How_Money_Works_-_The_Facts_Visually_Explained

Receives interest on loans,

which it invests

Receives premiums, which it

$ $ invests for interest and growth

$ $

IN

VESTMENT

IN

VESTMENT

$$$ $$ $$$ $$

Financial

institutions

Around the globe, money moves between banks, businesses, governments,

organizations, and individuals, crossing time zones, continents, and cultures.

At the heart of the global financial systems are the banks, hedge funds, pension

funds, and insurance companies that hold and invest the world’s money. Without

the liquidity that banks provide, organizations and individuals would find it hard

to borrow or save money, invest in existing businesses, or start up new businesses.

Services and fees

Financial institutions make money

primarily by lending out cash

at a higher interest rate than the

one they are paying to their

depositors. They also make

money by investing the cash

entrusted to them by customers,

and by buying and selling assets

for clients and charging a fee for

this service. They lose money

when debts are not repaid, or

only partially repaid, or in the

event that they make the wrong

investment decision. Does not have a^

banking license or is not

supervised by a banking

regulator. May provide

banking services but is

not allowed to hold

deposits from public.

See pp.82−83

Insures companies

and individuals against

named risks, invests

premiums, and pays

out claims under terms

of the policy schedule.

Required to reinsure

its own risks to prevent

collapse. Se e pp.78−79

Public and

investors

Non-bank

financial institution

Insurance

company

Commercial

bank

$$$ $$$

$ $ $ $

LOAN PREMIUMS

INSURANCE

PAYOUT S

INTEREST

US_070-071_OV_How_financial_instituations_make.indd 70 13/10/2016 16:17