2.5 Financial Sector Flashcards
What is in a financial sector
firms which provide financial services to customers
What are the 4 main financial agents
Central Bank (BofE)
Commercial banks
Building Societies
Insurance Companies
What are the roles of the BofE (5)
Lender of last resort for the commercial banks
Keep inflation on target
Control monetary policy
Ensure financial stability
Maintains economic growth
What do the commercial banks/high street banks aim to do
make profit by providing financial services to individuals and businesses
What can commercial banks do yo cover investments of individuals and firms
receive deposits and make loans
What 6 things effect the level of interest charged by a commercial bank
length/size of loan
security of loan
past record of repayments
base rate interest (BofE)
risk of loan
economic conditions
What is the difference with a building society to a commercial bank
they are owned and run by their members
What do insurance companies provide
a means of protection against financial loss during a particular event such as loss damage or injury
What 3 ways does the financial sector impact economic agents
Credit provision
Liquidity provision
Risk Management
What is credit provision
allowing the economic agents to borrow money at given rate of interest to spend today
What is liquidity provision
how easy it is to turn an asset into cash
used by producers and gov in order to tide them over short term cash shortages
What is liquidity provision known as
Overdraft
What is risk management
financial institutes make a finance manager allocate money to borrowers from multiple lenders so that not one persons deposit is ever drained
