Financial Institutions Flashcards
Financial Institutions
Financial institutions are organisations that offer financial services to individuals and/ or businesses
These services include the ability to deposit or withdraw money, obtain credit and make investments, as well as offering advice on matters of personal and business finance
Bank Of England
This is the UK’s central bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole
+ Lends to banks
- Can raise interest rates making borrowing more expensive
Banks
A bank is an organisation that handles financial transactions and stores money on behalf of its customers
+ Provide a secure place to store money
- Savings only protected up to a value of £85, 000
Building Societies
These are 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
+ Pay interest on credit balances on most types of accounts
- May lack the business drive of a commercial bank
Credit Unions
These are not-for-profit organisations that handle financial transactions and store money on behalf of their members. Members are the owners and have a voting right
+ Owned by members so costs can be kept down allowing for higher interest payments
- May lack the business drive of a commercial bank
National Savings + Investments
This is a government-backed organisation that offers a secure saving option. It offers a range of options including ISAs, premium bonds and gilts and bonds
+ Government-backed so offers security on all savings with no upper limit
- Often required to give notice on withdrawals
Insurance Companies
These are businesses that protect against the risk of loss in return for a premium. They are profit-making organisations
+ Protect against unexpected loses or financial expenses
- Profit-making organisations so premiums will be charged to ensure shareholders needs are met
Pension Companies
These are businesses that sell policies to individuals, either privately or through
employers, to allow them to save now to fund retirement in the future
+ Provides a structure to help plan for financial security after retirement
- Poor investment decisions by the pension company may result in a disappointing return
Pawnbrokers
These are businesses/ individuals who loan money against the security of a personal asset, for example an item of jewellery. If the item is not bought back from the pawnbroker within a specified period of time then it will be sold on
+ A quick way of acquiring cash needed for a short period of time
- The amount given for asset is often substantially
Payday Loans
These are organisations that offer a short-term source of finance used to bridge the gap between now and next receiving a wage; they are normally only available
for relatively small amounts at very high rates
+ A quick way to acquire cash needed for a short period of time
- Interest charges are likely to be very high
