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Financial Institutes

Financial Institutions

QuestionAnswer
Bank of England UK’s central bank. Their mission is to promote the good of the people by maintaining monetary and financial stability.
Role of Bank of England Issuing bank notes, monetary policy (setting interest rates) and financial stability.
Monetary Policy Done through the Bank of England raising or reducing interest rates
Issuing Bank notes Bank of England design and print banknotes. They make sure the banknotes include the latest anti-forgery features, and provide training and education resources to help people spot fake notes.
Financial Stability The Bank of England identifies and monitors risks in the financial system, and takes action to reduce or remove them where necessary.
Features of Building Societies (1) Offer services similar to a bank (2) Account holders are members and as such part owners of the building society (3)They therefore receive a voting right (4) There are no shareholders therefore less pressure to make a profit.
National Savings and Investments This is a state owned savings bank that attracts individual savers to reduce the governments need to borrow money. The government do this through selling premium bonds
Features of Premium Bonds (1) Savings account you can put money into (and take out when you want) (2)You buy £1 bonds and each has an equal chance of winning (3) The more you buy, the more your chances improve of winning £1 million
Features of Payday Loans (1) Short-term loans (2) The money is paid directly into your bank account (3) Repay in full with interest – at the end of the month (4) Payday lenders set up recurring payments. Lets them take what you owe from your account.
Credit Union Form of co-operative. It is "run by the members, for the members".
Features of Credit Unions (1) Not-for-profit (2) Formed by people who have something in common. This 'common bond' could be same: Locality, Industry (police have a credit union) or trade union(3) Can only join a credit union if you meet its eligibility criteria.
Bank Financial institution that offers both individuals and businesses a wide range of services to help them manage their money.
Benefits of Banks (1)Convenient locations - high streets and online Wide range of services (2)Accounts to meet different needs e.g. student, young person (3) Advice for individuals and business e.g. small business advisers (4) Interest paid on positive balances
Drawbacks of Banks (1) Conflict of interest between customers and shareholders (2) Interest charged on loans and overdrafts can be high (3) High charges if default on repayments or exceed overdraft (4) Savings covered up to £75 000. Beyond this savings are lost
Benefits of Building Societies (1) Owned by the members – members have a direct say in decision making. (2) More democratic. Every member has a vote (3) Works for the interests of the members, not of the shareholders and financiers. (4) Often offers better saving and borrowing rates.
Drawbacks of Building Societies (1)Not as secure as they have historically been. (2) Many building societies have geographical restrictions. e.g. you can only open an account if you live in a certain postcode (3) They often have a restricted choice of products e.g. no current accounts
Benefits of National Savings and Investment (1) 100% safe guarantee from the treasury (2) Winnings are tax free (3) May win big with premium bonds
Drawbacks of National Savings and Investment (1) Rates often low (2) Bank savings are now tax free e.g. ISA (3) May win nothing with premium bonds
Benefits of Payday Loans (1) Available quickly, often for unexpected costs (2) Can be for just a few days
Drawbacks of Payday Loans (1) Very high interest rates (2) Usually for less than £1,000 (3) The full cost of the loan isn’t always obvious to the borrower
Benefits of Credit Unions (1) Anyone can join as long as they meet the criteria (2) Helps people who are unable to get a loan from a bank (3) Better terms than payday loans
Drawbacks of Credit Unions (1) Loans are usually small (2) Savings rates are often less than banks (3) Only a few have an online presence (4) Low interest rates 1% to 3% per month
Discuss the difference between Banks and Building Societies Banks (1) An organisation that handles financial transactions/stores money on behalf of customers (2) Provide people with credit. Building Societies (1) Handle transactions on behalf of members (2) Members are part owners/have a right to vote
Created by: durquhart1
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