Question

Define and detail the different types of financial institutions in the US.

Answer 1

Different types of financial institutions in the US.

1)The Central Bank-The Federal Reserve is the central bank in the US,it manages the banking activity in the country.It conducts the monetary policy of the economy.It also supervises and regulates the other financial institutions in the country.Federal Reserve is the banker of the banks and thus the common people have no access to this bank.

2)Commercial banks and Retail banks-Commercial banks deal with business houses,whereas retail banks deal with consumers.However most banks now cater both to business houses as well as consumers and are known as commercial banks.They provide various services like providing saving and current accounts,providing loans and mortgages as well as other related products.

The commercial banks are divided into various other banks depending on their size and types,which are discussed below

3)National Banks-Banks like Bank of America and Wells Fargo are examples of National banks in the US.Such banks have complex models and are known as The Big Banks.They have a large number of branches throughout the country.

4)Regional Banks-Regional Banks are those which usually operate within a region of a country like a state or a group of states.Examples of regional banks are the First Citizens and the Carter Bank and Trust.

5)Community Banks-Benchmark is an example of a community bank.Such banks are locally owned and operated.They cater to needs of businesses and families where the bank is located.They usually serve small rural communities like farmers.

6)Internet Banks-Internet banks is the new form of financial institutions.They do not have any physical location and they only cater to their customers in the virtual world.All the functions of the bank are done through the internet.

7)Saving And Loan associations-They are also known as thrifts.They specialize in providing saving type deposits,mortgages as well as other type of loans.They cater to both businesses as well as consumers however they can not have more than 20% of their lending in commercial loans.

8)Credit Unions-Credit unions are member owned financial institutions which are democratically controlled by its members,and cater to the financial needs of its members only.Credits unions may be that of teachers,military personnel etc.

9)Investment banks-An investment bank,assists individuals,or corporations in raising capital by underwriting or by acting as the clients agent while issuing securities,

10)Mutual Fund Companies-These companies pool money from the investors and purchase securities.Each fund invests in a different group of securities for the investors.Mutual Fund Companies cater to the general public.

11)Brokerage Firms-These financial institutions facilitate the buying and selling of securities between various investors.They help to deal in public stocks and other such securities.

12)Insurance Companies-Insurance companies insure their customers against loss.The customers pay a premium,in exchange of which the company promises them to protect them against certain losses which may arise at the occurance of certain events.Various types of insurance includes,life insurance,health insurance,vehicle insurance and so on.

13)Mortgage Companies-These institutions originate or fund mortgage loans for residential or commercial property.