A financial institution (FI) is an establishment that focuses on dealing with

financial transactions, such as investments, loans and deposits. Conventionally, financial

institutions are composed of organizations such as banks, trust companies, insurance
companies and investment dealers.

A financial institution (FI) is an establishment that focuses on dealing with financial

transactions, such as investments, loans and deposits. Conventionally, financial institutions
are composed of organizations such as banks, trust companies, insurance companies and
investment dealers. Almost everyone has deal with a financial institution on a regular basis.
Everything from depositing money to taking out loans and exchange currencies must be
done through financial institutions.

Financial institutions are organizations that process monetary transactions, including

business and private loans, customer deposits, and investments. They're key to thefinancial
intermediation process, whereby financial institutions transfer funds from those who save
money to those who borrow money. Let's take a look at the three main types of financial
institutions: depository, non- depository, and investment.

Depository Institutions
Depository institutions allow customers to deposit money in an account. You're probably
most familiar with these types of financial institutions if you have a checking or savings account.
Examples of depository institutions include commercial banks and credit unions. Commercial
banks are for-profit entities that provide a number of services to their account holders. These
types of financial institutions usually operate at the local, regional or national level, have large
advertising budgets, and charge higher fees than a credit union. Credit unions are non-profit
entities owned by accountholders, also called members. You must be affiliated with a certain
organization or live within a certain proximity to the credit union to be a member. Fees are
usually lower at credit unions. They're typically found at the local level.
It's relatively easy to understand how financial intermediation works at depository institutions
because customers deposit money in accounts, and the institutions loan that money to
borrowers. Now let's see how non-depository institutions play a role in this process.

financial institution - Investment & Finance Definition

A company that takes in money from individuals or companies and uses those funds

to purchase financial assets such as deposits, loans, and securities as opposed to

tangible property. Financial institutions are split into two types: depository and nondepository. Depository firms are banks, credit unions, and savings and loans that
pay interest on deposits and then lend money in the form of interest-earning loans.
Non-deposit firms offer pension funds, life and property/ casualty insurance policies,
and retirement income in exchange for receiving premiums payments or
contributions to retirement accounts from their clients.

financial
institution
Definition of FINANCIAL INSTITUTION
1.

: a company that deals with money (as a bank, savings

and loan, credit union, etc.) <You can get a loan at a fi nancial
institution.>

Financial institution
An enterprise such as a bank whose primary business and function is to collect money from the
public and investit in financial
assets such as stocks and bonds, loans and mortgages, leases, and insurance policies.
Copyright 2012, Campbell R. Harvey. All Rights Reserved.

Financial Institution

An organization, which may be either for-profit or non-profit, that takes money from clients and
places it in any of avariety of investment
vehicles for the benefit of both the client and the organization. Common examples of financialins
titutions are retail
banks, which take deposits into safekeeping and use them to make loans to other customers,and
insurance
companies, which do not take deposits, but provide guarantees of payment if a certain situationo
ccurs in exchange for a premium. See also: Depository institution, Non-depository institution.
Farlex Financial Dictionary. 2012 Farlex, Inc. All Rights Reserved

Financial institution.
Any institution that collects money and puts it into assets such as stocks, bonds, bank deposits, or
loans is considered afinancial institution. There are two types of financial institutions: depository
institutions and nondepository institutions.
Depository institutions, such as banks and credit unions, pay you interest on your deposits and us
e the deposits to makeloans. Nondepository institutions, such as insurance companies, brokerage
firms, and mutual fund companies, sell financialproducts.
Many financial institutions provide both depository and nondepository services.
Dictionary of Financial Terms. Copyright 2008 Lightbulb Press, Inc. All Rights Reserved.

financial institution
an institution that acts primarily as a FINANCIAL
INTERMEDIARY in channelling fundsfrom LENDERS to BORROWERS (e.g. COMMER
CIAL BANKS, BUILDING SOCIETIES), or from SAVERS to INVESTORS(e.g. PENSION
FUNDS, INSURANCE COMPANIES). See FINANCIAL SYSTEM.
Collins Dictionary of Business, 3rd ed. 2002, 2005 C Pass, B Lowes, A Pendleton, L
Chadwick, D OReilly and M Afferson

financial institution
an institution that acts primarily as a FINANCIAL
INTERMEDIARY in channelling fundsfrom LENDERS to BORROWERS (e.g. COMMER
CIAL BANKS, BUILDING SOCIETIES) or from SAVERS to INVESTORS(e.g. PENSION
FUNDS, INSURANCE COMPANIES). See FINANCIAL SYSTEM.

In finance and economics, a financial institution is an institution that provides financial services for
its clients or members. One of the most important financial services provided by a financial institution
is acting as a financial intermediary. Most financial institutions are regulated by the government.

Function[edit]
Financial institutions provide services as intermediaries of financial markets. Broadly speaking, there
are three major types of financial institutions:[1][2]
1. Depositary institutions deposit-taking institutions that accept and manage deposits and
make loans, including banks, building societies, credit unions, trust companies,
and mortgage loan companies;
2. Contractual institutions insurance companies and pension funds; and
3. Investment institutions investment banks, underwriters, brokerage firms.
Some experts see a trend toward homogenisation of financial institutions, meaning a tendency to
invest in similar areas and have similar business strategies. A consequence of this might be fewer
banks serving specific target groups, for example small-scale producers could be under served. [3]

Definition

Institution which collects funds from the public and places them in financial assets, such
as deposits, loans, and bonds, rather than tangible property.

A financial institution can be defined as an organization that processes financial

transactions such as loans, deposits and investments. Almost every person deals
with various financial institutions on a daily basis. Whether it is depositing money,
applying for loans or exchanging currencies, financial institutions are the nucleus of
these activities. Here is a short overview on the list of financial institutions and a
summary on their roles.
Commercial Banks

A Commercial bank accepts deposits & provides security in a convenient way to its
customers. Previously, a part of the prime purpose of these banks was to provide
security to the customers money. Commercial banks also generate loans that

individuals & businesses utilize to purchase goods or even expand business

operations. A Commercial Bank is also a type of Financial Institution that often
performs roles as a payment agent within a country & between nations.
Investment Banks

While an investment bank is also referred to as a normal bank, its operations are
very different from the deposit-gathering commercial banks. An investment bank is
an institution that acts as a financial arbitrator that performs a wide array of
services for governments and businesses.
Insurance Companies

An Insurance company pools risk by gathering premiums from a large number of

people who wish to protect themselves or their loved ones from particular losses.
These losses may include car accidents, fire incidents, disability, lawsuit, illness or
death. Insurance companies also help individuals & companies to manage risk &
preserve wealth.
Brokerage Firms

Brokerages act as arbitrators between buyers & sellers. They mainly assist in
securities transactions. A Brokerage company is compensated via commissions after
successful completion of transactions. For e.g. when the trade order for some stocks
is carried out, a person generally pays a transaction fee. He pays this fee for the
efforts the brokerage company puts in, to implement the trade.
So broadly speaking, Financial Institutions are Private or public organizations that
act as facilitators between savers & borrowers of funds.

The functions and regulations of financial institutions have changed since our most recent recession
and will likely continue to be governed at a higher level going forward. This is critical for the success
of our future economy.
Financial institutions help provide opportunity for our economic growth and improve our living
standards. They do this by assisting as a liaison for those who have savings (dollars) and those who

have a need for capital. Institutions typically will raise dollars from other institutions or individuals
then loan those dollars to other entities at a cost (interest rate). This is how financial institutes help
aid the flow of money through our economy.
There are several types of financial institutions, such as banks, credit unions, brokerage companies,
insurance companies and trust companies all of which have different primary functions and assist
with the transferring of funds from investors to companies in need of funds.

Banks
Banks are corporations with a state or federal charter, which can accept deposits, invest in securities
and make loans to businesses or individuals. Loans are considered to be the most valuable assets
for commercial banks and deposit accounts are their main liability. Some banks may provide other
financial services for its members. Banks are regulated on a federal level and have government
protection for their depositors (FDIC insurance).

Credit unions
FDIC insures depositor accounts for commercial banks and most non-bank thrift institutions, such as
credit unions. Credit unions have similar services as banks but are focused more for small savers
and checkable type of transactions. They provide lending services and are owned by their members.

Brokerage companies
Brokerage companies are large corporations and are an intermediary to investors and investment
companies. They offer financial services typically to buy and sell stocks for clients.

Insurance companies
An insurance company is another type of financial institution that offers investment vehicles for
investors along with other products which may provide financial protection by way of insuring
businesses or individuals.
These financial institutions are the backbone of our economy. With improved regulation, we hope
they will continue to prosper and develop a strong foundation for our country.

Q: What's the definition of nondepositoryfinancial institution?

A: nondepository financial institution: a financialinstitution that funds their investment activities from the
sale of securities or insurance Read More
Source: www.kgbanswers.com
Q: What is the definition and function offinancial institutions.
A: A financial institution accepts deposits from consumers, and "places the money in a variety of
investment vehicles," such as loans and mutual funds, to benefit ... Read More
Source: www.answers.com
Q: What is the definition of non bank financialinstitution.
A: A non-bank financial institution does'nt have a full banking license nor supervised by a national
regulatory banking Read More
Source: www.chacha.com
Q: What is financial definition of financialinstitution?
A: An organization, which may be either for-profit or non-profit, that takes money from clients and places
it in any of a variety of investment vehicles for the be... Read More
Source: financial-dictionary.thefreedictionary.com
Q: Do Nonprofits Fall within the Definition of Financial Institutio...
A: The Act defines a financial institution as anyinstitution the business of which is engaging
infinancial activities as described in section 4(k) of the Bank

ntroduction - Types Of Financial

Institutions And Their Roles
A financial institution is an establishment that conducts financial transactions such as
investments, loans and deposits. Almost everyone deals with financial institutions on a
regular basis. Everything from depositing money to taking out loans and exchanging
currencies must be done through financial institutions. Here is an overview of some of the
major categories of financial institutions and their roles in the financial system.

Commercial Banks
Commercial banks accept deposits and provide security and convenience to their
customers. Part of the original purpose of banks was to offer customers safe keeping for
their money. By keeping physical cash at home or in a wallet, there are risks of loss due to
theft and accidents, not to mention the loss of possible income from interest. With banks,
consumers no longer need to keep large amounts of currency on hand; transactions can be
handled with checks, debit cards or credit cards, instead.
Commercial banks also make loans that individuals and businesses use to buy goods or
expand business operations, which in turn leads to more deposited funds that make their
way to banks. If banks can lend money at a higher interest rate than they have to pay for
funds and operating costs, they make money.
Banks also serve often under-appreciated roles as payment agents within a country and
between nations. Not only do banks issue debit cards that allow account holders to pay for
goods with the swipe of a card, they can also arrange wire transfers with other institutions.
Banks essentially underwrite financial transactions by lending their reputation and credibility
to the transaction; a check is basically just a promissory note between two people, but
without a bank's name and information on that note, no merchant would accept it. As
payment agents, banks make commercial transactions much more convenient; it is not
necessary to carry around large amounts of physical currency when merchants will accept
the checks, debit cards or credit cards that banks provide.
Investment Banks
The stock market crash of 1929 and ensuing Great Depression caused the United States
government to increase financial market regulation. The Glass-Steagall Act of 1933 resulted
in the separation of investment banking from commercial banking.
While investment banks may be called "banks," their operations are far different than
deposit-gathering commercial banks. An investment bank is a financial intermediary that
performs a variety of services for businesses and some governments. These services
include underwriting debt and equity offerings, acting as an intermediary between an issuer
of securities and the investing public, making markets, facilitating mergers and other
corporate reorganizations, and acting as a broker for institutional clients. They may also

provide research and financial advisory services to companies. As a general rule,

investment banks focus on initial public offerings (IPOs) and large public and private share
offerings. Traditionally, investment banks do not deal with the general public. However, some
of the big names in investment banking, such as JP Morgan Chase, Bank of America and
Citigroup, also operate commercial banks. Other past and present investment banks you
may have heard of include Morgan Stanley, Goldman Sachs, Lehman Brothers and First
Boston.
Generally speaking, investment banks are subject to less regulation than commercial banks.
While investment banks operate under the supervision of regulatory bodies, like
the Securities and Exchange Commission, FINRA, and the U.S. Treasury, there are typically
fewer restrictions when it comes to maintaining capital ratios or introducing new products.
Insurance Companies
Insurance companies pool risk by collecting premiums from a large group of people who
want to protect themselves and/or their loved ones against a particular loss, such as a fire,
car accident, illness, lawsuit, disability or death. Insurance helps individuals and companies
manage risk and preserve wealth. By insuring a large number of people, insurance
companies can operate profitably and at the same time pay for claims that may arise.
Insurance companies use statistical analysis to project what their actual losses will be within
a given class. They know that not all insured individuals will suffer losses at the same time
or at all.
Brokerages
A brokerage acts as an intermediary between buyers and sellers to facilitate securities
transactions. Brokerage companies are compensated via commission after the transaction
has been successfully completed. For example, when a trade order for a stock is carried
out, an individual often pays a transaction fee for the brokerage company's efforts to
execute the trade.
A brokerage can be either full service or discount. A full service brokerage provides
investment advice, portfolio management and trade execution. In exchange for this high
level of service, customers pay significant commissions on each trade. Discount brokers
allow investors to perform their own investment research and make their own decisions. The

brokerage still executes the investor's trades, but since it doesn't provide the other services
of a full-service brokerage, its trade commissions are much smaller.
Investment Companies
An investment company is a corporation or a trust through which individuals invest in
diversified, professionally managed portfolios of securities by pooling their funds with those
of other investors. Rather than purchasing combinations of individual stocks and bonds for a
portfolio, an investor can purchase securities indirectly through a package product like a
mutual fund.
There are three fundamental types of investment companies: unit investment trusts (UITs),
face amount certificate companies and managed investment companies. All three types
have the following things in common:

An undivided interest in the fund proportional to the number of shares held

Diversification in a large number of securities

Professional management

Specific investment objectives

Let's take a closer look at each type of investment company.

Unit Investment Trusts (UITs)
A unit investment trust, or UIT, is a company established under an indenture or similar
agreement. It has the following characteristics:

The management of the trust is supervised by a trustee.

Unit investment trusts sell a fixed number of shares to unit holders, who receive a
proportionate share of net income from the underlying trust.

The UIT security is redeemable and represents an undivided interest in a specific

portfolio of securities.

The portfolio is merely supervised, not managed, as it remains fixed for the life of the
trust. In other words, there is no day-to-day management of the portfolio.

Face Amount Certificates

A face amount certificate company issues debt certificates at a predetermined rate of
interest. Additional characteristics include:

Certificate holders may redeem their certificates for a fixed amount on a specified
date, or for a specific surrender value, before maturity.

Certificates can be purchased either in periodic installments or all at once with a

lump-sum payment.

Face amount certificate companies are almost nonexistent today.

Management Investment Companies

The most common type of investment company is the management investment company,
which actively manages a portfolio of securities to achieve its investment objective. There
are two types of management investment company: closed-end and open-end. The primary
differences between the two come down to where investors buy and sell their shares - in the
primary or secondary markets - and the type of securities the investment company sells.

Closed-End Investment Companies: A closed-end investment company issues

shares in a one-time public offering. It does not continually offer new shares, nor
does it redeem its shares like an open-end investment company. Once shares are
issued, an investor may purchase them on the open market and sell them in the
same way. The market value of the closed-end fund's shares will be based on supply
and demand, much like other securities. Instead of selling at net asset value, the
shares can sell at a premium or at a discount to the net asset value.

Open-End Investment Companies: Open-end investment companies, also known

as mutual funds, continuously issue new shares. These shares may only be
purchased from the investment company and sold back to the investment company.
Mutual funds are discussed in more detail in the Variable Contracts section.

Read more: Series 26 Exam Guide: Investment Companies

Nonbank Financial Institutions
The following institutions are not technically banks but provide some of the same services
as banks.

Savings and Loans

Savings and loan associations, also known as S&Ls or thrifts, resemble banks in many
respects. Most consumers don't know the differences between commercial banks and
S&Ls. By law, savings and loan companies must have 65% or more of their lending in
residential mortgages, though other types of lending is allowed.
S&Ls emerged largely in response to the exclusivity of commercial banks. There was a time
when banks would only accept deposits from people of relatively high wealth, with
references, and would not lend to ordinary workers. Savings and loans typically offered
lower borrowing rates than commercial banks and higher interest rates on deposits; the
narrower profit margin was a byproduct of the fact that such S&Ls were privately or mutually
owned.
Credit Unions
Credit unions are another alternative to regular commercial banks. Credit unions are almost
always organized as not-for-profit cooperatives. Like banks and S&Ls, credit unions can be
chartered at the federal or state level. Like S&Ls, credit unions typically offer higher rates on
deposits and charge lower rates on loans in comparison to commercial banks.
In exchange for a little added freedom, there is one particular restriction on credit unions;
membership is not open to the public, but rather restricted to a particular membership
group. In the past, this has meant that employees of certain companies, members of certain
churches, and so on, were the only ones allowed to join a credit union. In recent years,
though, these restrictions have been eased considerably, very much over the objections of
banks.
Shadow Banks
The housing bubble and subsequent credit crisis brought attention to what is commonly
called "the shadow banking system." This is a collection of investment banks, hedge funds,
insurers and other non-bank financial institutions that replicate some of the activities of
regulated banks, but do not operate in the same regulatory environment.
The shadow banking system funneled a great deal of money into the U.S. residential
mortgage market during the bubble. Insurance companies would buy mortgage bonds from

investment banks, which would then use the proceeds to buy more mortgages, so that they
could issue more mortgage bonds. The banks would use the money obtained from selling
mortgages to write still more mortgages.
Many estimates of the size of the shadow banking system suggest that it had grown to
match the size of the traditional U.S. banking system by 2008.
Apart from the absence of regulation and reporting requirements, the nature of the
operations within the shadow banking system created several problems. Specifically, many
of these institutions "borrowed short" to "lend long." In other words, they financed long-term
commitments with short-term debt. This left these institutions very vulnerable to increases in
short-term rates and when those rates rose, it forced many institutions to rush to liquidate
investments and make margin calls. Moreover, as these institutions were not part of the
formal banking system, they did not have access to the same emergency funding facilities.
(Learn more in The Rise And Fall Of The Shadow Banking System.)

ntroduction - Types Of Financial

Markets And Their Roles
A financial market is a broad term describing any marketplace where buyers and sellers
participate in the trade of assets such as equities, bonds, currencies and derivatives.
Financial markets are typically defined by having transparent pricing, basic regulations on
trading, costs and fees, and market forces determining the prices of securities that trade.
Financial markets can be found in nearly every nation in the world. Some are very small,
with only a few participants, while others - like the New York Stock Exchange (NYSE) and
the forex markets - trade trillions of dollars daily.
Investors have access to a large number of financial markets and exchanges representing a

vast array of financial products. Some of these markets have always been open to private
investors; others remained the exclusive domain of major international banks and financial
professionals until the very end of the twentieth century.
Capital Markets
A capital market is one in which individuals and institutions trade financial securities.
Organizations and institutions in the public and private sectors also often sell securities on
the capital markets in order to raise funds. Thus, this type of market is composed of both the
primary and secondary markets.
Any government or corporation requires capital (funds) to finance its operations and to
engage in its own long-term investments. To do this, a company raises money through the
sale of securities - stocks and bonds in the company's name. These are bought and sold in
the capital markets.
Stock Markets
Stock markets allow investors to buy and sell shares in publicly traded companies. They are
one of the most vital areas of a market economy as they provide companies with access to
capital and investors with a slice of ownership in the company and the potential of gains
based on the company's future performance.
This market can be split into two main sections: the primary market and the secondary
market. The primary market is where new issues are first offered, with any subsequent
trading going on in the secondary market.
Bond Markets
A bond is a debt investment in which an investor loans money to an entity (corporate or
governmental), which borrows the funds for a defined period of time at a fixed interest rate.
Bonds are used by companies, municipalities, states and U.S. and foreign governments to
finance a variety of projects and activities. Bonds can be bought and sold by investors on
credit markets around the world. This market is alternatively referred to as the debt, credit or
fixed-income market. It is much larger in nominal terms that the world's stock markets. The
main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds,
notes and bills, which are collectively referred to as simply "Treasuries." (For more, see

the Bond Basics Tutorial.)

Money Market
The money market is a segment of the financial market in which financial instruments with
high liquidity and very short maturities are traded. The money market is used by participants
as a means for borrowing and lending in the short term, from several days to just under a
year. Money market securities consist of negotiable certificates of deposit (CDs), banker's
acceptances, U.S. Treasury bills, commercial paper, municipal notes, eurodollars, federal
funds and repurchase agreements (repos). Money market investments are also called cash
investments because of their short maturities.
The money market is used by a wide array of participants, from a company raising money
by selling commercial paper into the market to an investor purchasing CDs as a safe place
to park money in the short term. The money market is typically seen as a safe place to put
money due the highly liquid nature of the securities and short maturities. Because they are
extremely conservative, money market securities offer significantly lower returns than most
other securities. However, there are risks in the money market that any investor needs to be
aware of, including the risk of default on securities such as commercial paper. (To learn
more, read our Money Market Tutorial.)
Cash or Spot Market
Investing in the cash or "spot" market is highly sophisticated, with opportunities for both big
losses and big gains. In the cash market, goods are sold for cash and are delivered
immediately. By the same token, contracts bought and sold on the spot market are
immediately effective. Prices are settled in cash "on the spot" at current market prices. This
is notably different from other markets, in which trades are determined at forward prices.
The cash market is complex and delicate, and generally not suitable for inexperienced
traders. The cash markets tend to be dominated by so-called institutional market players
such as hedge funds, limited partnerships and corporate investors. The very nature of the
products traded requires access to far-reaching, detailed information and a high level of
macroeconomic analysis and trading skills.

Derivatives Markets
The derivative is named so for a reason: its value is derived from its underlying asset or
assets. A derivative is a contract, but in this case the contract price is determined by the
market price of the core asset. If that sounds complicated, it's because it is. The derivatives
market adds yet another layer of complexity and is therefore not ideal for inexperienced
traders looking to speculate. However, it can be used quite effectively as part of a risk
management program. (To get to know derivatives, read The Barnyard Basics Of
Derivatives.)
Examples of common derivatives are forwards, futures, options, swaps and contracts-fordifference (CFDs). Not only are these instruments complex but so too are the strategies
deployed by this market's participants. There are also many derivatives, structured
products and collateralized obligations available, mainly in the over-the-counter (nonexchange) market, that professional investors, institutions and hedge fund managers use to
varying degrees but that play an insignificant role in private investing.
Forex and the Interbank Market
The interbank market is the financial system and trading of currencies among banks and
financial institutions, excluding retail investors and smaller trading parties. While some
interbank trading is performed by banks on behalf of large customers, most interbank
trading takes place from the banks' own accounts.
The forex market is where currencies are traded. The forex market is the largest, most liquid
market in the world with an average traded value that exceeds $1.9 trillion per day and
includes all of the currencies in the world. The forex is the largest market in the world in
terms of the total cash value traded, and any person, firm or country may participate in this
market.
There is no central marketplace for currency exchange; trade is conducted over the counter.
The forex market is open 24 hours a day, five days a week and currencies are traded
worldwide among the major financial centers of London, New York, Tokyo, Zrich, Frankfurt,
Hong Kong, Singapore, Paris and Sydney.
Until recently, forex trading in the currency market had largely been the domain of large

financial institutions, corporations, central banks, hedge funds and extremely wealthy
individuals. The emergence of the internet has changed all of this, and now it is possible for
average investors to buy and sell currencies easily with the click of a mouse through online
brokerage accounts. (For further reading, see The Foreign Exchange Interbank Market.)
Primary Markets vs. Secondary Markets
A primary market issues new securities on an exchange. Companies, governments and
other groups obtain financing through debt or equity based securities. Primary markets, also
known as "new issue markets," are facilitated by underwriting groups, which consist of
investment banks that will set a beginning price range for a given security and then oversee
its sale directly to investors.
The primary markets are where investors have their first chance to participate in a new
security issuance. The issuing company or group receives cash proceeds from the sale,
which is then used to fund operations or expand the business. (For more on the primary
market, see our IPO Basics Tutorial.)
The secondary market is where investors purchase securities or assets from other
investors, rather than from issuing companies themselves. The Securities and Exchange
Commission (SEC) registers securities prior to their primary issuance, then they start
trading in the secondary market on the New York Stock Exchange, Nasdaq or other venue
where the securities have been accepted for listing and trading. (To learn more about the
primary and secondary market, read Markets Demystified.)
The secondary market is where the bulk of exchange trading occurs each day. Primary
markets can see increased volatility over secondary markets because it is difficult to
accurately gauge investor demand for a new security until several days of trading have
occurred. In the primary market, prices are often set beforehand, whereas in the secondary
market only basic forces like supply and demand determine the price of the security.
Secondary markets exist for other securities as well, such as when funds, investment banks
or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary
market trade, the cash proceeds go to an investor rather than to the underlying
company/entity directly. (To learn more about primary and secondary markets, read A Look

at Primary and Secondary Markets.)

The OTC Market
The over-the-counter (OTC) market is a type of secondary market also referred to as a
dealer market. The term "over-the-counter" refers to stocks that are not trading on a stock
exchange such as the Nasdaq, NYSE or American Stock Exchange (AMEX). This generally
means that the stock trades either on the over-the-counter bulletin board (OTCBB) or
the pink sheets. Neither of these networks is an exchange; in fact, they describe themselves
as providers of pricing information for securities. OTCBB and pink sheet companies have far
fewer regulations to comply with than those that trade shares on a stock exchange. Most
securities that trade this way are penny stocksor are from very small companies.
Third and Fourth Markets
You might also hear the terms "third" and "fourth markets." These don't concern individual
investors because they involve significant volumes of shares to be transacted per trade.
These markets deal with transactions between broker-dealers and large institutions through
over-the-counter electronic networks. The third market comprises OTC transactions between
broker-dealers and large institutions. The fourth market is made up of transactions that take
place between large institutions. The main reason these third and fourth market transactions
occur is to avoid placing these orders through the main exchange, which could greatly affect
the price of the security. Because access to the third and fourth markets is limited, their
activities have little effect on the average investor.

Financial institutions include banks, credit unions, asset management firms, building
societies, and stock brokerages, among others. These institutions are responsible for
distributing financial resources in a planned way to the potential users.
There are a number of institutions that collect and provide funds for the necessary
sector or individual. On the other hand, there are several institutions that act as the
middleman and join the deficit and surplus units. Investing money on behalf of the client
is another of the variety of functions of financial institutions.Financial institutions can
be categorized as follows:

Deposit Taking Institutions

Finance and Insurance Institutions

Investment Institutions

Pension Providing Institutions

Risk Management Institutions

At the same time, there are several governmental financial institutions assigned with regulatory and
supervisory functions. These institutions have played a distinct role in fulfilling the financial and management
needs of different industries, and have also shaped the national economic scene.
Deposit taking financial organizations are known as commercial banks, mutual savings banks, savings
associations, loan associations and so on.
The primary functions of financial institutions of this nature are as follows:
Accepting Deposits
Providing Commercial Loans
Providing Real Estate Loans
Providing Mortgage Loans
Issuing Share Certificates
Finance companies provide loans, business inventory financing and indirect consumer loans. These companies
get their funds by issuing bonds and other obligations. These companies operate in a number of countries. On
the other hand, there are insurance companies that provide coverage for a variety of risk factors and they also
provide several investment options.Insurance companies provide loans for a number of purposes and create
investment products.
The functions of financial institutions, such as stock exchanges, commodity markets, futures, currency, and
options exchanges are very important for the economy. These institutions are involved in creating and
providing ownership for financial claims. These institutions are also responsible for maintaining liquidity in
the market and managing price change risks. As part of their various services, these institutions provide
investment opportunities and help businesses to generate funds for various purposes.
The functions of financial institutions like investment banks are also vital and related to the investment sector.
These companies are involved in a number of financial activities, such as underwriting securities, selling
securities to investors, providing brokerage services, and fund raising advice.

Credit Unions
The credit unions are the co-operative financial institutions that are owned by the members of the union. The
major difference between the credit unions and banks is that the credit unions are owned by the members
unlike banks.
The policies of credit unions are governed by a volunteer Board of Directors that is elected by and from the
membership itself. This board of directors also decides on the interest rates to be charged. According to the
regulation of credit unions, only the members of the credit union are eligible to deposit money in the union or
borrow money from the union. The credit unions are always committed and dedicated to the members and
ensure to improve the financial status of the members. The size of the credit unions may vary in a large
manner. There are credits unions available both with handful of members to thousands of members.
The credit unions are generally non-profit organizations. The credit union can also be termed as profit
enterprise dedicated to earn profit for its members. The profits earned by the union are received by the
members in the forms of dividends. The dividends are paid on savings that are taxed as ordinary income.
It has been seen that in the USA, the dividend rates on shares offered by the credit unions are higher. The credit
unions also charge lower interest rates than banks in the USA. Usually credit unions have a lower cost of funds
than the commercial banks.
The credit unions also offer several financial services like banks, but the terminology used here are different
from the banks. The credit unions offer the services of share accounts, share draft accounts, share term
certificates, credit cards and online banking services.
Depending on the financial structure of the country, the functionality of credit unions may vary in different
countries. The operations of the credit unions of UK, credit unions of Canada and U.S credit unions are
different from each other.

Types of Financial Institutions

Financial institutions are the firms that provide financial services and advice to their
clients. The financial institutions are generally regulated by the financial laws of the
government authority.
Various types of financial institutions are as follows:

Commercial Banks

Credit Unions

Stock Brokerage Firms

Asset Management Firms

Insurance Companies

Finance Companies

Building Societies

Retailers

Role of Financial Institutions

The various financial institutions generally act as an intermediary between the capital market and debt market.
But the services provided by a particular institution depends on its type.
The financial institutions are also responsible to transfer funds from investors to the companies.
Typically, these are the key entities that control the flow of money in the economy.
Services Offered by Various Financial Institutions
The services provided by the various types of financial institutions may vary from one institution to another.
For example,
The services offered by the commercial banks are
insurance services, mortgages,
loans and
credit cards.

Various types of financial institutions are as follows:

Commercial Banks institutions
Credit Unions institutions
Stock Brokerage Firms institutions
Asset Management Firms institutions
Insurance Companies institutions
Finance Companies institutions
Building Societies institutions
Retailers institutions
The services provided by the brokerage firms, on the other hand, are different and they are
Insurance,
Securities,
Mortgages,

Loans,
Credit cards,
Money market and
Check writing.
The insurance companies offer
Insurance services,
Securities,
Buying or selling service of the real estates,
Mortgages,
Loans,
Credit cards and
Check writing.
The credit union is co-operative financial institution, which is usually controlled by the members of the union.
The major difference between the credit unions and banks is that the credit unions are owned by the members
having accounts in it.
The stock brokerage firms are the other types of financial institutions that help both the corporations and
individuals to invest in the stock market.
Another type of financial institution is the asset management firms. The prime functionality of these firms is to
manage various securities and assets to meet the financial goals of the investors. The firms also offer fund
management advice and decisions to the corporations and individuals.

Largest Banks in the World

Banks are financial intermediary that accepts deposits and channels those deposits into lending activities, either
directly or through capital markets. They connect customers with capital deficits to customers with capital
surpluses. Following is the list of Worlds Largest Banks
Banks are financial intermediary that accepts deposits and channels those deposits into lending activities, either
directly or through capital markets. They connect customers with capital deficits to customers with capital
surpluses. Following is the list of Worlds Largest Banks rank according to total Assets and market
capitalization:

List of Top Banks in the world

Rank

Bank name

City

Country

Assets US$m

Industrial & Commercial Bank of China Limited

Beijing

China

3124474

China Construction Bank Corporation

Beijing

China

2537402

BNP Paribas SA, France

Paris

France

2474078

Agricultural Bank of China Limited

Beijing

China

2405091

Bank of China Limited

Beijing

China

2291492

Deutsche Bank AG

Frankfurt am Main

Germany

2214678

Barclays Bank PLC

London

UK

2173936

Crdit Agricole SA

Montrouge

France

2112250

Japan Post Bank Co Ltd

Tokyo

Japan

1961701

10

JPMorgan Chase Bank National Association

New York

USA

1945467

11

The Bank of Tokyo-Mitsubishi UFJ Ltd

Tokyo

Japan

1760014

12

Socit Gnrale

Paris La Defense

France

1697721

13

The Royal Bank of Scotland plc

Edinburgh

UK

1688912

14

BPCE

Paris

France

1544145

15

Banco Santander SA

Boadilla del Monte

Spain

1533312

16

Sumitomo Mitsui Banking Corporation

Tokyo

Japan

1518269

17

Mizuho Bank Ltd

Tokyo

Japan

1437609

18

Bank of America NA

Charlotte

USA

1433716

19

Lloyds TSB Bank Plc

London

UK

1427395

20

Wells Fargo Bank NA

San Francisco

USA

1373600

21

China Development Bank Corporation

Beijing

China

1352212

22

Citibank NA

New York

USA

1346747

23

HSBC Bank plc

London

UK

1344088

24

UniCredit SpA

Milan

Italy

1162505

25

UBS AG

Zurich

Switzerland

1130736

26

ING Bank NV

Amsterdam

Netherlands

1082523

27

Bank of Communications Co Ltd

Shanghai

China

984514

28

Credit Suisse AG

Zurich

Switzerland

956681

29

Bank of Scotland plc

Edinburgh

UK

941235

30

Rabobank Nederland

Utrecht

Netherlands

926524

31

Postal Savings Bank of China Co Ltd

Beijing

China

920682

32

Nordea Bank AB (publ)

Stockholm

Sweden

866457

33

Intesa Sanpaolo SpA

Milan

Italy

860752

34

Crdit Agricole Corporate and Investment Bank

Paris La Defense

France

832791

35

The Hongkong and Shanghai Banking Corporation Limited

Hong Kong

Hong Kong

830456

36

The Toronto-Dominion Bank

Toronto

Canada

826814

37

Royal Bank of Canada

Montreal

Canada

825172

38

The Norinchukin Bank

Tokyo

Japan

805396

39

Banco Bilbao Vizcaya Argentaria SA

Madrid

Spain

800680

40

Commerzbank AG

Frankfurt am Main

Germany

755444

41

National Australia Bank Ltd

Melbourne

Australia

753146

42

Commonweath Bank of Australia

Sydney

Australia

746370

43

The Bank of Nova Scotia

Toronto

Canada

712987

44

Natixis

Paris

France

701115

45

Standard Chartered PLC

London

UK

674380

46

China Merchants Bank Co Ltd

Shenzhen

China

663352

47

Australia and New Zealand Banking Group Limited

Docklands

Australia

654920

48

Westpac Banking Corporation

Sydney

Australia

648969

49

Kreditanstalt fur Wiederaufbau (KfW)

Frankfurt am Main

Germany

638751

50

Shanghai Pudong Development bank Co. Ltd

Shanghai

China

607813

Source: Balance Sheet of respective banks March 2014

Banking is generally a highly regulated industry, and government restrictions on financial activities by banks
have varied over time and location. The current set of global bank capital standards is called Basel II. In some
countries such as Germany, banks have historically owned major stakes in industrial corporations while in
other countries such as the United States, banks are prohibited from owning non-financial companies. In Japan,
banks are usually the nexus of a cross-share holding entity known as the keiretsu. In Iceland, banks had very
light regulation prior to the 2008 collapse.Banks not only help in growth of the country economy but also give
stability to capital market.

Stock Brokerage Firms

Stock Brokerage Firms Overview
The stock brokerage firms are those entities, that are responsible for helping the
investors put their money in thestock market.
However, the stock brokerage firms are also useful in many other ways, especially for
the investors.The stock brokerage firms help their clients, the investors, by providing
them with accurate information regarding the workings of a stock market. The stock
brokerage firms are useful as they can help the investors get the maximum return from
their investments in the stock market.

Stock Brokerage Firms Types

There are primarily two types of stock brokerage firms, based on their mode of operation the online stock
brokerage firms and the off line stock brokerage firms. The off line stock brokerage firms are the traditional
stock brokerage firms. The online stock brokerage firms are those, who offer their services through the
Internet.

Online Stock Brokerage Firms

The online stock brokerage are the predominant form of stock brokerages at present. This has happened owing
to the coming of Internet and its increasing influence on the world of today. The online stock brokerage firms
are regarded as being extremely popular with the investors, by virtue of, the quality of the services, provided
by them.
The services of the online stock brokerage firms save the investor a lot of money and time, which may be
invested in other purposes. It is always easy for the investors to gather information on the online stock
brokerage firms and their services, as information on them are always found on the Internet.

Stock Brokerage Firms Procedures

There are certain steps, that an investor needs to follow before enlisting the services of a particular stock
brokerage firm. It is not advisable to trust a stock brokerage without having done some research on them
beforehand.
The investors need to thoroughly go through the website of the stock brokerage firm they are looking to do
business with. They may also read the testimonials of satisfied customers of that particular stock brokerage
firm. Normally these testimonials are available on the websites of these companies.

Top Asset Management Firms

Asset Management firms are companies that invests its clients pooled fund into securities that match its
declaredfinancial objectives. This is a list of top asset management firms of the world. Asset management
companies provide investors with more diversification and investing options than they would have by
themselves & attain their investment goals by proper management of assets.
There are a large number of asset management firms operating all over the world. These asset management
firms are famous for providing professional financial services to the corporations and finance companies on the
management of their assets. Thetop asset management firms of the world offer professional management
services for managing the shares andbonds of their clients.
The clients of the asset management firms may be insurance companies, corporations, pension funds or
individual investors. The primary goal behind the service of the asset management firms is to help the
investors attain their investment goals by proper management of assets.
Services like wealth management and portfolio management are also offered by the asset management
firms to their clients. Asset management is nothing but the investment management of collective investments
of the companies.
The asset management firms recruit proficient and knowledgeable investment managers to take the financial
decisions.
The investment managers are responsible for managing the assets of the companies and funds in the most
feasible way so that the investment ensures maximum profit on a given condition. For a fee, the asset
management firmprovides more diversification, liquidity, and professional management consulting service
than is normally available to individual investors. The diversification of portfolio is done by investing in such
securities which are inversely correlated to each other. They collect money from investors by way of floating
various mutual fund schemes.
Top Asset Management Firms:
Below is the list of Top 40 Top asset management firms Rank according to there Assets under management.
Ran
k

Company

Country

Assets under management,

US$b

Balance
sheet

BlackRock

US

4770

3/31/2015

Vanguard Group

US

3149

12/31/2014

State Street Global Advisors (SSGA)

US

2440

3/31/2015

Fidelity Investments

US

2025

12/31/2014

Allianz Asset Management (AAM)

Germany

1949

12/31/2014

J.P. Morgan Asset Management

US

1760

3/31/2015

BNY Mellon Investment Management

US

1740

3/31/2015

PIMCO (Pacific Investment Management

Company) (1)

US

1590

3/31/2015

Credit Suisse Group

Switzerland

1420

3/31/2015

10

AXA Group

France

1383

12/31/2014

11

Capital Group

US

1397

12/31/2014

12

Deutsche Asset & Wealth Management

Germany

1255

3/31/2015

13

Prudential Financial

US

1204

3/31/2015

14

BNP Paribas

France

1049

3/31/2015

15

Amundi (2)

France

1033

3/31/2015

16

Goldman Sachs Group

US

1029

3/31/2015

17

Northern Trust

US

960.1

3/31/2015

18

Wellington Management Company

US

939

3/31/2015

19

Bank of America

US

902.9

12/31/2014

20

Franklin Resources (Franklin Templeton

Investments)

US

894.9

4/30/2015

21

Natixis Global Asset Management

France

887.6

3/31/2015

22

TIAA-CREF

US

866

3/31/2015

23

Invesco Ltd

US

810.9

4/30/2015

24

T. Rowe Price

US

772.7

3/31/2015

25

MetLife

US

771.6

12/31/2014

26

Legal & General Investment Management

(LGIM)

UK

739

12/31/2014

27

Prudential plc

UK

734.5

12/31/2014

28

Legg Mason, Inc

US

706.8

4/30/2015

29

Sumitomo Mitsui Trust Bank

Japan

682

12/31/2014

30

UBS Global Asset Management

Switzerland

680

3/31/2015

31

Mass Mutual

US

651

12/31/2014

32

Manulife Financial

Canada

648.1

3/31/2015

33

Sun Life Financial

Canada

641.5

3/31/2015

34

Ameriprise Financial

US

643.1

3/31/2015

35

Affiliated Managers Group (AMG)

US

638

3/31/2015

36

Generali Group

Italy

553.3

3/31/2015

37

Principal Financial

US

530

3/31/2015

38

Wells Fargo

US

493

3/31/2015

39

Schroders

UK

472.4

3/31/2015

40

HSBC Global Asset Management

UK

454

12/31/2014

ref: www.relbanks.com
The asset management firms also offer asset management services to the companies in order to maximize the
return of the company. It can also be an account at a financial institution that includes services like checking
services, debit cards, credit cards, and margin loans and also brokerage services. It has been seen that the
services offered by the top asset management firms are for high net-worth clients.
The process of asset management includes keeping the records of assets of the companies. The asset
management system is believed to have evolved from the maintenance management systems. The main
principle of maintenance management is to use work orders for the predictive and preventive maintenance.
Some of the top asset management firms of the world are UBS AG, State Street Global Advisors, Fidelity
Investments, BlackRock, Barclays Global Investors, JPMorgan Chase, Legg Mason, etc.
Over the last two years, many cases of misconduct have led to intense scrutiny of the asset management
industry by regulatory authorities around the world. Keeping pace with the wave of new regulations is a
challenge for every firm, but especially for smaller firms, which lack economies of scale.

What is Insurance?
Insurance is a form of risk management, primarily used to hedge against the risk of a contingent or an
uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in
exchange for payment.
An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying
the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain
amount of insurance coverage, called the premium.
Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and
practice.An insurance contract promises to make good to the insured a certain sum in consideration for a
payment in the form of premium from the insured.

The insured receives a contract called the insurance policy which details the conditions and circumstances
under which the insured will be compensated. Market integration among the world economies has largely
benefited the financial market.
Congruously, the insurance industry over the world has grown very rapidly. The statistics on the world
insurance conducted by Swiss Re shows that world insurance premium reached $4.3 trillion in 2010. Premium
collections from both life and non-life sources have increased by 3.2 and 2.1 percent respectively.
Insurance business and premiums for 2013 in leading countries is as follows:
Ran
k

Country

Life
Premiums

Non Life
Premiums

Amount

% change from
prior year

% of total world
premiums

United States

$532,858

$726,397

$1,259,25
5

-1.1%

27.13%

Japan

422733

108773

531506

-15.2

11.45

United
Kingdom

222893

106750

329643

2.4

7.1

P.R. China

152121

125844

277965

13.3

5.99

France

160156

94598

254754

7.2

5.49

Germany

114349

132813

247162

6.3

5.33

Italy

117978

50576

168554

17.1

3.63

South Korea

91204

54223

145427

-4.9

3.13

Canada

52334

73010

125344

0.6

2.7

10

Netherlands

26005

75135

101140

5.5

2.18

Last Updated: 23rd June 2015

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Commercial Vehicle Insurance

Motorcycle Insurance

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More Information on Insurance Country wise

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Fundamentals of Finance
Fundamentals of Finance plays a very important role in the present market driven world. Starting
from the process of production to distribution, the entrepreneur as well as the company needs
finance. The business enterprises as well as firms need finance to meet all of their short term,
medium term and long term needs.
The long-term financial need is generally to make investment on the fixed assets such as plants,
machines and buildings.
The short term financial needs is generally for working capital management.
The medium term financial needs generally for a period of 1 year to 5 years.
Finance cover following important topics:
Stock Market
Bond Market
Raising capital: debt vs. equity
Investment
Managing financial risk
World Economy
Stock Trading
Companies Financial Report
World Banks
World Capital Market
Taxation
Brand Management
Long-Term Sources Of Finance
Share capital or equity share

Preference shares

Retained earnings

Debentures

Bonds

Loans from financial institutions

Loan from state financial corporation

Loans from commercial banks

Asset securitization

International

Venture capital funding

Medium Term Sources Of Finance

Preference shares

Debentures

Bonds

Public deposits/fixed deposits for three years

Loans from financial institutions

Loan from state financial corporation

Loans from commercial banks

Lease financing / hire purchase financing

External commercial borrowings

Euro-issues

Foreign currency bonds

Short term sources of finance

Trade credit

Commercial banks

Advances received from customers

Various short-term provisions

Public deposits/fixed deposits for one years

Finance Table
Finance Companies

Business Finance

Small Business Finance

Financial Instruments

Hyudai Motors Finance

Finance Taxation

International Finance

Public Finance

International Micro Finance

Finance Ministry of Countries

Legal Finance

Car Finance

Finance Advisor

Loan Finance

Finance & Banking

Global Financial Market

Micro Finance

Household Finance

Financial Services

Real Estate Finance

Honda Finance

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Financial Planning

Finance Organisation

Last Updated on : 23rd June 2015

Darlington Building Society

Darlington Building Society is one of the top building societies in the UK and offers a range of mortgage and
investment products. The society principally serves Country Durham, North Yorkshire and Tees Valley.
Darlington Building Society is a mutual organization and doesnt have any outside shareholders.
Hence, the society can use its profits enhancing the capital strength of the society and also provide protection
for the members funds. The Darlington Building Society has chosen to be so in the future also ensuring
benefits for the members of the society. The society focuses on the organization of the community and also
looks after the interests of the local people.
It also supports local sport, local charities and local arts apart from giving mortgage and home loan
solutions.Darlington Building Society is regulated by the Financial Services Authority and is a member of the
Building Societies Association.
The Home Insurance by Darlington is managed by Health Lambert Group, a member of the General Insurance
Standards Council. A member of the Association of British Insurers, Groupama Insurance Company Limited is
the insurer of the Darlington Mortgage Payment Protection.
It is regulated and authorized by Financial Services Authority of the UK .
The Darlington Investment Planning Limited is a subsidiary of the Darlington Building Society and is
authorized by the Financial Services Authority of the UK. All the products and services offered by Darlington
Building Society is availed by UK residents only and are subject to be modified or withdrawn ay any time
without notice and are also subject to some changes. The mortgages offered by Darlington Building Society
deals with the property that are only in England, Wales or in Scotland. There are special conditions related to
each mortgage type offered by the Darlington Building Society and are also governed by the rules of the
society. The mortgages are generally given to those clients who are planning to buy the property in order to
live there and the property becomes a security for the loan taken by any borrower.
The basic types of mortgages that are offered by the Darlington Building Society are Fixed Rate Mortgage,
Discount Mortgage, Cashback Mortgage and Standard Variable Rate Mortgage. The fixed rate mortgage allows
the borrowers to plan their finances knowing that the rate of mortgage will not change for a fixed time period.
At the end of the fixed time period, the mortgage plan automatically turns to standard variable rate mortgage.
The discount rate mortgage gives the borrowers a privilege of reduction from current standard variable rate for
a set period. During the discount-rate period the borrower doesnt have to pay full standard variable rate of
interest but after the discount rate period is over, the mortgage becomes a standard variable rate mortgage. In
cashback mortgage, the borrower gets an amount back based on the percentage of the mortgages. In this plan,
the repayment increases or decreases according to the rise and fall of standard variable rate. In standard
variable rate mortgage, the borrower has to pay according to the changes in the mortgage rate.

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Last Updated on : 24th August 2013

Types of Financial Institutions

Financial institutions are the firms that provide financial services and advice to their
clients. The financial institutions are generally regulated by the financial laws of the
government authority.
Various types of financial institutions are as follows:

Commercial Banks

Credit Unions

Stock Brokerage Firms

Asset Management Firms

Insurance Companies

Finance Companies

Building Societies

Retailers

Role of Financial Institutions

The various financial institutions generally act as an intermediary between the capital market and debt market.
But the services provided by a particular institution depends on its type.

The financial institutions are also responsible to transfer funds from investors to the companies.
Typically, these are the key entities that control the flow of money in the economy.
Services Offered by Various Financial Institutions
The services provided by the various types of financial institutions may vary from one institution to another.
For example,
The services offered by the commercial banks are
insurance services, mortgages,
loans and
credit cards.

Various types of financial institutions are as follows:

Commercial Banks institutions
Credit Unions institutions
Stock Brokerage Firms institutions
Asset Management Firms institutions
Insurance Companies institutions
Finance Companies institutions
Building Societies institutions
Retailers institutions
The services provided by the brokerage firms, on the other hand, are different and they are
Insurance,
Securities,
Mortgages,
Loans,
Credit cards,
Money market and
Check writing.
The insurance companies offer
Insurance services,
Securities,
Buying or selling service of the real estates,
Mortgages,
Loans,
Credit cards and
Check writing.
The credit union is co-operative financial institution, which is usually controlled by the members of the union.
The major difference between the credit unions and banks is that the credit unions are owned by the members
having accounts in it.

The stock brokerage firms are the other types of financial institutions that help both the corporations and
individuals to invest in the stock market.
Another type of financial institution is the asset management firms. The prime functionality of these firms is to
manage various securities and assets to meet the financial goals of the investors. The firms also offer fund
management advice and decisions to the corporations and individuals.

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Last Updated on : 23rd June 2015

Regulations of Financial Institutions

Regulations of financial institutions differ from one country to another. The financial institution regulations are
delineated by the government authorities of different countries. The principal objective of these government
authorities is to regulate the financial activities going on in the country.
The financial regulatory bodies control the stock markets, bond markets, foreign exchange markets, and
various other segments of financial markets.
The financial regulations are laid out for the purpose of creating a fair and customer-friendly environment in
the financial market of a particular country, which is conducive for economic growth. Some of the examples of
financial regulatory bodies are the Federal Reserve Bank (United States), Reserve Bank of India (RBI),
Securities and Exchange Board of India (SEBI), the Financial Services Authority (FSA) in the United
Kingdom, the Securities and Exchange Commission (SEC) in the United States and many others.

The statutory objectives of the regulatory bodies of financial institutions include the following:
Market confidence: Sustaining confidence in the financial markets is one of the most important objectives of
the financial regulatory bodies
Consumer protection: Ensuring the most suitable level of customer protection
Public awareness: Encouraging public awareness about the financial market through imparting educational
programs
Eliminating financial crime: The financial regulations are designed for the purpose of reducing financial
crimes and frauds
The regulatory principles that are followed by the regulators of financial institutions include the following:
Role of management: Regulatory measures on the senior management of the financial institutions so that they
do not take decisions that are detrimental to the financial market
Innovation: Innovation should be facilitated with restriction so that the financial products and services
launched are compliant to the rules and regulations
International aspects: Strict monitoring should be there to see whether the international standards are
maintained or not
Efficiency and economy: The financial resources of a country should be used in the most prudent and
effective way
Proportionality: The financial regulations that are imposed should be proportional to the advantages that are
anticipated from the regulations
Competition: There should be strict supervision on the financial market for the purpose of minimizing harmful
effects of competition.

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Last Updated on : 27th June 2013

Functions of Financial Institutions

Financial institutions include banks, credit unions, asset management firms, building
societies, and stock brokerages, among others. These institutions are responsible for
distributing financial resources in a planned way to the potential users.
There are a number of institutions that collect and provide funds for the necessary
sector or individual. On the other hand, there are several institutions that act as the
middleman and join the deficit and surplus units. Investing money on behalf of the client
is another of the variety of functions of financial institutions.Financial institutions can
be categorized as follows:

Deposit Taking Institutions

Finance and Insurance Institutions

Investment Institutions

Pension Providing Institutions

Risk Management Institutions

At the same time, there are several governmental financial institutions assigned with regulatory and
supervisory functions. These institutions have played a distinct role in fulfilling the financial and management
needs of different industries, and have also shaped the national economic scene.
Deposit taking financial organizations are known as commercial banks, mutual savings banks, savings
associations, loan associations and so on.
The primary functions of financial institutions of this nature are as follows:
Accepting Deposits
Providing Commercial Loans
Providing Real Estate Loans
Providing Mortgage Loans
Issuing Share Certificates
Finance companies provide loans, business inventory financing and indirect consumer loans. These companies
get their funds by issuing bonds and other obligations. These companies operate in a number of countries. On
the other hand, there are insurance companies that provide coverage for a variety of risk factors and they also
provide several investment options.Insurance companies provide loans for a number of purposes and create
investment products.

The functions of financial institutions, such as stock exchanges, commodity markets, futures, currency, and
options exchanges are very important for the economy. These institutions are involved in creating and
providing ownership for financial claims. These institutions are also responsible for maintaining liquidity in
the market and managing price change risks. As part of their various services, these institutions provide
investment opportunities and help businesses to generate funds for various purposes.
The functions of financial institutions like investment banks are also vital and related to the investment sector.
These companies are involved in a number of financial activities, such as underwriting securities, selling
securities to investors, providing brokerage services, and fund raising advice.

More Information Related to Financial Institutions

Banks

Credit Unions

Indian Financial Institutions

Stock Brokerage

Community Development

Institutional Compliance

Financial Institutional Fraud

Financial Institutional Functions

Financial Institution Management

Financial Institution Ratings

Financial Institutional Regulation

Risk Management

International Role of Financial Institution

Stock Exchange

Trust Company

Financial Institution Valuation

Types of Financial Institution

Financial Institutional Security

Marketing in Financial Institution

Financial Institutional Insurance

Last Updated on : 23rd June 2015