B1 - Features of Financial Institutions Flashcards
Explain and evaluate Bank of England.
UK’s central bank that ensures the financial stability of the UK.
+ Protects the financial stability of the UK economy, lends to banks & sets interest rates
- Do not lend to the general public & can raise interest rates making borrowing such as mortgages more expensive
Explain and evaluate banks.
Handles financial transactions and stores money on behalf of general public.
+ Secure place to store money, pays interest on savings & offers variety of services
- Savings only protected to £85,000 if bank goes bankrupt & owned by shareholders so designed to make profit
Explain and evaluate building societies.
Financial services owned entirely by their members so they can set rates to benefit them.
+ Like a bank but owned by members
- May lack the business drive of commercial banks as banks are profit driven & savings only protected to £85,000
Explain and evaluate credit unions.
Member owned financial cooperative, controlled by its members and operated on the principle of people helping people.
+ Variety of services & offer additional benefits to the community and charities
- May lack the business drive of commercial banks as banks are profit driven & savings only protected to £85,000
Explain and evaluate National Savings & Investments.
It’s a government backed organisation that offers a secure savings option; includes many options.
+ Savings are 100% secure as it is Government backed & there’s various ways to save such as premium bonds
- Variable rates, lack a high street presence & usually need to give notice on withdrawals
Explain and evaluate insurance companies.
They’re profit businesses that protect people against loss in return for a monthly premium.
+ Protect against unexpected losses, cover available on a variety of things & pay monthly so easier to budget
- Premiums assessed on risk and the higher the risk the higher the premium & owned by shareholders so need to make a profit
Explain and evaluate pension companies.
They sell policies that enable themselves or their employees to save for future retirement.
+ Structured way to plan for retirement & you can nominate whoever you want to receive your pension fund when you die
- Poor investment decisions may mean a poor return on investment & can’t access money until the agreed term
Explain and evaluate pawnbrokers.
It’s when you loan money and secure loan against an asset, if item isn’t bought back, pawnbroker will sell it to repossess the cost of the loan.
+ Quick way of acquiring short term cash, interest not charged
- Amount given for the asset is much lower than its worth & asset will be sold on if loan is not repaid
