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 The term - 'The City' - is often used as a shorthand description for the UK financial services sector. London is still the UK's main financial hub, but many other cities, such as Edinburgh, Leeds, Manchester and Birmingham also have booming financial centres. City Institutions, Markets and Types of Firm The City is made up of many and varied financial institutions. Listed here are some of the main bodies with whom you would come into contact on a relatively frequent basis:
Within the City, there are many different types of firms who will all be looking to recruit the best graduates.
Financial Services Authority (FSA) www.fsa.gov.uk The FSA acquired its powers in November 2001, as the sole regulator of financial services in the UK. It has four primary responsibilities: o To maintain confidence in the UK financial system. o To promote public understanding of the financial system. o To secure the appropriate degree of protection for consumers. o To reduce the scope for financial crime. The FSA's regulations cover firms such as insurance companies, investment houses and financial advisers and later in 2004 its reach will be extended. Depending on your job function, the FSA will require you to prove that your knowledge is up-to-date, initially through qualifications and then continuing professional development such as attending seminars, training on new products etc. The FSA will also monitor your firm as a whole to make sure that all the rules, such as those for customer protection and anti-money laundering initiatives, are being complied with. Most dealings with them are routine, but it must be remembered that their powers are extensive - individuals and firms who do not meet their standards can face severe penalties. back to top The Bank of England www.bankofengland.co.uk The Bank of England is responsible for the overall stability of the UK's financial system. It has three main objectives, namely: o To maintain the integrity and value of the currency. o To maintain the stability of the financial system. o To ensure the effectiveness of the UK's financial services. In 1997, the Government gave the Bank of England independent power to raise or lower interest rates, to meet inflation targets set by the Government. back to top The London Stock Exchange www.londonstockexchange.com The London Stock Exchange is one of the world's primary markets for selling equities. The 'trading floor', traditionally pictured in old photographs on which traders dealt face to face with each other, disappeared in 1987 when the Exchange computerised - a change often known as 'Big Bang'. The Exchange's member firms now trade via computerised trading systems. For a company's shares to be traded on the Exchange, they must fulfil certain criteria known as 'listing' requirements, set by the FSA. They can then be traded on one of the markets the London Stock Exchange offers. These include the primary market (for those company shares meeting full listing requirements), AIM (a secondary market trading smaller, younger companies' shares that fulfil most, but not all, of the listing requirements - many companies start on AIM before transferring to the main market), and techMARK (for technology companies - dot.coms etc). back to top London Financial Futures and Options Exchange (LIFFE) www.liffe.com LIFFE is London's primary exchange for people to trade in financial derivatives (futures and options*). By their nature, these are riskier products than simply buying and selling shares which is the business commonly done on the London Stock Exchange. However, they do allow customers to plan ahead - they know what they will be paying for a share at a future date. If traded successfully, they can also yield large returns. back to top London Clearing House www.lch.co.uk The London Clearing House is an independent settlement organisation offering these services. It is a not-for-profit organisation, owned by its 117 members and is one of the premier clearing houses in Europe. The job of a Clearing House is to make sure that, once shares have been traded, money and shares are transferred smoothly and efficiently. If this did not happen, the whole trading system would grind to a halt. A Clearing House may also keep records of options and futures contracts, ensuring that the holders are maintaining enough assets (known as 'margin') to cover possible losses. back to top CREST www.crestco.co.uk CREST is a clearing and settlement system for equities and government stock, which went live in 1996 and is an alternative for companies to the London Clearing House. It also has direct links to major European countries and the USA. Its aim is to deliver a single integrated service for its members, giving them the widest range of securities and the widest range of people to trade with at the lowest cost. back to top Lloyds of London www.lloydsoflondon.co.uk Lloyd's is an insurance market, not an insurance company. Through it, insurance brokers deal with high risk, specialist insurance for businesses. Although Lloyd's does provide some insurance products suitable for the general public - motor, travel, household - Lloyd's insurers only deal with authorised insurance brokers. Lloyd's complicated membership structure became infamous in the 80's when its individual members had to make enormous payouts to cover losses. Individual members were liable for their personal assets and many lost a substantial amount of their savings. However, since then, Lloyd's has changed its membership slant and now the vast majority of its members are large corporations rather than private individuals. back to top Investment banks Investment banks have the highest profile of the City firms. They work primarily for corporate or government clients to raise money for such activities as mergers, privatisations, flotations etc. They also deal in investment management, share and options trading, research and IT. Graduate-level jobs in these firms are very diverse and they will cover graduate trainee schemes, guiding you through your first career steps in the City. The main areas of business will be: • Investment management — including private client advice, investment analysis, fund management and investment research. • Corporate finance — dealing with company flotation, new share issues, privatisations, and mergers and acquisitions. • Capital markets — working in sales and trading, share research and foreign exchange dealing. • Operations — which used to be known as the ‘back office’ — deals primarily with settlements, systems analysis, treasury and accountancy. Commercial banks These banks focus on personal savers and borrowers, as well as loans and funding packages for businesses, ranging from small, start-up companies to multinationals. Venture capital organisations Venture capital firms specialise in lending money to companies, small or large, to develop a new business where a high degree of risk may be involved. This is an exciting field, but relatively small compared to the investment or commercial houses. Private client stockbrokers/investment managers The primary role of private client stock-broking firms and investment management firms is to build and manage portfolios of shares for private individuals. This will involve discerning the needs of the customers and providing general financial advice. Either trades will be made according to the client’s wishes or the firm will manage their portfolio for them on a discretionary basis. Investment management firms will also take decisions on where to place shares and what strategies to use as appropriate to the client. Retail Investment Management Firms Firms involved in retail investment management will specialise in managing the portfolios of other companies.
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