Give examples of providers of financial services?
- banks
- building societies
- credit unions
- post office
- national savings and investments
What is a bank?
A public limited company that sells financial products and services to businesses and individual customers
What is retail banking?
The part of the banking business that deals with individual customers
What does retail banking enable people to do? (5)
- spend -make transactions
- save
- invest
- borrow
- insure - protect themselves
What is a public limited company?
The shares of the company can be bought and sold on the stock exchange
How do public limited companies work -e.g. bank? (6)
-Banks raise capital by selling shares on the stock market
- buyers of the shares are known as shareholders
- shareholders are part owners of the companies
- shareholders of the bank can receive a proportion of the profits in the form of dividends
- banks thus need to satisfy shareholders by providing a dividend which means they must make profit
- shareholders can also gain if the share price increases
- this is more likely if demand for the shares is high which is likely to follow from high profits
How do banks operate?
- The main uK banks are very large organisations that operate in all aspects of financial services globally.
How are banking groups formed?
When financial services providers merge or acquire other providers.
How do banks make money?
- charging fees
- interest rate margin
- difference between interest the banks pay to savers (AER) and the interest they charge to borrowers (APR)
What should be considered when choosing a financial provider?
- How they wish to operate their accounts and communicate with their provider
- visiting a branch, via the internet, by the. phone
- how safe the funds are
- they must be authorised by the prudential regulation authority
What are the PRA and FCA?
Financial conduct authority work together to ensure financial service providers work appropriately
Providers can be checked if they are the regulated by looking at the Financial services register
What are the 5 biggest banks in the uk in terms. Of assets?
- Barclays
- hsbc
- Lloyds banking group
- standered chartered ( uk based but doesnt conduct retail banking in the uk)
- royal bank of Scotland group
What are advantages of banks?
- customers have easy access to a large range of financial products
- banks can invest in new products and services
What are disadvantages of large banks? (2)
- customer service may be less efficient than smaller organisations
- events in other countries can have an impact on UK banks
What were the original function of Building societies?
To provide savings accounts and mortgages
What is a Building Society?
Mutual organisations owned by their customers, called members.
Why are building societies smaller than banks?
- 75% of their assets must be mortgages
- 50% of their total funding must come from members deposits
- restrictions on unsecured loans a building society can make
What are advantages of building societies? (4)
- all customers are members
- they do not have shareholders so don’t need to maximise profits to give shareholders dividends
- All profits made are used to benefit its members
- Customer service tends to score more highly than banks due to mutual status, and because they’re smaller than banks
- tend to only operate within the uk
What does mutual mean in terms of banking?
A bank owned and run for the benefit of the members, a building society.
What is demutualisation?
When a building society becomes a bank.
What are disadvantages of building societies?
- smaller sizes thus less likely to invest in research and development for innovative products or services
- rely on partners to offer a range of services
What happens when demutualisation occurs? (4)
- building societies are free of restrictions
- largest building societies can become banks
- members are typically offered shares
- don’t demutualise know their original form but taken over to be part of larger banking groups
What are credit unions?
Similar to building society in terms of them being a mutual organisation though all members must share a common bond,
What are the common bonds members of a credit union may have? (4)
- live and work in a certain area
- work for a specific employer, co-op, police, Royal Mail
- work in specific industry
- belong to a specific organisation; church or housing association
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Topic 1 - Purposes of money25
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Topic 3 - Payment Methods31
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Topic 2 - The Personal Life Cycle14
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Topic 4 - Everyday Banking24
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Topic 5 - Saving Products34
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Topic 6 - Borrowing Products50
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Topic 7 - Providers42
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Topic 8 - Consumer Protection34
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Topic 9- Budgets And Forcasts42
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Topic 10 - Dealing With Unexpected Events37
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Topic 11 - Dealing With Debt40
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Topic 12 - Earnings42
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Case Study - Vea16
