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: Depositary Institutions : Deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies Contractual Institutions: Insurance companies and pension funds; and Investment Institutes: Investment Banks, underwriters, brokerage firms. Function
Financial institutions provide service as intermediaries of financial markets. They are responsible for transferring funds from investors to companies in need of those funds. Financial institutions facilitate the flow of money through the economy. Standing settlement instructions
Standing Settlement Instructions (SSIs) are the agreements between two financial institutions which fix the receiving agents of each counter party in ordinary trades of some type. These agreements allow traders to make faster trades since time used to settle the receiving agent is conserved. Limiting the trader to an SSI also lowers the likelihood of a fraud. 1. -------------------------------------------------
Financial institutions in most countries operate in a heavily regulated environment as they are critical parts of countries' economies. Regulation 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...