The Financial Sector

It facilitates saving. Individuals and businesses deposit their excess money with financial intermediaries such as banks, which then lend these funds to those lacking sufficient capital.
The sector enables risk management. Through diversification associated with lending, it minimises the potential losses.
It assists in determining prices. The financial markets provide a venue where people can buy and sell securities, which helps figure out the value of these investments.
The sector contributes to economic development and growth. By channeling funds into productive use, it encourages investment in capital goods and ultimately the economic growth.

Commercial banks are profit-oriented organisations that accept deposits, give out loans and, through this process, create money.
Building societies are mutual organisations that primarily provide residential mortgages to their members using the mutual members’ savings.
Insurance companies provide a way for individuals and corporations to smooth out their income by protecting them against unforeseen financial losses.
Investment banks provide advisory based financial services to individuals, corporations, and governments. They often assist these entities with raising capital.

The money market is a sector of the economy where the borrowing and lending of short term securities occur.
The capital market is a marketplace for long-term finance, i.e., bonds and shares.
The foreign exchange market facilitates the exchange of one currency for another. It is crucial for global trade and investment.

Interest rates are the cost of borrowing or the reward for saving. They have a significant impact on household consumption and business investment.
Inflation is the overall general upward price movement of goods and services in an economy.
Exchange rates refer to the value of one currency for the purpose of conversion to another.

Financial sector regulation aims to prevent market failures, protect consumers, maintain market confidence, and promote competition.
The Bank of England plays a pivotal role in the UK’s financial system. It is the government’s banker and the bankers’ bank, a “lender of last resort”.
The Financial Conduct Authority (FCA) is a regulatory body in the UK that operates independently of the UK Government. Its aim is to regulate financial firms which provide services to consumers.