standards and to monitor global firms and markets effectively.

6. In making judgements in this area, we take into account the costs to firms and consumers. One of the main techniques the FSA uses is cost-benefit analysis of proposed regulatory requirements. This approach is shown, in particular, in the different regulatory requirements the organisation applies to wholesale and retail markets.

Ex. 10. Match terms to their definitions

Financial market	a)An amount of the profit that a company pays to shareholders.
Liability	b)The process of converting loans and other financial assets that are not tradable into securities.
Commercial bank	c)The total quantity of money in the tconomy.
Foreign Exchange	d)A financial asset such as a share or bond; the certificate that shows you own this.
Securities	e)A thing of value that a person or a company owns, such as money or property or a right to receive payment of a debt.
Asset	f) The activity of buying and selling shares, bonds, currencies etc.; the organized structure for doing this or the place where it happens.
Bond	g) The system of exchanging the money of one country for that of another.
Dividend	h)The amount of money that a company or a person owes.
Financial asset	i) A financial firm that serves as a financial intermediary by taking in deposits and using them to make loans.
Financial institution	j)An asset that is not physically useful but has a financial value, for example money, an investment or a right to claim payments.
Securitization	k)An organization such as a bank that offers financial services, such as accepting deposits, making loans or investing customers’ money.
Money supply	l)An agreement by a government or an organization to pay back the money an investor has lent plus a fix amount of interest on a particular date; a document containing this agreement.

Ex. 11. Case Study.

The teacher of English of International Economics and Management Department asks the students to work as translators and to present the translation of the text “Система регулювання фінансового ринку Великобританії”. The students are asked to be particularly close to the Ukrainian version, translating the pieces of the text, answering the following:

1.	What is the main body regulating the financial services industry in the UK? What are the main functions and responsibilities of the FSA? What is the FSA responsible to? What is the FSA financed by?

Система регулювання фінансового ринку Великобританії

Регулювання всіх сегментів фінансового ринку Великобританії покладено на спеціальний орган – Відомство з фінансових послуг (Financial Services Authority, FSA), яке де-факто існує з кінця 1990-х років. Раніше регулювання здійснювали різні організації від Банку Англії до саморегульованих організацій. У кінці минулого десятиліття У Великій Британії почалася реформа системи регулювання, в результаті якої сформувався теперішній мегарегулятор. Нормативною базою діяльності FSA є Закон про фінансові послуги та ринки 2000 року (Financial Services and Markets Act 2000). Законом перед Відомством поставлені наступні основні завдання:

• Підтримувати довіру до фінансової системи Великобританії;

• Сприяти кращому розумінню фінансової системи населенням;

• Забезпечити належний рівень безпеки для інвесторів;

• Зменшити можливі злочини у фінансовій сфері.

Ці завдання вирішуються шляхом ліцензування (authorisation) учасників фінансових ринків (компаній та фізичних осіб); запровадження та доримання нормативів, які забезпечують економічну безпеку (достатня капіталізація, структура активів та пасивів), контролю та постійного моніторингу їх діяльності на ринку; підтримання бази даних про ліцензовані установи; формування інвесторів про потенційно доступні механізми інвестування; створення механізмів компенсації для інвесторів та забезпечення роботи системи контролю за діючим законодавством, включаючи механізми впливу на порушників.

FSA є статутним (statutory) органом регулювання, тобто таким, що виник на підставі закону,(не урядовим– non-governmental). Відомство є підзвітним парламенту через Міністерство фінансів. Голова та члени правління Відомства призначаються Міністерством фінансів (при цьому Міністерство не втручається у справи Відомства, яке є абсолютно самостійним органом). Англія, таким чином, відійшла від моделі саморегулювання фондового ринку яка була характерна для неї аж до кінця минулого десятиліття. Відомство фактично є державним органом регулювання, хоча формально частково зберегло ознаки саморегульованої організації. Відомство не має бюджетного фінансування, а фінансується фінансовими установами, які воно контролює, за рахунок відрахувань з прибутку. Загальна кількість співробітників у 2009 році складала приблизно 2300 осіб.

Ex.12. The teacher asks the group of students to prepare a round-table discussion on the topic “The structure of the financial system of Great Britain”. Dwell upon past and recent developments in its history and the role of the bodies that manage and supervise the system. Use not only information of the unit but also that provided by the official sites of the Bank of England, HM Treasury and the FSA.

EX.13. Summarize the following text in 100 words.

Особливості фінансової системи Великобританії.

Хоча фінансову систему Великобритінії за типом відносять до таких, що «засновані на ринку цінних паперів» (market-based), за співвідношенням «активи банків/ВВП» вона перевершує Німеччину та Японію – країни з банківськими фінансовими системами. Причиною цього є те, що в Лондоні знаходяться 254 іноземних банки (більше ніж будь де у світі), на долю яких припадало у 2009 році 58% банківських активів. Діяльність іноземних банків у Лондоні пов’язана в основному з міжнародними операціями, а не з кредитуванням англійських позичальників.

У залежності від напрямку діяльності банки Великобританії поділяються на комерційні та інвестиційні. Хоча , найбільші англійські банки можна назвати універсальними, оскільки вони утворюють групи, у складі яких є організації, що працюють в усіх сегментах ринку. Часи, коли англійські банки спеціалізувались лише на класичних банківських операціях, залишились далеко у минулому. Разом з тим слід підкреслити, що робота з цінними паперами та деривативами здійснюється не безпосередньо комерційним банком, який входить у ту чи іншу банківську групу, а його дочірнім підрозділом (інвестиційним, тими, що керують активами та надають брокерські послуги).

Дуже важливою групою фінансових установ у Великобританії є страхові компанії, пенсійні фонди та інститути колективного інвестування. Страховий сектор Великобританії – найбільший у Европі та третій у світі після США та японії.

Серед інститутів колективного інвестування (інвестиційних фондів) переважають пайові фонди (unit trusts) та інвестиційні компанії відкритого типу (open-end investment companies), які з’явилися за останні десять років.

Галузь вирізняється відносно високим рівнем концентрації: на долю десяти основних гравців припадає половина всіх активів, які знаходяться у управлінні. Найкрупнішими учасниками є Barclays та Global Investors, які управляють 1,6 трлн.дол. активів.

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