Question

Identify the major types of financial institutions and their significance in the financial system. Describe how the institutions were affected by the financial crisis.

175 word minimum

Answer 1

Major types of financial institution will be including various kinds of investment bankers and insurance companies along with commercial bank and they were impacted negatively during the financial crisis.

Financial institutions are important for management of of healthy financial system which will be promoting infusion of credit and accessibility of credit to a large group of people and they will also be promoting higher amount of liquidity and they will also help the Federal Reserve in order to establish proper monetary system in the economy so that money flow can be controlled.Financial institutions are also important for providing transparency and support to various borrowers and lenders and providing them with adequate investment options in the market so that there could be a high degree of credit availability and liquidity in the economy.

During the times of the financial crisis, These Financial institutions were impacted in a negative manner because they were exposed to bad Assets and bad lending so their assets were turning bad and their liabilities were increasing to a large extent and they were not able to cope with it and many of them merged with another companies and their even filed for the insolvencies and Federal Reserve had to step in and provide bailout programs to many of the Financial institutions.