Investment banks, retail banks and building societies
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Why is it good to keep money in the banks?
To earn interest so businesses can increase retained profit and help fund future investments
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How do investors interest rates reflect?
How risky the project is
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What do individuals interests rates reflect?
Their personal financial history
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How do banks make money?
By charging higher interest rates for loans than they pay in interest to savers. The difference must cover the risk of default
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How are payment systems becoming quicker?
Bank transfers and online banking
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What are credit reference agencies?
They gather information to courts and bankruptcy proceedings, hire-purchase companies and professional debt collectors to help banks assess the risk-worthiness of creditors
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Why are credit reference agencies helpful for banks?
They can accurately assess the probability that a loan will not be paid back so they can have the right reservations of funds to cover potential losses
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How did the lack of assessment lead to the financial crisis?
Many banks failed to notice that the rating agencies were overlooking some weaknesses in the system
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What are futures?
When banks arrange contracts to purchase currency or commodities in the forward market
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What have moves to modernise led to stockbrokers being taken over by?
Banks
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What are investment banks involved in?
Helping businesses that want to become PLC, ie listed on the stock exchange
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Other cards in this set
Card 2
Front
Why is it good to keep money in the banks?
Back
To earn interest so businesses can increase retained profit and help fund future investments
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