Topic 3: Financial Services In The Wider Economy

Question 1

What level of funding can building societies raise on the wholesale markets?

Answer 1

Building Societies are permitted to raise up to a total of 50% of their liabilities on the wholesale markets, although the Treasury now has the facility to raise this amount to 75% without further primary legislation.

Question 2

Briefly explain the main difference between retail and wholesale banking.

Answer 2

Retail Banking is primarily concerned with the more common services provided to personal and corporate customers, such as deposits, loans, and payment systems.

Question 3

Describe, in one sentence, how Credit Unions operate.

Answer 3

Credit Unions are mutual organisations and financial co-operations run for the benefit of their members, who are all linked in a particular way. eg. Church.

Question 4

Which two groups of people are linked by financial intermediation?

Answer 4

Intermediaries link groups of people with a cash surplus and a cash deficit.

Question 5

How does the ownership of a bank differ from that of a building society?

Answer 5

A bank is a Proprietary Organisation owned by its shareholders; A building society is a Mutual Organisation owned by its members.

Proprietary - Owned by shareholders, issues dividends, and offers votes at shareholders meetings.

Mutual - Does not have shareholders, instead owned by its members and run through general meetings.