B1- Finacial Institution

Question 1

BANK OF ENGLAND

Answer 1

The UK central-bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole. Responsibilities include issuing legal tender, setting interest rates and controlling the national debt.
Advantages:
Responsible for protecting the financial stability ability of the economy as a whole. Set interest rates at a level designed to help achieve a stable economy. Lends to banks. Disadvantages:
Not a bank for members of the general public. Can raise interest rates which makes borrowing more expensive.

Question 2

BANKS

Answer 2

An organisation that handles financial transactions and stores money on behalf of its customers. Services offered will include holding deposits, making payments when introduced to do so and supplying credit.
Advantages:
Offer a range of services and account types. Provide a secure place to store money.
Disadvantages:
Savings are only protected of the value of £85,000 so if a bank goes bankrupt savings above this would be lost. Profit making organisation is owned by shareholders, therefore costs to individuals may be higher than necessary in order to fulfil shareholder objectives.

Question 3

BUILDING SOCIETIES

Answer 3

Organisations that handle financial transactions and store money on behalf of their members. The members, or account holders, are part owners of the building society and have a right to vote and receive information on the running of the society. Unlike banks they do not have shareholders on a stock exchange which allows costs to be kept down.
Advantages:
Offer a range of services and account types. Provide a secure place to store money. Pay interest on credit balances on most types of accounts. Owned by members and therefore costs can be kept down allowing for high interest payments.
Disadvantages:
Savings are only protected up to the value of £85,000 if building society goes bankrupt savings above this would be lost. May lack the business drive of a commercial bank.

Question 4

CREDIT UNIONS

Answer 4

Not-for-profit Organisations that handle financial transactions and stole money on behalf of the members. Often there is a responsibility or desire to support a community made up of its members. Members are the owners and have a voting rights. Advantages: offer a range of services in account types. Provide a secure place to store money. I want by members and therefore costs can be kept down allowing for higher interest payments. Often offer additional benefits to the community or a good cause. Disadvantages: Savings and only protected up to the value of £85,000.40 for credit union goes bankrupt savings above this would be lost. May lack the business drive of a commercial bank.

Question 5

NATIONAL SAVINGS AND INVESTMENTS

Answer 5

A government backed organisation that offers a secure saving option. It offers a range of options including ISAs, premium bonds and gilts and bonds.
Advantages:
Government backed therefore offering security on 100% of savings with no upper limits. Offers additional services/methods of savings e.g. premium bonds.
Disadvantages:
Rates are variable. Not as easy to access due to lack of a High Street presence. Often required to give notice on withdrawals.

Question 6

INSURANCE COMPANIES

Answer 6

Businesses that protect against the risk of loss in return for a premium and are for profit making. Advantages:
Protect against unexpected losses or financial expenses. Easy and regular monthly payments make planning easy. Wide range of services and levels of cover to suit the needs of individuals.
Disadvantages:
Premiums are assessed on the estimated degree of risk which may be seen to penalise some members or groups of society to harshly. Profit making organisation is therefore premium will be charged to ensure shareholder needs are met.