Financial Institution Overview

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Category: Business and Industry

Date Submitted: 11/19/2012 10:36 AM

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A financial institution is an institution which collects funds from the public and places them in financial assets, such as deposits, loans, and bonds, rather than tangible property ( There are several different financial institutions in the United States today. These institutions are useful in helping to raise capital in a well-developed economy.

Some of the institutions include investment banks, commercial banks, financial services corporations, credit unions, pension funds, life insurance companies, mutual funds, ETFs, Hedge funds and private equity companies (Brigham & Houston, 2013).

Investment banks offer a broad array of financial products including equities, credit, rates, currency, commodities, and their derivatives. These financial institutions typically offer services worldwide. These institutions are known to help companies raise capital.

Commercial banks generally compete by offering the widest variety of services; however, they generally do not offer the highest interest rates on deposits or the lowest interest rates on loans ( Such large banks include Bank of America, Citibank, Wells Fargo and Chase to name just a few.

Financial services corporations combine different institutions into a single corporation. An example of how this works would be Citigroup corporation as it owns a commercial bank, investment banks, securities brokerages, insurance companies and leasing companies (Brigham & Houston, 2013).

Mutual funds are corporations that accept money from investors and purchase stocks and securities. By pooling funds together, the company reduces risks by diversification.

In the past, these financial institutions were heavily regulated and free flow of capital was restricted which did not help the efficiency of capital markets. However, many of the restrictions were lifted in the 1980s and 1990s in an effort to optimize capital flow. It is believed that the deregulation and...