Syllabus: Cambridge - IGCSE Economics
Module: 3.1 Money and Banking
Lesson: 3.1.2 Banking
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Introduction
What is a bank really for? Beyond ATMs and contactless cards lies a world of economic importance. This topic helps learners understand the role of banking in a modern economy — a foundation for both exam success and lifelong financial literacy.
The Cambridge IGCSE Economics syllabus (0455) places this topic in Unit 3: Money and Banking. Section 3.1.2 focuses on the types of banks, their functions, and how they impact the circular flow of income.
Key Concepts
Cambridge learners should be able to:
Differentiate between commercial banks and central banks.
Describe key functions of commercial banks, including accepting deposits, making loans, and providing means of payment.
Explain the role of central banks in issuing currency, setting interest rates, and maintaining financial stability.
Understand the importance of trust and regulation in banking systems.
Discuss how banking links to savings, investment, and consumer confidence.
This section supports foundational understanding for later topics, such as interest rates (3.2.2) and government monetary policy (6.1).
Real-World Relevance
The 2008 global financial crisis and the 2023 collapse of Silicon Valley Bank underline how critical banks are to economic health. Students can investigate how the Bank of England responded to crises — for example, with quantitative easing or raising the base rate.
Closer to home, many students may hold bank accounts with providers like Monzo or Santander. Exploring digital banking and fintech opens discussion on innovation and regulation, especially around data protection and fraud.
Mini case study idea: Compare how the Bank of England and the US Federal Reserve responded to inflation spikes post-COVID.
How It’s Assessed
This topic is typically tested through:
Paper 1 (Multiple Choice): e.g., identifying bank functions or central bank roles.
Paper 2 (Structured Questions): Explain questions (4 marks), Analyse (6 marks), or Discuss (8 marks).
Command words to focus on: define, explain, analyse, discuss.
Examiners look for clear understanding, relevant examples, and well-structured reasoning. Diagrams (e.g. circular flow of income) may enhance top-band responses.
Enterprise Skills Integration
Teaching this topic offers a rich context for developing:
Decision-making: Exploring interest rates and savings choices.
Critical thinking: Assessing the role of regulation in preventing crises.
Numeracy: Calculating simple interest or comparing loan options.
Financial literacy: Evaluating services from different types of banks.
Practical activities like mock bank account comparisons or role-play debates on interest rate changes can deepen engagement.
Careers Links
Banking links directly to Gatsby Benchmarks 4 (linking curriculum to careers) and 5 (encounters with employers). Relevant career paths include:
Banking and finance (e.g. retail banker, financial analyst)
Economics (e.g. policy adviser, central bank economist)
Fintech (e.g. product manager, compliance officer)
Invite guest speakers from local banks or use platforms like Speakers for Schools to broaden exposure to banking careers.
Teaching Notes
Common pitfalls: Students often confuse central and commercial bank roles. Reinforce distinctions with clear examples.
Stretch tasks: Analyse a central bank’s recent policy decision or evaluate the ethical role of banks in society.
Cross-curricular links: PSHE (financial education), Business Studies (functions of banks), Maths (interest rates).
Assessment prep: Use past Paper 2 questions focusing on banking and mark schemes for peer-assessment.
Digital tools: Try Padlet for class idea sharing or use Quizlet for banking terminology revision.
Start with relatable questions: “Who has a bank account?” or “What does your bank actually do for you?”
