An establishment which conducts financial transactions like deposits, loans, and investment is called a financial institution.
Many Categories Of Financial Institution
Commercial Banks – They accept deposits and provide convenience and security to their customers. They also make loans that both businesses and individuals use to expand their business operations or purchase goods. In turn, this can lead to more deposited funds. Banks are considered payment agents in the country and overseas. They make commercial transactions more convenient by providing checks, credit cards or debit cards to their customers.
Investment Banks – Their operations are far more different than commercial banks. Be aware that an investment bank is a financial intermediary which performs various services for businesses and some governments. These include underwriting debt and equity offerings, facilitating mergers, acting as a broker for an institutional client, and acting as intermediary between the investing public and an issuer of securities. As compared to commercial banks, investments banks are generally subjected to less regulation.
Insurance Companies – They collect premiums from people who want to protect themselves against a certain loss like car accident, lawsuit, fire, illness, or even death.
Brokerages – They act as an intermediary between sellers and buyers to facilitate securities transactions. They are being compensated through commission after the transaction has been completed.
Investment Companies – These are corporations through which people invest in diversified portfolios of securities by pooling their funds with other investors. Instead of buying different individual stocks and bonds for a portfolio, investors purchase securities indirectly via a package product like a mutual fund.
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