1. What is the primary purpose of financial regulation? Answer: To protect
consumers, maintain market integrity, promote competition, and ensure
financial stability while preventing systemic risk.
2. Which international body sets standards for banking supervision?
Answer: The Basel Committee on Banking Supervision (BCBS).
3. What does MiFID II stand for? Answer: Markets in Financial Instruments
Directive II - EU legislation governing investment services and activities.
4. What is the role of IOSCO? Answer: International Organization of
Securities Commissions - sets international standards for securities regulation
and promotes cooperation between securities regulators.
5. What are the three pillars of Basel III? Answer: Pillar 1 (Minimum Capital
Requirements), Pillar 2 (Supervisory Review Process), and Pillar 3 (Market
Discipline/Disclosure).
6. What is the purpose of the Senior Managers and Certification Regime
(SM&CR)? Answer: To ensure clear accountability and responsibility at senior
levels in financial firms, improve conduct standards, and reduce harm to
consumers and markets.
7. What does GDPR stand for and when did it come into effect? Answer:
General Data Protection Regulation, which came into effect on May 25, 2018.
8. What is the principle of proportionality in regulation? Answer:
Regulatory requirements should be proportionate to the risks posed by different
firms and activities, with larger, more complex firms subject to more stringent
requirements.
9. What is a Systematic Internaliser (SI) under MiFID II? Answer: An
investment firm that deals on its own account when executing client orders
outside a regulated market or MTF on an organized, frequent, systematic basis.
10. What is the purpose of the Financial Action Task Force (FATF)?
Answer: To set international standards and promote effective implementation of
,legal, regulatory, and operational measures for combating money laundering
and terrorist financing.
11. What are the four key outcomes the FCA aims to achieve? Answer:
Consumers get a fair deal, markets work well, firms take responsibility, and the
financial system serves the wider economy.
12. What is the difference between principles-based and rules-based
regulation? Answer: Principles-based regulation provides broad guidelines and
outcomes, allowing flexibility in implementation, while rules-based regulation
provides specific, detailed requirements with less interpretive flexibility.
13. What is regulatory capture? Answer: When a regulatory agency becomes
dominated by the interests of the industry it is supposed to regulate, rather than
serving the public interest.
14. What does CRD V stand for? Answer: Capital Requirements Directive V -
EU legislation implementing Basel III requirements for banks and investment
firms.
15. What is the purpose of stress testing in financial regulation? Answer: To
assess how financial institutions would perform under adverse economic
scenarios and ensure they maintain adequate capital buffers.
16. What is the European Banking Authority (EBA)? Answer: An
independent EU authority that works to ensure effective and consistent
prudential regulation and supervision across the European banking sector.
17. What is the role of ESMA? Answer: European Securities and Markets
Authority - develops technical standards, ensures consistent application of EU
law, and supervises specific financial entities.
18. What is regulatory arbitrage? Answer: The practice of taking advantage
of differences in regulatory regimes by conducting business in jurisdictions with
more favorable regulations.
19. What are the main types of financial services regulation? Answer:
Prudential regulation (safety and soundness), conduct regulation (protecting
consumers), and market regulation (ensuring fair and efficient markets).
20. What is the purpose of the Central Securities Depositories Regulation
(CSDR)? Answer: To harmonize rules for central securities depositories
(CSDs) across the EU and improve the safety and efficiency of securities
settlement.
,21. What is a competent authority in financial services? Answer: The
national regulatory body responsible for supervising and regulating financial
services firms within a specific jurisdiction.
22. What is the passporting regime under EU financial services legislation?
Answer: The ability for authorized firms in one EU member state to provide
services in other member states without requiring separate authorization.
23. What is the difference between authorization and registration? Answer:
Authorization is formal permission to conduct regulated activities with ongoing
supervision, while registration is typically a simpler notification process with
fewer ongoing requirements.
24. What is the role of the Financial Stability Board (FSB)? Answer: To
coordinate at the international level the work of national financial authorities
and international standard-setting bodies to develop effective regulatory,
supervisory, and other financial sector policies.
25. What are the main pillars of consumer protection in financial services?
Answer: Information disclosure, suitability/appropriateness assessments,
complaints handling, and redress mechanisms.
26. What is the purpose of the Insurance Distribution Directive (IDD)?
Answer: To harmonize rules for insurance and reinsurance distribution across
the EU and enhance consumer protection.
27. What is a regulatory sandbox? Answer: A framework that allows fintech
startups and other innovators to test their products, services, and business
models in a live environment with relaxed regulatory requirements.
28. What is the difference between hard law and soft law in financial
regulation? Answer: Hard law consists of legally binding rules and regulations,
while soft law includes guidelines, recommendations, and best practices that are
not legally enforceable.
29. What is the role of the Committee of European Banking Supervisors
(CEBS)? Answer: CEBS was replaced by the EBA in 2011, but previously
advised the European Commission on policy and promoted supervisory
convergence.
30. What is the purpose of the Market Abuse Regulation (MAR)? Answer:
To prevent insider dealing, unlawful disclosure of inside information, and
market manipulation across EU financial markets.
, 31. What are the three lines of defense in risk management? Answer: First
line (business operations), second line (risk management and compliance), and
third line (internal audit).
32. What is the difference between a directive and a regulation in EU law?
Answer: A regulation is directly applicable in all member states, while a
directive requires transposition into national law by each member state.
33. What is the purpose of the Benchmark Regulation (BMR)? Answer: To
restore confidence in benchmarks by improving their governance and controls,
and ensuring they are robust and reliable.
34. What is extraterritorial jurisdiction in financial regulation? Answer:
The application of a country's laws and regulations to activities or entities
outside its territorial boundaries.
35. What is the role of the European Systemic Risk Board (ESRB)?
Answer: To identify and assess systemic risks to financial stability in the EU
and issue warnings and recommendations.
36. What is regulatory equivalence? Answer: Recognition by one jurisdiction
that another jurisdiction's regulatory regime achieves similar outcomes,
allowing for mutual recognition of regulations.
37. What is the purpose of the Settlement Finality Directive (SFD)? Answer:
To reduce systemic risk in payment and securities settlement systems by
ensuring the finality of payments and transfers.
38. What is the difference between conduct regulation and prudential
regulation? Answer: Conduct regulation focuses on how firms treat customers
and market integrity, while prudential regulation focuses on the safety and
soundness of individual firms and the financial system.
39. What is the role of the Joint Committee of the ESAs? Answer: To ensure
consistent regulation across the banking, insurance, and securities sectors and
address issues that span multiple sectors.
40. What is the purpose of the Solvency II Directive? Answer: To harmonize
insurance regulation across the EU, ensuring insurers hold adequate capital and
manage risks effectively.
41. What is regulatory perimeter? Answer: The boundaries that define which
activities, products, and entities fall within the scope of financial regulation.
42. What is the difference between authorization and notification? Answer:
Authorization requires formal approval from regulators before commencing
consumers, maintain market integrity, promote competition, and ensure
financial stability while preventing systemic risk.
2. Which international body sets standards for banking supervision?
Answer: The Basel Committee on Banking Supervision (BCBS).
3. What does MiFID II stand for? Answer: Markets in Financial Instruments
Directive II - EU legislation governing investment services and activities.
4. What is the role of IOSCO? Answer: International Organization of
Securities Commissions - sets international standards for securities regulation
and promotes cooperation between securities regulators.
5. What are the three pillars of Basel III? Answer: Pillar 1 (Minimum Capital
Requirements), Pillar 2 (Supervisory Review Process), and Pillar 3 (Market
Discipline/Disclosure).
6. What is the purpose of the Senior Managers and Certification Regime
(SM&CR)? Answer: To ensure clear accountability and responsibility at senior
levels in financial firms, improve conduct standards, and reduce harm to
consumers and markets.
7. What does GDPR stand for and when did it come into effect? Answer:
General Data Protection Regulation, which came into effect on May 25, 2018.
8. What is the principle of proportionality in regulation? Answer:
Regulatory requirements should be proportionate to the risks posed by different
firms and activities, with larger, more complex firms subject to more stringent
requirements.
9. What is a Systematic Internaliser (SI) under MiFID II? Answer: An
investment firm that deals on its own account when executing client orders
outside a regulated market or MTF on an organized, frequent, systematic basis.
10. What is the purpose of the Financial Action Task Force (FATF)?
Answer: To set international standards and promote effective implementation of
,legal, regulatory, and operational measures for combating money laundering
and terrorist financing.
11. What are the four key outcomes the FCA aims to achieve? Answer:
Consumers get a fair deal, markets work well, firms take responsibility, and the
financial system serves the wider economy.
12. What is the difference between principles-based and rules-based
regulation? Answer: Principles-based regulation provides broad guidelines and
outcomes, allowing flexibility in implementation, while rules-based regulation
provides specific, detailed requirements with less interpretive flexibility.
13. What is regulatory capture? Answer: When a regulatory agency becomes
dominated by the interests of the industry it is supposed to regulate, rather than
serving the public interest.
14. What does CRD V stand for? Answer: Capital Requirements Directive V -
EU legislation implementing Basel III requirements for banks and investment
firms.
15. What is the purpose of stress testing in financial regulation? Answer: To
assess how financial institutions would perform under adverse economic
scenarios and ensure they maintain adequate capital buffers.
16. What is the European Banking Authority (EBA)? Answer: An
independent EU authority that works to ensure effective and consistent
prudential regulation and supervision across the European banking sector.
17. What is the role of ESMA? Answer: European Securities and Markets
Authority - develops technical standards, ensures consistent application of EU
law, and supervises specific financial entities.
18. What is regulatory arbitrage? Answer: The practice of taking advantage
of differences in regulatory regimes by conducting business in jurisdictions with
more favorable regulations.
19. What are the main types of financial services regulation? Answer:
Prudential regulation (safety and soundness), conduct regulation (protecting
consumers), and market regulation (ensuring fair and efficient markets).
20. What is the purpose of the Central Securities Depositories Regulation
(CSDR)? Answer: To harmonize rules for central securities depositories
(CSDs) across the EU and improve the safety and efficiency of securities
settlement.
,21. What is a competent authority in financial services? Answer: The
national regulatory body responsible for supervising and regulating financial
services firms within a specific jurisdiction.
22. What is the passporting regime under EU financial services legislation?
Answer: The ability for authorized firms in one EU member state to provide
services in other member states without requiring separate authorization.
23. What is the difference between authorization and registration? Answer:
Authorization is formal permission to conduct regulated activities with ongoing
supervision, while registration is typically a simpler notification process with
fewer ongoing requirements.
24. What is the role of the Financial Stability Board (FSB)? Answer: To
coordinate at the international level the work of national financial authorities
and international standard-setting bodies to develop effective regulatory,
supervisory, and other financial sector policies.
25. What are the main pillars of consumer protection in financial services?
Answer: Information disclosure, suitability/appropriateness assessments,
complaints handling, and redress mechanisms.
26. What is the purpose of the Insurance Distribution Directive (IDD)?
Answer: To harmonize rules for insurance and reinsurance distribution across
the EU and enhance consumer protection.
27. What is a regulatory sandbox? Answer: A framework that allows fintech
startups and other innovators to test their products, services, and business
models in a live environment with relaxed regulatory requirements.
28. What is the difference between hard law and soft law in financial
regulation? Answer: Hard law consists of legally binding rules and regulations,
while soft law includes guidelines, recommendations, and best practices that are
not legally enforceable.
29. What is the role of the Committee of European Banking Supervisors
(CEBS)? Answer: CEBS was replaced by the EBA in 2011, but previously
advised the European Commission on policy and promoted supervisory
convergence.
30. What is the purpose of the Market Abuse Regulation (MAR)? Answer:
To prevent insider dealing, unlawful disclosure of inside information, and
market manipulation across EU financial markets.
, 31. What are the three lines of defense in risk management? Answer: First
line (business operations), second line (risk management and compliance), and
third line (internal audit).
32. What is the difference between a directive and a regulation in EU law?
Answer: A regulation is directly applicable in all member states, while a
directive requires transposition into national law by each member state.
33. What is the purpose of the Benchmark Regulation (BMR)? Answer: To
restore confidence in benchmarks by improving their governance and controls,
and ensuring they are robust and reliable.
34. What is extraterritorial jurisdiction in financial regulation? Answer:
The application of a country's laws and regulations to activities or entities
outside its territorial boundaries.
35. What is the role of the European Systemic Risk Board (ESRB)?
Answer: To identify and assess systemic risks to financial stability in the EU
and issue warnings and recommendations.
36. What is regulatory equivalence? Answer: Recognition by one jurisdiction
that another jurisdiction's regulatory regime achieves similar outcomes,
allowing for mutual recognition of regulations.
37. What is the purpose of the Settlement Finality Directive (SFD)? Answer:
To reduce systemic risk in payment and securities settlement systems by
ensuring the finality of payments and transfers.
38. What is the difference between conduct regulation and prudential
regulation? Answer: Conduct regulation focuses on how firms treat customers
and market integrity, while prudential regulation focuses on the safety and
soundness of individual firms and the financial system.
39. What is the role of the Joint Committee of the ESAs? Answer: To ensure
consistent regulation across the banking, insurance, and securities sectors and
address issues that span multiple sectors.
40. What is the purpose of the Solvency II Directive? Answer: To harmonize
insurance regulation across the EU, ensuring insurers hold adequate capital and
manage risks effectively.
41. What is regulatory perimeter? Answer: The boundaries that define which
activities, products, and entities fall within the scope of financial regulation.
42. What is the difference between authorization and notification? Answer:
Authorization requires formal approval from regulators before commencing
