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Financial institutions

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are regulated by the government.

Broadly speaking, there are three major types of financial institutions:

Deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies

Insurance companies and pension funds;

Brokers, underwriters and investment funds.

Accounts types:

Checking accounts: A deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money.Money market account: A deposit account with a relatively high rate of interest, and short notice (or no notice) required for withdrawals.

Time deposit: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time.

The economic functions of banks include:

Issue of money, in the form of banknotes and current accounts subject to check or payment at the customer's order. Netting and settlement of payments – banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. Credit intermediation – banks borrow and lend back-to-back on their own account as middle men.Credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. Maturity transformation – banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long.

Money creation – whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of virtual money is created.

activities .Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses.

 

MY SPeCiALity

After graduating from the University most of my follow-students are going to work as financial managers. The main task and goal of any financial manager in a profit-seeking organization is to maximize the owners’ wealth through effective financial planning and analysis, asset management, and of financial capital. These same financial management functions must be performed by financial managers in non-for-profit organizations, such as governmental units or hospitals, in order to provide the level of service at acceptable costs.



At the University we study a lot of subjects: banking, mathematics, foreing languages, philosophy and others. We are to master all of them to be experts in our specific field. Finance can be defined as the art and science of managing money, and is concerned with the process, institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and governments. It can also be defined at both the aggregate or macro-level and the firm or micro level. Finance at the macro level is the study of financial institutions and financial markets and how they operate within the financial system. Finance at the micro level is the study if financial planning, asset management and fund raising for business firms and financial institutions. Financial markets, institutions or intermediaries and business financial management are basic elements of well-developed financial systems

 

 


Date: 2016-03-03; view: 1045


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