There are several financial functions of financial institutions. These are a number of financial institutions like banks, credit unions, asset management firms, building societies, stock brokerages and many more. These institutions are responsible for distributing financial resources in a planned way to the potential users. Again, there are a number of financial institutions that collects fund and provides the same for the necessary sector or individual. On the other hand, there are several financial institutions that acts as the middleman and joins the deficit and surplus units. There are several other functions of the financial institutions and investing money on behalf of the client is one of them.
According to the functions of financial institutions, these financial institutions can be categorized in several categories. These are as follows:
Deposit Taking Institutions
Finance and Insurance Institutions
- Investment Institutions
- Pension Providing Institutions
- Risk Management Institutions
At the same time, there are several government financial institutions that are assigned with the regulatory and supervisory functions. All these institutions have played a distinct role in fulfilling the financial and management needs of different industries. At the same time, these institutions have also shaped the economic scenario of the country.
The 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 loan. The finance companies get their funds by issuing obligations like bonds and so on. These companies are operating in a number of countries. On the other hand, there is the insurance companies that are involved in providing coverage for a lot of risk factors and at the same time, these companies also provide several investment options. The insurance companies provide loan for a number of purposes and at the same time, these companies are also involved in creating investment products.
The functions of financial institutions like stock exchanges, commodity markets, futures, currency and options exchanges are very important for the economy. These institutions are involved in creating financial claims and providing ownership ,for the same. At the same time, these institutions are also responsible for maintaining the liquidity in the market and manages the price change risks. As a part of their various services, these institutions provide investment opportunity to investors and helps the businesses to generate funds for various purposes.
The functions of financial institutions like investment banks are also very vital and are related to the investment sector. These companies are involved in a number of financial activities like underwriting securities, selling the securities to the investors, providing brokerage services, fund raising advice and many more.