BUS614 Study Guide

Unit 10: The Future in Global Markets

10a. Analyze the political, economic, and financial challenges facing the EU as a common market 

  • What are the EU's common market's various economic, political, and financial challenges?

There are several challenges that the EU may encounter. These could be economic, financial, or political. One of the main challenges the EU could experience is the withdrawal or expulsion of a member state. This political challenge could negatively impact the economic and financial environment of the bloc. For example, the recent departure of the UK has resulted in a few challenges on the economic and financial fronts. If another member state, such as Italy, were to leave the EU, this would challenge other member states as Italy's membership in the bloc also includes its membership in the Eurozone and the use of the common currency.

The current COVID-19 crisis is also projected to impact the EU negatively, with the EU experiencing a double-dip recession. The health crisis is also likely to shed a cloud of doubt over the long-term sustainability of the EU project.

To review, see Leaving the Euro and Five Challenges for the European Union.

 

10b. Assess how regulations governing KYC and AML have affected banking services and how they could affect the banking sector

  • How have KYC and AML regulations affected the banking services sector?

With the introduction of new measures to combat money laundering and terrorist financing, the banking and financial sectors are expected to encounter more costs to comply with these laws and regulations. Some AML/KYC measures (such as customer due diligence rules) could also restrict formal financial services from reaching lower-income people. This is particularly true for financial services providers who serve low-income customers.

To review, see AML/CFT Regulation.

 

10c. Identify new trends, such as Islamic finance and cryptocurrencies, in global financial markets

  • How is the financial services sector evolving?

With technology always evolving and adapting within different sectors, the financial sector adopted new technologies to provide customers with enhanced services. The use of tech in the financial sector was not only to provide customers with more content access to financial services but rather came in the form of innovation in the sector with new financial products emerging. Products like cryptocurrencies have evolved into a speculative asset class. This drove central banks to consider issuing their own cryptocurrency backed by the Central Bank, unlike traditional cryptocurrencies like bitcoin.

Additionally, in the wake of the financial crisis of 2008, the search for alternative finance led to the emergence of Islamic Finance on an international level. Pre-2008 crisis, Islamic finance was most prominent in Islamic countries. However, after the 2008 crisis, the search for more sustainable financing helped Islamic finance emerge internationally, especially since it emphasizes risk-sharing and appears to have been able to hedge the most severe consequences of the 2008 crisis.

To review, see Blockchain Technology and Cryptocurrencies and The Potential of Islamic Finance.

 

Unit 10 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • Cryptocurrencies
    • These are digital currencies where transactions are verified, and records are maintained by a decentralized system rather than a centralized authority.
  • Blockchain
    • Blockchain refers to a system in which a record of transactions made in a cryptocurrency is maintained across several computers linked in a peer-to-peer network.
  • Islamic Finance
    • Islamic Finance is a type of finance that is based on Islamic Law (Sharia Law).
  • KYC
    • Know Your Customer/Client is a set of guidelines professionals in the financial services sector must follow to verify the identity, suitability, and risks involved in maintaining a business relationship with a particular customer/client.
  • AML
    • Anti-money laundering laws and regulations aim to prevent disguising illegally obtained funds as legitimate ones.