Understand who is who in the financial world Topic 2 Understand who is who in the financial world

Financial Intermediaries: are Banks Building societies Credit Unions Insurance Companies

What is a bank The services they offer are: Current accounts – Savings accounts Investments for larger sums Loans Credit cards Overdrafts Mortgages Life assurance Pensions (long term – saving for retirement General insurance – house, car, medical Foreign currency Share dealing – business advice

Who owns banks in the UK The are Plc’s Public Limited Companies Owed by shareholders They charge more interest for borrowing They have fees and charges for their services

What are building societies They do not have shareholders They are owned by the people who use them – ‘their members’ Their profits are used to benefit their customers/ members There interest rates are competitive They make money through charging interest to their borrowers and charging fees for services they provide

Number of Banks and B.Societies 51 Building Societies (regional)

Insurance Companies – they offer: Life assurance General assurance Some offer both

They also offer: Pensions Investments Long term-sickness insurance Endowments Whole-of-life policies They are owned by shareholders and the shares can be bought and sold on the stock exchange – some are owned by banks and offered in their branches

Mutual insurance companies They do not have shareholders They run for the benefit of their policy holders

Credit Unions They are financial co-operatives Controlled by their members They offer savings and loans They are local Ethical They know what their members want Members can take an active part in managing them There is a common bond, where they live, work worship

How do Credit Unions work? Members pool their money together Rates of interest are not very high Non-profit making Rates of interest restricted by law

Providers that are not mainly financial providers Supermarkets Retailers i.e. Marks and Spencer – Debenhams Online retailers – Amazon Motoring organisations - AA and the RAC

FSA – Financial Services Authority Oversees the behaviour of the whole of the financial services industry It is there to ensure customers get a fair deal and that their money is safe They are ‘regulators’ to the financial industry – they can take action against disreputable firms They have 4 objectives: To protect consumers To help consumers to understand the financial system To maintain confidence in the market To fight financial crime

The FSA has regulations They regulate 29000 firms and 165,000 individuals They reduce financial scams and crime i.e. money laundering

Financial providers have to give their customers: The correct advice They have to send the customer regular statements on how their investments are progressing They have to inform the client on their qualifications and commission received

Ethics Some banks will not lend to companies that run: Sweat shops Employ children in the 3rd world to make products Arms dealers The Co-op is and ethical bank