Financial Institutions Flashcards
Define the Bank of England
UK’s central bank, responsible for maintaining a healthy economy, not a public bank
2 advantages of the Bank of England
- Responsible for protecting financial stability of the economy
- Lends to banks and sets interest rates
2 disadvantages of the Bank of England
- not a bank for general public
2. can raise interest rates
Define banks
Banks handle all manner of financial transactions, with different types of payment services offered
2 advantages of banks
- offers a range of financial services
2. Provides a secure place to store money
A disadvantage of a bank
- interest rates could decrease
Define a building society
Partially owned by its members. A building society carries out the same primary functions as a bank but has a different ownership structure e.g. Nationwide
An advantage of a building society is…
- owned by members - costs can be kept down allowing for higher interest payments.
2 disadvantages of a building society
- savings only protected up to £85,000
2. may lack ‘business drive’ of a commercial bank
Define A Credit Union
Not-for-profit organisations that handle financial transactions + store money for their members
2 advantages of Credit Unions
- free to use due to being not-for-profit
2. higher rates on savings accounts than a basic bank account
A disadvantage of a Credit Union is…
Credit Unions offer fewer financial services than regular banks
Define Insurance Companies…
Often profit making businesses that protect customers from premiums
An advantage of an Insurance company is…
Customers are protected against unexpected losses
A disadvantage of Insurance Company is…
Premiums are assessed on the estimate degree of risk, causing insurance to cost a lot for some certain premiums
