Fiscal establishments such as Bankss. insurance companies and pension financess are besides known as ‘Financial Intermediaries’ . They dominate the fiscal scene all around the Earth. It is virtually impossible to pass or salvage or impart or put money presents without acquiring involved with some sort of fiscal mediator in one manner or another. Although all have similar maps. yet they are different. They are as follow…

Banks versus Non-Banks – A Brief Comparison

A crisp differentiation has been drawn between the commercial Bankss. on one manus. and all other fiscal establishments on the other. such as life insurance companies. belongings and casualty insurance companies. nest eggs and loans associations. recognition brotherhoods. common salvaging Bankss. common financess. and other types of nonbank fiscal establishments.

-Banks: harmonizing to Li and Kim ( 1987 ) . “Banks facilitate trade and commercialism by supplying:

safekeeping for hard currency deposited in the current. nest eggs and fixed sedimentation histories

a convenient and a safe agency of doing payments through the current history. or by manner of bank bill of exchanges. bank transportations and measures of exchange ;

Finance in the signifier of loans. overdrafts or discounted measures of exchange ;

Advice on fiscal investings or on the credit-worthiness of clients. local or abroad” .

There are three types of Bank ; Central Bank. Commercial Banks. and besides Merchant Banks. The three will be described as the following…

Central Bank

The Central Bank controls the operation of the whole banking system in a state and carries out its pecuniary policy. Its main maps are to publish. control and modulate the supply of money in the state ; to move as a banker and fiscal advisor to the authorities ; to move as banker to commercial Bankss ; and to advance pecuniary stableness and a sound fiscal construction in the state. Some illustrations of Central Bank are Bank Indonesia. Bank Negara ( Malaysia ) . and while in Singapore. the Monetary Authority of Singapore.

Commercial Banks:

These Bankss are privately-owned. profit-seeking fiscal establishments. Harmonizing to Ritter and Silber ( 1989 ) . commercial Bankss are the most outstanding of all fiscal establishments. These Bankss are besides the most widely diversified in footings of both liabilities and assets. Their major beginning of financess used to be demand sedimentations ( look intoing histories ) . but today. nest eggs and clip sedimentations ( including certifications of sedimentation ) have become more valuable. With these financess. such Bankss buy a broad assortment of assets. runing from short-run authorities securities to long-run concern loans every bit good as place mortgages. The services include accepting sedimentations. supplying a convenient agency of doing payments. imparting to clients. every bit good as supplying other services. Examples of Commercial Banks are Citibank. Hong Kong and Shanghai Banking Corporation. Bank Bumiputra and Malayan Banking.

Merchant Banks:

Merchant Bankss are specialized fiscal establishments which complement and supplement the activities and services already offered by bing fiscal establishments. These Bankss deal chiefly in medium and long-run finance for big corporations ; they besides provide fiscal services that are non provided by other bing fiscal establishments. Examples are Malayan International Merchant Bankers. Merchant Bankers Malaysia. etc.

After the types of Bankss above. along with their descriptions. let’s now turn to single fiscal establishments. These establishments maps about the same like normal Bankss ; they are into investings and loaning. However. like other establishments. they have their ain regulations in making their funding concerns.

Savingss and Loan Associations ( S & A ; Ls )

Before. Savingss and Loan Associations ( S & A ; Ls ) ’s original intent is to promote household thrift and place ownerships. by offering mortgage loans services. These establishments have been turning quickly since the past few decennaries. particularly in the 1950s and 1960s where they grew more quickly than commercial Bankss. These associations. as said by Mishkin ( 2003 ) . obtain financess chiefly through nest eggs sedimentations. besides known as portions. every bit good as clip and checkable sedimentations. Today. they are capable to the same demands merely like commercial Bankss. in footings of sedimentations. Besides. the line that separates such associations and commercial Bankss has become indistinct recently. and hence. has been competitory.

Life Insurance Companies

Life insurance companies. such as Prudential or Manulife Insurance Companies. and even VIG. have been a popular pick for people to put their money. It has been a twofold benefits manner of puting or salvaging money. we are non merely salvaging our money. but besides have our lives insured. This is particularly for those who are low-cost. normally Middle to Upper categories. It’s good because a life insurance guarantees the payment of the in agreement amount of money during a person’s decease. although that individual has to pay annually premiums for the in agreement life old ages within specific age demands. This is profitable because the individual will acquire involvements. which normally is high plenty.

Pension and Retirement Fundss

Harmonizing to Kamerschen ( 1984 ) . pension financess hold their assets in the signifier of corporate stocks. although some other long-run claims. such as existent
estate. corporate bonds. authorities duties. and many others are held. Such financess are normally for those into retirement and pension age. besides. these retirement financess are usually chosen as a beginning of investing with the aim of secured and guaranteed retirement life.

Property and Casualty Insurance Company

Such insurance companies normally specialize in many sorts of insurance coverages. from air current and fire insurance. to burglary and wellness insurance. These companies beginning of financess are premiums paid by policyholders. Harmonizing to McCarty ( 1982 ) . belongings and casualty insurance companies differ from life insurance companies … they deal with smaller claims and smaller premiums than a life insurance company. they have less to put in big. long-run mortgages … belongings and casualty companies invest chiefly in more liquid. short-run securities” . Common illustrations are auto insurance. fire insurance. and many others.

Gross saless and Consumer Finance Companies

Finance companies raise financess by “both short- and long-run adoption. Short-run adoption is done both through Bankss and by sale of open-market paper ( commercial paper ) ” . ( Cooper and Fraser. 1983 ) . However. little finance companies tend to trust more on bank credits. but larger finance companies normally depend about wholly on commercial documents for their short-run financess. Here. the investings are chiefly in consumer credits and loans to concerns. Today. these houses have been progressively involved in both concern and consumer credits.

Recognition Unions

Recognition brotherhoods. as said by Zimmerer and Scarborough ( 2002 ) . non-profit-making fiscal co-ops that promote salvaging and supply loans to their members. are best known for doing consumer and auto loans. However. they don’t merely do loans for anyone ; a individual. in order to measure up for a loan. must be a member. Credit brotherhoods besides perform similar loaning patterns merely like Bankss. but normally for little sum of loan.

Common Fundss

These fiscal mediators obtain fundss by selling portions to people and utilize the net incomes to buy diversified portfolios of stocks and bond. Its profitable as it allows purchasers to pool their resources in order to take advantage of lower cost minutess when purchasing immense stocks or bonds. Harmonizing to Mishkin ( 2003 ) . common financess allow stockholders to keep more diversified portfolios. Another advantage of keeping common financess is that the purchaser is able to sell his portion anytime. although the rate will be determined by the securities retentions.

Money Market Mutual Fundss

Harmonizing to Kamerschen ( 1984 ) . these financess enable a broad assortment of rescuers and investors to set money in money market instruments. such as Treasury measures and bank-negotiable certifications of sedimentation. These financess have grown out of a assortment of past involvement rate ordinances that favored big savers” . Basically. they pool the financess of many smaller rescuers. and so use the financess to buy higher giving up of larger denomination duties.

Stock Brokerage Houses

Normally. the loaning activities here are performed by stockbrokers. These people normally offer loans to their clients at lower involvement rates than Bankss. or besides known as border loan. The lower rate is because these stockbrokers are being supported by collaterals. such as the stocks and bonds in the customer’s portfolio and besides. such collaterals are of high quality and extremely liquid.