Financial Institutions and Financial Services

Dacey Rankins
Member
Angemeldet: 2023-09-14 20:10:55
2023-11-13 18:43:57

In everyday life, everyone in one way or another comes into contact with the work of financial institutions. A financial institution is a special organization that, on the basis of a government permit (it is called a license), provides various services related to the use and movement of funds from one client to another.

In other words, financial institutions are organizations that provide financial services.
Financial services include:
  • banking services;
  • insurance services;
  • pension savings services;
  • buying and selling securities, and much more.
 
Every citizen interacts with financial institutions, in particular, in order to:
  • opening deposits in the bank;
  • issuance of bank cards;
  • insurance of their property or health, etc.
 
Note!
In this regard, we can say that financial organizations are an integral part of our life, and therefore, it is simply necessary to know their main types and principles of work.
Competent use of the capabilities of various financial organizations allows people to facilitate or speed up the solution of money problems. However, it is worth remembering:
  • A certain fee is required for the services of financial institutions (and you will see this below);
  • If you are going to use the services of any organization that is ready to help you with money, always be prudent and use the services of only reliable financial institutions.
Dacey Rankins
Member
Angemeldet: 2023-09-14 20:10:55
2023-11-14 17:28:54

As the main goal of their activities, financial institutions consider the attraction of free funds of citizens and the provision of funds on loan to those who need them.

  • Banks;
  • insurance companies;
  • pension funds;
  • credit unions;
  • investment funds, trust management companies of investors' funds;
  • brokerage companies;
  • dealer companies;
  • Stock exchanges.
 
We will start considering the activities of financial institutions with banks, because the services of these financial institutions are most in demand among the population.
 
The main activities of banks include:
  • credit services (granting loans for various purposes);
  • settlement operations (making the necessary payments on behalf of holders, depositors, etc.);
  • cash transactions (acceptance and disbursement of funds and valuables through the operating cash desk);
  • commission operations (issuance of orders to the bank's clients for transactions related to purchase and sale);
  • exchange rate transactions (purchase and sale of foreign currency and securities);
  • financial transactions.
 
Note!
Banking organizations also include special clearing institutions and leasing companies.
Clearing is a system of non-cash settlements between countries and companies.
Clearing Institutions provide their clients with guarantees for the timely settlement of settlements, the transmission of settlement and monetary documents, and account statements.

A leasing company acquires ownership of a specific property and transfers it for use to a third party for a long time for a fee. At the same time, the recipient of the property has the opportunity to redeem this property, paying for it in installments (in installments).

 
Depending on the role and purpose of accumulating household savings, non-bank credit and financial institutions can be:
  • insurance companies;
  • pension and charitable foundations;
  • credit unions;
  • investment companies;
  • savings and loan associations;
  • financial companies.

 

 

Insurance companies

 

form monetary funds at the expense of enterprises, organizations and the population, the funds of which are mainly intended for the payment of insurance compensation for damage in the event of certain events (insured events).
 

Pension funds are designed to organize the collection and accumulation of funds intended for the provision of pensions to citizens. In terms of the form of ownership, pension funds can be non-state and state-owned.


 

Charitable foundations

are usually not related to commercial activities. As a rule, they are aimed at solving humanitarian problems and supporting socially significant initiatives. Charitable foundations can finance education (universities, colleges, schools), research institutes, art centers, churches, various public organizations, as well as provide assistance to citizens in difficult life situations.
 

Credit unions

 

are established as cooperative organizations that accumulate the savings of their members and provide mutual credit. Citizens may be united in such unions on professional, religious, territorial or other grounds.
 
Investment companies stand out for the fact that, by issuing their own securities, they accumulate funds of the population and other investors, which they put into operation.
 
Savings and loan associations are organizations (credit institutions) whose main activity is to attract funds from the population for the purpose of long-term lending, purchase or construction of housing.
 
Financial companies specialize in lending to the sale of consumer goods. In addition, they can be established as separate structural units, branches, subsidiaries of banks, insurance companies and industrial firms producing consumer goods. Financial companies can apply various lending schemes, in some cases they can carry out leasing operations.
 
Companies engaged in financial activities as an intermediary are called brokerage companies.
 
A brokerage company is a company that buys or sells securities on behalf of clients. The brokerage company does not conclude transactions at its own expense.
 
The next type of financial organizations are dealer companies.
Dealers are companies or individuals who act as representatives between the manufacturer and the consumer.
 
In the field of stock and foreign exchange market, a dealer is considered as a commercial or state organization that formalizes the purchase and sale of shares on its own behalf and at its own expense.
 

A stock exchange is an organization that trades in a variety of securities.
The stock exchange organizes the supply and demand of various securities, and facilitates the conclusion of relevant transactions.


 
Note!
The Exchange itself and its staff do not make direct transactions with securities, but create the necessary conditions for their execution.

A currency exchange

is a place where foreign currency is freely bought and sold.
Dacey Rankins
Member
Angemeldet: 2023-09-14 20:10:55
2023-11-15 18:40:03
Financial institutions use many tools to manage and increase citizens' funds.
 
One of these tools is the investment of free funds of the population.
Investment is the allocation of capital in order to make a profit.
In addition to investments, citizens make savings.
Savings are the accumulated part of the monetary income of the population, intended to meet their needs in the future.
Note!
Savings are set aside for some purpose, usually it is the purchase of some thing, a car, real estate. The goal is also to create a kind of "safety cushion" for a rainy day.

In order to save their money, citizens most often turn to the bank.
Placing personal finances in accounts helps to save money, and placing them on deposits allows you to receive interest on the deposit, and this is an additional income.

It is worth noting that savings can earn interest, but if this interest does not cover inflation or is slightly higher than it, then it is still savings, i.e., it does not generate additional income.
 

Sometimes, investments in precious metals offered by banks or other financial organizations are used for savings purposes.


 
Note!
Investments, unlike savings, are intended not only to preserve, but also to increase the amount of money saved.
Note!
Investments always involve risk-based investments.
Investments are made in order to make a regular profit from the use of these funds.
Dacey Rankins
Member
Angemeldet: 2023-09-14 20:10:55
2023-11-20 19:09:07

A bank is a credit institution that has the exclusive right to carry out all banking operations.
Note!
Not all credit institutions are banks!
A credit institution is a legal entity that acts to make a profit (as the main purpose of its activities) on the basis of a special permit – a license obtained from the Central Bank.
The bank carries out banking operations, such as:
attraction of funds in deposits (on demand and for a certain period);
placement of such raised funds on its own behalf and at its own expense;
opening and maintenance of bank accounts for individuals and legal entities;
settlements on behalf of individuals and legal entities, including correspondent banks, on their bank accounts;
collection of funds, bills of exchange, payment and settlement documents and cash services for individuals and legal entities;
purchase and sale of foreign currency in cash and non-cash forms;
attraction of deposits and placement of precious metals;
issuance of bank guarantees;
Money transfers on behalf of individuals without opening bank accounts (except for postal transfers).
 
As a rule, people turn to the bank for these services. The most common of them are:
obtaining a loan;
Investing funds in a deposit (deposit).
 
Investing money in a deposit helps to accumulate savings, and a loan allows you to buy something that you do not have enough money for at the moment.

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