b) Information Technology - widely available information
c) Decreased Regulation - leads to international competition
d) Increased Use of Derivatives - “Risk Management”
e) Institutions - indirect investment through institutions is becoming more important
(>60% of all stock controlled by institutions - Pension Funds, Mutual Funds, Insurance
Companies, Investment Companies, etc.)
FINANCIAL INSTITUTIONS
A healthy economy depends heavily on efficient transfer of funds from savers to
individuals, businesses, and government who need capital i.e. link between borrowers
and lenders. Banks and other financial institutions are known as financial intermediaries
as they help create new securities.
Financial institutions provide four important services, which are expert advice,
Expertise in channelling funds, Maturity transformation, and Risk transformation.
Transmission of payment by using cheques, debit cards, credit cards, standing orders so
on without relying on cash.
Types of Financial Intermediaries/Institutions
- Depository Institutions
Banks, Credit Unions
- Institutional Investors
Pension Funds, Insurance Companies, Endowments
- Investment Intermediaries
Mutual Funds, Investment Banks, Securities Brokers and Dealers
Two main groups of banks are the retail banks and wholesale banks
Retail bank (primary) - they specialized in providing branch banking facilities to
members of the public, but they also lend to business, albeit often on a short-term basis.
Their business is in retail deposits and loan.
