Financial institutions, otherwise known as banking institutions, are corporations which provide services as intermediaries of financial.

Broadly, there are three major types of financial institutions.

  • Depository institutions – deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies;
  • Contractual institutions – insurance companies and pension funds.
  • Investment institutions – investment banks, underwriters, brokerage firms.

Financial institutions serve most people in some way, as financial operations are a critical part of any economy, with individuals and companies relying on financial institutions for transactions and investing. Governments consider it imperative to oversee and regulate banks and financial institutions because they do play such an integral part in the economy. Historically, bankruptcies of financial institutions can create panic.

Types of Financial Institutions:

Financial institutions offer a wide range of products and services for individual and commercial clients. The specific services offered vary widely between different types of financial institutions.

Financial institutions – Banks and similar business entities, such as thrifts or credit unions, offer the most commonly recognized and frequently used financial services: checking and savings accounts, certificates of deposit (CDs), home mortgages, and other types of loans for retail and commercial customers. Banks also act as payment agents via credit cards, wire transfers, and currency exchange.

6; specialize in providing services designed to facilitate business operations, such as capital expenditure financing and equity offerings, including initial public offerings (IPOs). They also commonly offer brokerage services for investors, act as market makers for trading exchanges, and manage mergers, acquisitions and other corporate restructurings.

Among the most familiar non-bank institutions are insurance companies. Providing insurance, whether for individuals or corporations, is one of the oldest financial services. Protection of assets and protection against financial risk, secured through insurance products, is an essential service that facilitates individual and corporate investments that fuel economic growth.

Investment companies and brokerages, such as mutual fund and exchange-traded fund (ETF) provider Fidelity Investments, specialize in providing investment services that include wealth management and financial advisory services. They also provide access to investment products that may range from stocks and bonds all the way to lesser-known alternative investments, such as hedge funds and private equity investments.

There’s also the rise of online-only banks that maintain no physical branches, and non-bank financial firms that provide niche financial services such as personal loans, money transfers, and specific investments.

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Sneha is a full-time writer at Nvestweekly and is passionate about Blockchain Technology. Leveraging over three years of experience in media, she covers the daily developments in the crypto ecosystem.

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