The Financial Sector and the Bank of England

Who looks after the money

When you save, borrow or take out a mortgage, a whole set of institutions is at work behind the scenes. At the top sits the Bank of England, and beneath it the high-street banks and building societies most people deal with. This module works through who these institutions are and the job each one does in the financial sector.

Financial words to know

Learn these before you sort out who does what.

Central bank against high-street bank

The two work at different levels of the financial sector.

Keep the two levels apart

In the exam, keep the two levels of the money system apart. At the top sits one body that guides the level of interest rates for the country and works to keep the whole system stable and safe; it does not serve shoppers itself. Below it, the everyday lenders people visit and their member-owned cousins deal with the public, looking after savings and lending to households and firms so investment can happen. Name the right body and give its job.

Match the institution

Match the example

Which is the central bank?

Which institution is the central bank of the United Kingdom?

• The Bank of England
• A high-street bank
• A building society
• A supermarket

True about the sector

Select the TWO true statements about the financial sector.

• The Bank of England works to keep the financial system stable
• High-street banks lend money to people and businesses
• The Bank of England runs everyday current accounts for shoppers
• Building societies are owned by foreign governments

Total the interest earned

A saver puts money in an account that pays 20 pounds of interest each year. Multiply the yearly interest by 3 to find the total interest earned over 3 years in pounds. What is the answer?

Order the money flow

Put the flow of money through a high-street bank in order, earliest first.

• A saver deposits money in a high-street bank
• The bank holds the deposit safely
• The bank lends some of it to a borrower
• The borrower repays the loan with interest

Complete the rules

The banks and institutions that handle money make up the financial _____. The central bank of the United Kingdom is the Bank of _____. A high-street bank takes deposits from savers and makes _____ to borrowers. A member-owned savings and mortgage provider is a building _____.

Spot the central-bank jobs

Tap the TWO jobs of the Bank of England.

• guiding the level of interest rates
• working to keep the financial system stable
• running everyday accounts for shoppers
• selling groceries to the public

Name the institution

Read each case and choose the right institution.

• A family wants to open an everyday savings account. Which institution do they use?
• Which institution works to keep the whole financial system stable?
• A business needs a loan to buy new machinery. Where does it usually borrow from?

Explain the financial sector

Explain the main parts of the financial sector and the role of the Bank of England.

• Name the main institutions in the financial sector
• Explain the two main roles of the Bank of England
• Explain how high-street banks and building societies serve savers and borrowers