LeoGlossary: Financial Institution

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Financial Institutions are companies that provide financial services to individuals and businesses. Basically the "products" they deal in are financial.

Some of the services provides are:

Since these organization deal with money, they tend to be heavily regulated by governments. The services are provided by financial intermediaries who adhere to the regulations.

Financial institutions are essential because they provide a marketplace for money and assets so that capital can be efficiently allocated to where it is most useful. Lenders provide resources to those who are in need, either on a short or long term basis.

Commercial banks find borrowers while investment banks find investors.

Depository Institutions

Some financial institutions make money by collecting deposits. These entities are depository institutions and use the deposits to earn a higher return as compared to the the interest rate it is paying. These are traditional banks and credit unions. The difference between the two of these is who owns the institution.

Banks are owned by their shareholders whereas credit unions are owned by the members.

Banks take in deposits and pool it. Then it lends the money to borrowers who are in need of the capital. It is the merging of savers and borrowers.

This contrasts with non-depository institutions that do not take in deposits. The money that is utilized by these firms come from operations. These are brokerage firms and insurance companies.

Investment Institutions

Financial institutions that provide investment services are called investment institutions. These can be brokerage firms, exchanges, and investment banks. These can provide access to securities along with management services.

These entities target both individuals and corporations. The services to corporations can be asset management as well as underwriting. Investment banks also are market makers, helping to provide liquidity.

Hedge funds are a popular investment institutions especially among high net worth individuals. These are some of the biggest in terms of assets under management.

Types of Financial Institutions

The 9 Types of Financial Institutions are:

Largest Banks

The largest banks in the world by revenue.

  • Industrial and Commercial Bank Of China Ltd. (IDCBY)
  • China Construction Bank Corp. (CICHY)
  • JPMorgan Chase & Co. (JPM)
  • Bank of America Corp. (BAC)
  • Wells Fargo & Co. (WFC)
  • Citigroup Inc. (C)
  • BNP Paribas (BNPQY)
  • HSBC Holdings (HSBC)
  • Banco Santander (SAN)
  • China Merchants Bank (CIHKY)

Top 10 Banks By Market Capitalization (as of 3/20/23)

NameTickerMarket Cap
JP Morgan ChaseJPM$376 billion
Bank of AmericaBAC$225 billion
Industrial and Commercial Bank of China (ICBC)IDCBY$224 billion
China Construction BankCICHY`$163 billion
Bank of ChinaBACHF$158 billion
Agricultural Bank of ChinaACGBY$154 billion
Morgan StanleyMS$145 billion
Wells FargoWFC$144 billion
HSBCHSBC$133 billion
Royal Bank of CanadaRY$130 billion


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