Financial institutions : Companies known as financial institutions (FI) are in charge of supplying the market with money by transferring funds from investors to the businesses in the form of loans, deposits, and investments.
Commercial banks, trust companies, investment banks, brokerage houses or investment dealers, insurance companies, and asset management funds are among the most prevalent forms of financial institutions. Credit unions and financial institutions are further examples.
To manage the amount of money in circulation and safeguard consumers, financial institutions are subject to regulation.
Types of Financial Institutions
1. Banking Financial Institutions
The most well-known banking financial institution is called Bank. Between depositors, or providers of funds, and lenders, or users of funds, a financial intermediary operates as a middleman. A banking financial institution’s primary responsibilities are to collect deposits and then use those money to provide loans to its clients, who will use them to finance purchases, education, business expansion, investments in development, etc.
By providing different payment services, such as debit cards, credit cards, check facilities, direct deposit facilities, bank drafts, etc., a bank also serves as a payment agent. Convenience, earning interest, and safety are the main benefits of bank deposits. A bank’s capacity to lend money depends on the quantity of excess reserves it holds as well as the proportion of cash reserves.
2. Non-Banking Financial Institutions
There are also a number of non-banking financial institutions, such as investment banks, leasing businesses, insurance firms, investment funds, and finance corporations. An institution that provides financial services other than banking does so.
Investment banks provide businesses with services such as corporate advising services, trading in securities, underwriting debt and equity issuance, and derivative transactions;
Insurance companies and other financial entities provide protection against certain losses in exchange for a fee. Mutual and pension funds serve as savings institutions where investors can put their money into vehicles for collective investment and earn interest.
The primary distinction between the two categories of financial organizations is that banking financial institutions, unlike non-banking financial institutions, can accept deposits into a variety of savings and demand deposit accounts.
Examples of Financial Institutions in the Banking Sector
Here are some instances of financial institutions in banking. The top 15 US banks by total assets are as follows:
Non-Banking Financial Institutions Here is the list of some non-banking financial institutions that are:
This business, Loandepot Inc. (LDI), offers online mortgage application services.The corporation has more than 6.6 billion dollars in assets overall. On NYSE, stocks are traded.
The PennyMAC This is a California-based mortgage company. One of the most well-known lenders in the US today, the business was started in 2008.
American International Group (AIG) is a well-known New York-based corporation. The business offers insurance solutions to clients who are both institutional and non-institutional.
Digital payment solutions are provided by PayPal Holdings Inc. It maintains accounts in 56 different currencies and operates in 150 countries.
By the way, the founder of the business is Peter Thiel, who built his fortune alongside X.com’s owner, Elon Musk.
Source: Mckpage.com
