Learn the top five most powerful companies in British finance
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| INTRODUCTION |
| Kellie: Top 5 Most Powerful Companies in British Finance. For this lesson, we are turning our attention to the top five most powerful companies in British finance. |
| Gina: These are the companies that control the money and have the most power and influence. |
Lesson focus |
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| Kellie: We’ll start of course with number 5 – Prudential plc |
| Gina: The company was founded in 1948 to provide loans to workers and professionals. It was known then as the Prudential Mutual Assurance Investment and Loan Association. |
| Kellie: I think it’s most famous now for insurance sales. |
| Gina: Yeah, insurance and financial services. In the UK it has seven million customers and is one of the largest life insurance providers in the country. |
| Kellie: Is it successful worldwide? |
| Gina: Its largest division is actually in Asia where it has 15 million customers. It also owns subsidiary companies in the US, such as Jackson National Life Insurance Company, which is one of the leading insurance companies in the US. |
| Kellie: Do you have money figures? |
| Gina: You’re all about the money! Yes, in 2012 it had a net income of £2.197billion. |
| Kellie: That’s impressive! Now, number 4 is FTSE Group. |
| Gina: The FTSE Group was formed in 1995 by the London Stock Exchange. FTSE is really synonymous with the stock exchange in Britain. |
| Kellie: Yes, the commonly used stock index is the FTSE 100 Index, isn’t it? |
| Gina: It is. The FTSE 100 and FTSE 250 are the most popular and well used stock indices in Britain and they are well known and respected worldwide too. |
| Kellie: Is that all FTSE does? The stock exchange? |
| Gina: No, FTSE also provide market indices and data services for companies as well as listing the biggest companies publicly. |
| Kellie: They’re a very important group for those who deal with stocks and shares and for larger companies that are listed on the UK stock market. |
| Gina: Definitely! |
| Kellie: So our number 3 is the Financial Conduct Authority. |
| Gina: This is a government agency that was founded on 1st April 2013, but it was made to replace the Financial Services Authority so it isn’t a new agency, as such. |
| Kellie: What role does it serve? |
| Gina: It regulates companies that provide services to consumers and aims to protect the integrity of the UK’s financial markets. |
| Kellie: That’s quite a task. How does it do that? |
| Gina: It checks promotions to make sure they aren’t misleading, it can investigate individuals and companies, and sets regulations that need to be adhered to. |
| Kellie: What powers does it have if companies or individuals don’t meet the FCA standards? |
| Gina: The FCA can request the immediate withdrawal of promotions, can suspend products while investigating them, and can set some pretty heavy fines. |
| Kellie: How heavy are the fines? |
| Gina: Back to the money again, I see! In 2013 JP Morgan was fined £137million for breaching FCA guidelines. |
| Kellie: Okay, that is quite heavy! Number 2 is HSBC. |
| Gina: HSBC was founded in 1991 by the Hong Kong and Shanghai Banking Corporation as a new holding group for the company. |
| Kellie: I presume that’s where the name HSBC came from? |
| Gina: You presume correctly! The origins of that company can be traced back to 1865 when it was founded in Hong Kong by Scotsman Sir Thomas Sutherland. |
| Kellie: Hong Kong was still under British sovereignty then. |
| Gina: Yes, it was. HSBC group was formed not only as a holding group, but also due to Hong Kong reverting back to China. |
| Kellie: I suppose that having the base of the group in London instead of Hong Kong would have been easier after the changeover happened. |
| Gina: I think so. The headquarters were fully moved from Hong Kong to London in 1993, before the change over. Also, the group had purchased the British bank Midland Bank so a British base would have been beneficial. |
| Kellie: HSBC is now a huge bank, isn’t it? |
| Gina: By assets it’s the second largest bank in the world. It got through the 2007/8 banking crisis better than most banks did and continued to expand and grow while other banks struggled to stay open. It has offices in 85 countries and around 89 million customers worldwide. |
| Kellie: Wow, that’s impressive! However, it’s not enough to be our number 1. |
| Gina: What is the number one? What could be more powerful than HSBC bank? |
| Kellie: How about the bank that controls most of the money in Britain and sets the interest rates? |
| Gina: Ah, that would probably be more powerful. |
| Kellie: Yes, our number 1 is the Bank of England. |
| Gina: The Bank of England is the central bank of Britain. It is the model that most central banks are based on and was the second central bank in the world, behind its Swedish equivalent. |
| Kellie: What does a central bank actually do? |
| Gina: It manages the country’s currency, money supply and interest rates. It is the only bank with the authority to print banknotes in England and Wales and regulates the other seven that can print them in Scotland and Northern Ireland. |
| Kellie: Is it owned by the government? |
| Gina: Not directly. It’s owned by the Treasury Solicitor but has independence. Prior to this it was privately owned and later nationalised before becoming independent in 1998. |
| Kellie: It supports the government though, doesn’t it? |
| Gina: Yeah, part of the Bank’s job is to support the government’s financial policies and its most powerful tool is controlling the interest rates. |
| Kellie: So when loan repayments go up in Britain due to interest rates rising, blame the Bank of England? |
| Gina: Yes, but you can blame them if they go down too. The Bank of England is also custodian of Britain’s gold reserves and these are valued at around £156 billion. |
| Kellie: That’s a lot of gold! |
| Gina: I wouldn’t mind a share. |
| Kellie: Nor me! [laughter] That’s all for this lesson. |
Outro |
| Gina: Be sure to check the lesson notes for further information on what we’ve learned. |
| Kellie: Thanks for listening, and see you next time! |
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