Types of financial institutions Flashcards
define financial institution
company engaged in the business of dealing with financial and monetary transactions such as deposits, loans, investments and currency exchange.
They may also offer advice on both business and personal financial matters.
evaluate the bank of england as a financial institution
(BoE) is the central bank of the United Kingdom
responsible for maintaining monetary stability and financial stability in the UK economy.
regulates the supply of money, sets interest rates, and provides loans to commercial banks.
prints bank notes and stores 400 000 gold bars
doesnt lend to the public
give 2 advantages of BoE
operates independently from the UK government, allowing it to make decisions based on the best interests of the economy rather than political considerations.
maintains financial stability and economic growth by implementing policies to control inflation, stabilise the financial system, and ensures the availability of credit to support economic activity.
give 2 disadvantages of BoE
its policies may not always be effective in achieving their intended outcomes.
its policies may have unintended consequences (low-interest rates can encourage excessive borrowing, which can lead to higher levels of debt and financial instability in the long term)
evaluate banks as a financial institution
handles financial transactions and stores money on behalf of the general public.
They allow individuals and businesses to make payments, access credit and save.
give 2 advantages of banks
Secure place to store money
Pay interest on savings
Variety of services eg current and savings accounts and loans
give 2 disadvantages of banks
Savings only protected to £85,000 if
the bank goes bankrupt
Owned by shareholders therefore are
designed to make a profit
may charge for certain accounts and services
evaluate building societies as a financial institution
owned entirely by their members which means they can set rates that benefit their members and not shareholders.
provide financial services to the public such as day to day banking, mortgages and credit.
give 2 advantages of building societies
do not need to pay dividends from the profits to shareholders, customers can enjoy some of the profits being passed onto them meanings lower interest rates on mortgages and higher rates on a savings account.
Pay interest on savings
Safe place to store money
give 2 disadvantages of building societies
May lack the business drive of commercial banks as banks are profit driven so they have lower income
Savings only protected to £85,000
evaluate credit unions as a financial institution
member owned financial cooperative, controlled by its
members and operated on the principle of people helping
people, providing its members credit at competitive rates
as well as other financial services.
give 2 advantages of credit unions
Credit unions are usually local or regional, which means service may be more personal.
Owned by members so could benefit customers more
Educational resources. Credit unions tend to stress financial literacy, so it’s common for them to offer seminars, articles, calculators and other tools to help their members sharpen their money skills.
give 2 disadvantages of credit unions
more limited funds and opportunities than banks and building societies
evaluate national savings and investment as a financial institution
government backed organisation that offers a
secure savings option.
It offers a range of options
including ISA’s, premium bonds and gilts.
give 2 advantages of national savings and investment
Savings are 100% secure as it is government backed
