B1 Features Of Financial Institutions

Question 1

What is the Bank of England

Answer 1

The central bank of the UK

Question 2

What does the Bank of England do?

Answer 2

Provide trusted bank notes
Set interest rates to help control the economy
Ensure a safe banking system

Question 3

What is one advantage of the Bank of England?

Answer 3

Focused on protecting the financial stability of the UK economy
Sets interest rates to achieve stability
Monitors risks in the financial sector
Lends to banks and other financial institutions
They supervise all banks through the Prudential Regulation Authority

Question 4

What is a disadvantage of the Bank of England?

Answer 4

Not a bank for general public
Controls interest rates, may increase and decrease causing problems for both borrowers and savers

Question 5

What are Banks?

Answer 5

An organisation that stores money on behalf of customers and handles transactions on their accounts

Question 6

What is an advantage of Banks?

Answer 6

A secure store of money
Offer interests on most deposits
Provide a range of services to meet customer needs
Trusted providers of a range of services

Question 7

What is a disadvantage of Banks?

Answer 7

Savings are only protected up to the value of £85,000
Banks are limited companies with shareholders, banks have to make decisions to profit and satisfy shareholders

Question 8

What is a building society?

Answer 8

An organisation that stores money for customers

Question 9

What makes a bank different to a building society?

Answer 9

A building society customers are members and share part ownership, a bank has shareholders

Question 10

What is an advantage of a building society?

Answer 10

You becoming a member meaning you have a say in the company
Customer er services levels at a mutual
A secure place to store money
Offer interest on on most deposits
Provide a range of services too meet customer needs
Trusted provider
Provide competitive rates

Question 11

What is a disadvantage of building societies?

Answer 11

Savings are protected up to £85,000
Many building societies have geographical restrictions
May not offer a wide range of services

Question 12

What is a credit union?

Answer 12

A nonprofit organisation that stores money for customers often designed to provide a service for their members (customers)

Question 13

What is an advantage of credit unions?

Answer 13

Secure place to store money
Owned by customers
Supports a community or group of people

Question 14

What is a disadvantage of credit unions?

Answer 14

Savings are only protected up to £85,000
Offer limited services compared to banks and building societies
May lack business drive of a commercial bank

Question 15

What is national savings and investments?

Answer 15

One speechified business that is government backed that offers range of savings options

Question 16

What is an advantage of NS & I?

Answer 16

Government back with 100% security
Offers specialist products e.g. premium bonds, government bonds

Question 17

What is a disadvantage of NS & I?

Answer 17

Limited product range
No high street presence
Often required to give notice on withdrawals

Question 18

What are insurance companies?

Answer 18

Companies that protect people against the risk of loss in return for a fee called a premium
They are profit making meaning the higher the risk the higher the fee

Question 19

What is an advantage of insurance companies?

Answer 19

Protects against unexpected losses or financial expenses
Can buy protection on monthly payment plans
Wide range of protection services available

Question 20

What is a disadvantage of insurance companies?

Answer 20

Premium are based on assessment of degrees of risk which may seem to penalise some parts of society
Profit making focus lifts the premiums to ensure shareholder can be rewarded even when claims are made

Question 21

What are pension companies?

Answer 21

Businesses that take contributions from individuals and employers to invest money to fund a persons retirement in the future

Question 22

What is an advantage of a pension company?

Answer 22

Provides a stricter plan to save money for the future & plan for retirement
Money invested in pension schemes cannot be released until the dates agreed in the policy
Returns are often unknown as it depends on the success of the investment

Question 23

What are pawnbrokers?

Answer 23

Businesses who loan money against the security of a personal asset, they can also buy assets of value from customers the raise cash

Question 24

What is an advantage of a pawnbroker?

Answer 24

Access to money not based on a persons income
Quick access to cash
The asset can be returned to the owner if the debts are repaid in the agreed time period
The security assets brings down interest rates compared to other short term loans

Question 25

What is a disadvantage of pawnbrokers?

Answer 25

The amount given/loaned for the assets is usually substantially below its value
The assets will be sold on if the money owed is not presented within a set time period
Short term agreement
Interest rates can still be high

Question 26

What are payday loans?

Answer 26

Organisations that offer a short term source of finance used to bridge the gap between needing money now and the next wage or salary is received

Question 27

What is an advantage of a payday loan?

Answer 27

Quick way of acquiring cash for a short period of time
Processing is fast, as soon as the loan is accepted it goes straight into the account

Question 28

What is a disadvantage of a payday loan.

Answer 28

Interest rates are usually very high
Can result in repaying a substantially higher amount of money than what was borrowed
Time constraints of paying back can be difficult on borrowers as they are planning around a loan as well as monthly payments