Financial institutions are those organizations, that are involved in providing various types of financial services to their customers. The financial institutions are controlled and supervised by the rules and regulations delineated by government authorities.
Examples of financial institutions are the following:
Banks
Stock Brokerage Firms
Non Banking Financial Institutions
Building Societies
Asset Management Firms
Credit Unions
Insurance Companies
Some of the financial institutions also function as mediators in share markets and debt security markets. There the principal function of financial institutions is to collect funds from the investors and direct the funds to various financial services providers in search for those funds. Financial institutions deal with various financial activities associated with bonds, debentures, stocks, loans, risk diversification, insurance, hedging, retirement planning, investment, portfolio management, and many other types of related functions. With the help of their functions, the financial institutions transfer money or funds to various tiers of economy and thus play a significant role in acting upon the domestic and the international economic scenario. For carrying out their business operations, financial institutions implement different types of economic models. They assist their clients and investors to maximize their profits by rendering appropriate guidances. Financial institutions also impart a wide range of educational programs to educate the investors on the fundamentals of investment and also regarding the valuation of stock, bonds, assets, foreign exchanges, and commodities.
Financial institutions can be both private or public in nature. The most common forms of financial institutions can be categorized into the following types:
- Business finance company
- Mortgage finance company
- Car finance company
- Personal finance company
- Personal loan finance company
- Home finance company
- Corporate finance company
Thus, it can be concluded that a financial institution is that type of an institution, which performs the collection of funds from private investors and public investors and utilizes those funds in financial assets. The functions of financial institutions are not limited to a particular country, instead they have also become popular in abroad due to the growing impact of globalization.
For further details, please refer to the following links:
|