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The main functions of financial institutions are:
1. To help businesses manage risks e.g. by providing insurance in the case of insurance companies.
2. To provide corporate finance as is the case with banks, or investment trusts, which enable lots of investors to own shares in a range of companies.
Another function of financial institutions is the transformation of assets, which are acquired through markets, into a wider and more preferable form, which becomes their liability - this function is performed mainly by financial intermediaries, which is undeniably the most important category of financial institutions. Also financial institutions are involved in exchanging of assets on behalf of their customers. Other than that, exchanging of assets for their own personal accounts is also part of their job. Furthermore, financial institutions create financial assets for their customers and sell those assets to other market participants for a definite emolument. In addition to all these functions, financial institutions are also involved in providing investment advice to market participants and managing the portfolios of market participants.
4. Information of some types of FI
The credit union is co-operative financial institution, which is usually controlled by the members of the union. The major difference between the credit unions and banks is that the credit unions are owned by the members having accounts in it. The credit unions are generally non-profit organizations. The credit union can also be termed as profit enterprise dedicated to earn profit for its members. The profits earned by the union are received by the members in the forms of dividends. The dividends are paid on savings that are taxed as ordinary income. Depending on the financial structure of the country, the functionality of credit unions may vary in different countries. The operations of the credit unions of UK, credit unions of Canada and US credit unions are different from each other.
The stock brokerage firms are the other types of financial institutions that help both the corporations and individuals to invest in the stock market. There are primarily two types of stock brokerage firms, based on their mode of operation - the online stock brokerage firms and the off line stock brokerage firms. The off line stock brokerage firms are the traditional stock brokerage firms. The online stock brokerage firms are those, who offer their services through the Internet.
Another type of financial institution is the asset management firms . The prime functionality of these firms is to manage various securities and assets to meet the financial goals of the investors. The firms also offer fund management advice and decisions to the corporations and individuals.
Investment funds . These work like regulary companies. You buy th...
