Define financial institutions, and list its main types?
Depository institutions – e.g. Commercial banks, savings and loans, and credit unions. They raise funds mainly by collecting deposits from the general public, and also through short-term borrowing from other banks.
B. Insurance companies – e.g. MetLife (mainly life insurance), Hartford Insurance (mainly life and property insurance), and Prudential Insurance. These raise money primarily by issuing insurance policies and collecting premiums. They may also borrow in the debt capital markets.
C. Pension funds – e.g. CalPERS (California Public Employee Retirement System, the largest pension fund in the US). These are funded by deductions from member employees’ paychecks, and by the employers themselves
d. Securities firms – e.g. Goldman Sachs, Morgan Stanley. They raise money in the debt markets, issuing shares, etc.
E. Finance companies – e.g. Payday loan and tax refund advance companies. These raise funds by issuing debt or by borrowing from other institutions, but do not take deposits.