Role of the financial sector

Question 1

bank of england

UKs central bank :

• undertakes monetary policy (IR)
• regulates banking system ~ stops them failing
• provides financial services

Answer 1

MAINTAIN FINANCIAL STABILITY IN THE MONETARY SYSTEM :
( banker to the banks )
- last resort lender ~ if commercial banks suffer shortfall of cash or become illiquid in the short term, they can borrow
- viral in maintaining liquidity and confidence in financial system

MAINTAINING MACROECONOMIC STABILITY :

• maintains price stability
• support Govs wider macroeconomic objectives to help create conditions for EG and low unemployment

Question 2

commercial or retail banks

Answer 2

3 CORE FUNCTIONS :

• accepting deposits in order to provide security & to facilitate saving
• lending money to different economic agents who wish to borrow (firms and peeps)
• providing efficient means of payment & transferring funds between different economic agents

Question 3

building societies

Answer 3

financial institution that provides financial services to their members and owned by customers ~ entitled customers to a share of the profits (dividend)

Question 4

services provided by banks

Answer 4

• foreign exchange
• insurance services
• expensive branch networks
• also helps firms to raise finance for investment ~ loans and advice on how to run company