Financial Institutions

Question 1

What are the 9 types of financial institutions ?

Answer 1

-Bank of England
-Banks
-Building societies
-Credit unions
-National savings and investments
-insurance companies
-pension companies
-pawnbrokers
-Payday loans

Question 2

Financial institution - Bank of England ?

Answer 2

-Ul central bank - regulates and supervises banks , building societies , insurance companies , investment companies and credit unions
-responsible for maintaining the UK’s monetary and financial stability
-set interest rates - if it increases the rates then the cost of borrowing will rise
-issues the legal tender
-independent from the government

Question 3

Financial institutions - Banks ?

Answer 3

-owned by their shareholders
-offers customers a range of financial services eg current and savings accounts , loans etc
-are reliable , secure and private
-may charged for certain accounts and services
-in the event of a bank failing to, savings deposits are only secure up to an upper limit of £85,000

Question 4

Financial institutions - Building societies ?

Answer 4

-owned by their members (accounts holders )
-provide financial services eg saving accounts , mortgages etc
-can offer better interest rates and savings than banks
-fewer branches leading to poorer access

Question 5

Financial instructions - credit unions ?

Answer 5

-financial cooperatives owned and run by their members
-not for profit organisations
-offer members saving and current accounts and loans
-more limited funds and opportunities compared to commercial banks and buildings societies

Question 6

Financial institutions - national savings and investments ?

Answer 6

-sells savings and investment products eg premium bonds ,ISAs
-money invested in products used to finance government activities
-saving and investments are secure as government backed
-poor interest rates , no interest payments on premium bonds
-some of their services can be accessed form post offices

Question 7

Financial institutions - insurance companies ?

Answer 7

-offer policies which compensate policyholders against personal injury , loss or damage to property and other risks including third party liability
-also offer life insurance and pension plans that provide financial security for policyholders depending on the performance of investment funds

Question 8

Financial institutions - pension companies ?

Answer 8

-Businesses that sell policies to customers allowing them to save into personal pension schemes in preparation for retirement
-funds locked into savings scheme with penalties if taken out early
-projected income is based on figures that may change over time

Question 9

Financial institutions -Pawnbrokers ?

Answer 9

-individuals or businesses that loan money against the value of a persons assets eg jewellery
-interest is charged on loans for the period during which the money is borrowed
-pawned items not bought back within a certain time may be sold to pawnbroker to recover the debt
-instant cash available if the asset has value
-risk of losing the asset

Question 10

Financial institutions - payday loan companies ?

Answer 10

-businesses that offer short term loans to people requiring cash between paydays
-immediate cash available to even those with poor credit history
-very expensive and easy to get into deeper debt