Overview of Depository Financial Institutions
Depository financial institution is one, which specializes in depository lending. The services offered by the depository financial institutions are bit different from that of other financial service providers. The depository financial institutions are also known as deposit-taking financial organizations. The primary function of these institutions is to accept deposits and use the money thus collected for lending purposes.
Services of Depository Financial Institutions
The lending activities of depository financial institutions basically include channelizing funds for mortgage loans, commercial loans and real estate loans. The depository financial institutions work in association with the credit unions and many other cooperative organizations.
With their customized service and extensive network of branches the depository financial institutions are experiencing growing customer over the passage of time.
As per the 2005 data, over 9000 depository financial institutions are functional in the territory of the United States. The US depository financial institutions operate through their 92,000 branch offices placed in different states of the United States.
The depository financial institutions have set a benchmark in the field of commercial banking in US. The funds collected by the deposit-taking financial organizations of US are used to meet the credit requirements of others. The system of unit banking is an integral part of the deposit taking financial service. It prevents the growth of monopoly in the commercial banking sector of the United States.
The depository financial institutions make use of the deposits kept in checking accounts. The deposits constitute the liability of the depository financial institutions. The credits offered by them come under the asset side.
The use of hedging based on maturity ensures operational security of the depository financial institution. The hedging mechanism is mostly applied on the commercial lendings for short time period. The depository financial institutions also apply the technique of hedging for liabilities accrued from students, households, farmers and other clients who are devoid of financial capital.