Ajay Kumar at 21:45, 29 August 2023

2023-08-29T21:45:59Z

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{{short description|Institution that provides financial services for its clients or members}}
{{Redirect|Banking institutions|banks as financial institutions|Bank}}
{{More citations needed|date=March 2020}}
[[File:Banca Monte dei Paschi di Siena in Pisa.JPG|thumb|The [[List of oldest banks in continuous operation|oldest financial institution]] in the world, [[Banca Monte dei Paschi di Siena]], founded in 1472.]]
'''Financial institutions''', sometimes called '''banking institutions''', are [[business entities]] that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial institutions:<ref>{{cite book | last = Siklos | first = Pierre | title = Money, Banking, and Financial Institutions: Canada in the Global Environment | publisher = McGraw-Hill Ryerson | date = 2001 | location = Toronto | page = 40 | isbn = 0-07-087158-2}}</ref><ref>Robert E. Wright and Vincenzo Quadrini. Money and Banking: Chapter 2 Section 5: Financial Intermediaries.[http://www.saylor.org/site/wp-content/uploads/2012/06/ECON302-1.2-1st.pdf] Accessed July 24, 2012</ref>

# Depository institutions – [[Deposit (finance)|deposit]]-taking institutions that accept and manage deposits and make [[loan]]s, including [[bank]]s, [[Building society|building societies]], [[credit union]]s, [[Trust company|trust companies]], and [[mortgage loan]] companies;
# Contractual institutions – [[Insurance company|insurance companies]] and [[pension fund]]s
# Investment institutions – [[Investment banking|investment banks]], [[Underwriting|underwriters]], and other different types of financial entities managing investments.

Financial institutions can be distinguished broadly into two categories according to ownership structure:

* [[Commercial banks]]
* [[Cooperative banking|Cooperative banks]]

Some experts see a trend toward homogenisation of financial institutions, meaning a tendency to invest in similar areas and have similar business strategies. A consequence of this might be fewer banks serving specific target groups, and small-scale producers may be under-served.<ref>{{cite web |title=Too much of the same |author=Jayati Gosh |publisher=D+C Development and Cooperation/ dandc.eu |date=January 2013 |url=http://www.dandc.eu/en/article/globally-harmonised-banking-regulation-does-not-serve-developing-countries-needs}}</ref> This is why a target of the United Nations Sustainable Development Goal 10 is to improve the regulation and monitoring of global financial institutions and strengthen such regulations.<ref>{{Cite web|title=Goal 10 targets|url=https://www.undp.org/content/undp/en/home/sustainable-development-goals/goal-10-reduced-inequalities/targets.html|access-date=2020-09-23|website=UNDP|language=en|archive-date=2020-11-27|archive-url=https://web.archive.org/web/20201127140337/https://www.undp.org/content/undp/en/home/sustainable-development-goals/goal-10-reduced-inequalities/targets.html|url-status=dead}}</ref>

== Standard settlement instructions ==
Standard Settlement Instructions (SSIs) are the agreements between two financial institutions which fix the receiving agents of each [[counterparty]] in ordinary trades of some type. These agreements allow the related [[counterparty|counterparties]] to make faster operations since the time used to settle the receiving agents is conserved. Limiting each subject to an SSI also lowers the likelihood of a [[fraud]]. SSIs are used by financial institutions to facilitate fast and accurate cross-border payments.

==Regulation==
Financial institutions in most countries operate in a heavily regulated environment because they are critical parts of countries' economies, due to economies' dependence on them to grow the money supply via [[fractional-reserve banking]]. Regulatory structures differ in each country, but typically involve prudential regulation as well as consumer protection and market stability. Some countries have one consolidated agency that regulates all financial institutions while others have separate agencies for different types of institutions such as banks, insurance companies and brokers.

Countries that have separate agencies include the [[United States]], where the key governing bodies are the [[Federal Financial Institutions Examination Council]] (FFIEC), [[Office of the Comptroller of the Currency]] - National Banks, [[Federal Deposit Insurance Corporation]] (FDIC) State "non-member" banks, [[National Credit Union Administration]] (NCUA) - Credit Unions, [[Federal Reserve System|Federal Reserve]] (Fed) - "member" Banks, [[Office of Thrift Supervision]] - National Savings & Loan Association, State governments each often regulate and charter financial institutions.

Countries that have one consolidated financial regulator include: Norway with the [[Financial Supervisory Authority of Norway]], Germany with [[Federal Financial Supervisory Authority]] and Russia with [[Central Bank of Russia]].

=== Merits ===
Merits of raising funds through financial institutions are as follows:
# Financial institutions provide [http://www.worldbank.org/en/publication/gfdr/gfdr-2016/background/long-term-finance long term finance], which are not provided by [[commercial bank]]s;
# The funds are made available even during periods of depression, when other sources of finance are not available;
# Obtaining loan from financial institutions increases the goodwill of the borrowing in the capital market . Consequently, such a company can raise funds easily from other sources as well;
# Besides providing funds, many of these institutions provide financial, managerial and technical advice and consultancy to business firms;
# As repayment of loan can be made in easy installments, it does not prove to be much of burden on the business.

==See also==
{{colbegin}}
*[[Bank]]
*[[Consumer Credit Act 1974]] (UK law)
*[[Credit union]]
*[[Capital market]]
*[[Ethical banking]]
*[[Financial economics]]
*[[Fractional-reserve banking]]
*[[International financial institutions]]
*[[List of financial regulatory authorities by country]]
*[[Non-bank financial institution]]
*[[Savings and loan association]]
*[[Society for Worldwide Interbank Financial Telecommunication]]
*[[Cooperative banking]]
{{colend}}

==References==
{{Reflist|30em}}

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[[Category:Financial services organizations|Financial institution]]

Financial institution - Revision history

Ajay Kumar at 21:45, 29 August 2023