In financial economics, a financial institution
acts as an agent that provides financial services
for its clients. Financial institutions generally
fall under financial regulation from a
government authority.
Common types of financial institutions
include banks, Insurance Co, Leasing Co,
Investment Co, Mutual Funds
A bank is a commercial or state institution
that provides financial services, including
issuing money in various forms, receiving
deposits of money, lending money and
processing transactions and the creating of
credit.
A central bank, reserve bank or monetary
authority, is an entity responsible for the
monetary policy of its country or of a group
of member states, such as the European
Central Bank (ECB) in the European Union, the
Federal Reserve System in the United States
of America, State Bank in Pakistan.
Its primary responsibility is to maintain the
stability of the national currency and money
supply, but more active duties include
controlling subsidized-loan interest rates,
and acting as a “lender of last resort” to the
banking sector during times of financial crisis
A commercial bank accepts deposits from
customers and in turn makes loans, even in
excess of the deposits; a process known as
fractional-reserve banking. Some banks
(called Banks of issue) issue banknotes as
legal tender.
Investment banks help companies and
governments and their agencies to raise
money by issuing and selling securities in the
primary market. They assist public and
private corporations in raising funds in the
capital markets (both equity and debt), as
well as in providing strategic advisory
services for mergers, acquisitions and other
types of financial transactions.
A savings bank is a financial institution whose
primary purpose is accepting savings
deposits. It may also perform some other
functions.
For the purpose of poverty reduction
program, such kind of banks are working in
the different countries with the contribution
of UNO or World Bank.
In Pakistan 7 Micro Finance Banks are
providing services under the SBP prudential
regulation.
Islamic banking refers to a system of banking
or banking activity that is consistent with
Islamic law (Sharia) principles and guided by
Islamic economics. In particular, Islamic law
prohibits usury, the collection and payment
of interest, also commonly called riba in
Islamic discourse.
1. ZTBL
◦ The Zarai Taraqiati Bank Limited It
is also known as Agricultural
Development Bank of Pakistan
(ADBP).
◦ It is the premier financial
institution geared towards the
development of the agricultural
sector through the provision of
financial services and technical
know-how.
2. IDBP
Industrial Development Bank of Pakistan is
one of Pakistan's oldest development
financing institution created with the primary
objective of extending term finance for
investment in the manufacturing sector and
SME Sector of the economy.
3. SME Bank
Promote the business.
Positive impact on Financial environment.
Financing of projects.
Tell revenue generation schemes to
entrepreneurs.
Non-bank financial companies (NBFCs) also
known as a non-bank or a non-bank bank,
are financial institutions that provide banking
services without meeting the legal definition
of a bank, i.e. one that does not hold a
banking license.
Operations are, regardless of this, still
exercised under bank regulation. However
this depends on the jurisdiction, as in some
jurisdictions, such as New Zealand, any
company can do the business of banking, and
there are no banking licenses issued.
Non-bank institutions frequently acts as
suppliers of loans and credit facilities,
supporting investments in property,
providing services relating to events within
peoples lives such as funding private
education, wealth management and
retirement planning
however they are typically not allowed to take
deposits from the general public and have to
find other means of funding their operations
such as issuing debt instruments. In India,
most NBFCs raise capital through Chit Funds.
Generally, an "investment company" is a
company (corporation, business trust,
partnership, or limited liability company) that
issues securities and is primarily engaged in
the business of investing in securities.
An investment company invests the money it
receives from investors on a collective basis,
and each investor shares in the profits and
losses in proportion to the investor’s interest
in the investment company.
A lease or tenancy is the right to use or
occupy personal property or real property
given by a lessor to another person (usually
called the lessee or tenant) for a fixed or
indefinite period of time, whereby the
lessee obtains exclusive possession of the
property in return for paying the lessor a
fixed or determinable consideration
(payment).
Insurance companies may be classified as
1. Life insurance companies, which sell
life insurance, annuities and pensions
products.
2. Non-life or general insurance
companies, which sell other types of
insurance.
An investment which is comprised of a pool
of funds collected from many investors for
the purpose of investing in securities such as
stocks, bonds, money market securities and
similar assets.
Mutual funds are operated by money
mangers, who invest the fund's capital and
attempt to produce capital gains and income
for the fund's investors. A mutual fund's
portfolio is structured and maintained to
match the investment objectives stated in its
prospectus.
Stock brokers assist people in investing,
online only companies are called 'discount
brokerages', companies with a branch
presence are called 'full service brokerages'
or 'private client services.
Financial institutions provide a service as
intermediaries of the capital and debt
markets. They are responsible for
transferring funds from investors to
companies, in need of those funds. The
presence of financial institutions facilitate the
flow of cash through the economy.
To do so, savings accounts are pooled to
mitigate the risk brought by individual
account holders in order to provide funds for
loans. Such is the primary means for
depository institutions to develop revenue.
Should the yield curve become inverse, firms
in this arena will offer additional fee-
generating services including securities
underwriting, sales & trading, and prime
brokerage.
Financial analysis of an organization is
misleading when it is used to misrepresent
the organisation, its situation or its
prospects.
This type of deceit is sometimes used to
obtain money by misdirecting people to
invest in a stock market bubble, profiting
from the increase in value, then removing
funds before the bubble collapses, for
instance in a stock market crash.
To review, we have looked at the relationship
between institutions and Financial Markets.
This growing field of research may offer us a
new insight into the dynamics of economic
growth within and among various economies.
