8714688
Description
Mind Map by Syaeirra Nass, updated more than 1 year ago
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Created by Syaeirra Nass
about 9 years ago
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OVERVIEW OF FINANCIAL
MARKETS, INSTITUTIONS &
MONEY (II)
- COMMERCIAL BANKS
- Largest and most diversified. highly regulated intermediaries.
- Liabilities: Deposit accounts of various sorts and other source of funds.
- Asset: Loans in all denominations to consumers, businesses, state & local governments.
- Also engaged in other activities i,e, trust deparmetns, leasing operations, underwriting securitites.
- Largest and most diversified. highly regulated intermediaries.
- NON-BANK FINANCIAL CORPORATIONS
- BUILDING SOCIETIES
- Authorised deposit-taking institutions (ADIs) - accept retail deposits & provide loans to clients with
a traditional emphasis on home loan lending - structured as listed entities or mutuals.
- Competitive advantage with highly regulated banks - disappeared when interest rate
reforms - diminished i.e. some merged, some converted to banks, some collapsed.
- Authorised deposit-taking institutions (ADIs) - accept retail deposits & provide loans to clients with
a traditional emphasis on home loan lending - structured as listed entities or mutuals.
- CREDIT UNIONS
- Take deposits and make loans for various personal finance applications - traditionally
cooperative (membership is based on common bonds i.e. a trade union, local community,
religious group, working for the same employer).
- * Common bond requirement no longer exists in legal form.
- Take deposits and make loans for various personal finance applications - traditionally
cooperative (membership is based on common bonds i.e. a trade union, local community,
religious group, working for the same employer).
- MONEY MARKET CORPORATIONS
- Also known as merchant/investment
banks - Offer wide range of financial
products inc. deposits and lending
services.
- Also provide specialist advice,
underwriting facilities, trade in
financial and exchange markets and
funds management.
- Competitive pressure forced
commercial banks to diversify
operations to maintain growth &
revenues thus, investment banking
groups were acquired by large
banking groups.
- Competitive pressure forced
commercial banks to diversify
operations to maintain growth &
revenues thus, investment banking
groups were acquired by large
banking groups.
- Also provide specialist advice,
underwriting facilities, trade in
financial and exchange markets and
funds management.
- Also known as merchant/investment
banks - Offer wide range of financial
products inc. deposits and lending
services.
- FINANCE COMPANIES
- Make loans to consumers and small
business - do not accept savings deposits
from consumers - Obtain funds by
selling debentures and other capital
market instruments i.e. commercial
paper to investors..
- Balance of funds
comes from equity
capital and
long-term debt
obligations.
- Consumer F.C
- Business F.C.
- Sales F.C
- Finance products sold by retail dealers.
- Finance products sold by retail dealers.
- Loans and leases to business.
- Sales F.C
- Instalment loans to households.
- Business F.C.
- Was associated
with banks,
now
subsidiaries of
manufacturers,
also pastoral f.c.
as well as
general
financiers.
- Balance of funds
comes from equity
capital and
long-term debt
obligations.
- Make loans to consumers and small
business - do not accept savings deposits
from consumers - Obtain funds by
selling debentures and other capital
market instruments i.e. commercial
paper to investors..
- BUILDING SOCIETIES
- OTHER FINANCIAL INSTITUTIONS
- LIFE INSURANCE COMPANIES
- Obtain funds by selling insurance policies
that protect against loss of income from
premature death or retirement - receive
benefit i.e. risk protection + savings plan -
able to invest primarily in higher-yielding,
long-term assets i.e. corporate bonds and
stocks.
- Obtain funds by selling insurance policies
that protect against loss of income from
premature death or retirement - receive
benefit i.e. risk protection + savings plan -
able to invest primarily in higher-yielding,
long-term assets i.e. corporate bonds and
stocks.
- GENERAL INSURANCE COMPANIES
- Sell protection against loss of
property from fire, theft,
accident, negligence, etc. -
Major funds: premium
charged on insurance policies
- Casualty insurance policies
are pure risk-protection
policies = no cash surrender
value, no liquidity to
policyholders. unpredictable
cash out-flows.
- Assets are short-term. highly
marketable securities - Have
substantial holdings of equity
securities to offset the lower
returns.
- Assets are short-term. highly
marketable securities - Have
substantial holdings of equity
securities to offset the lower
returns.
- Sell protection against loss of
property from fire, theft,
accident, negligence, etc. -
Major funds: premium
charged on insurance policies
- Casualty insurance policies
are pure risk-protection
policies = no cash surrender
value, no liquidity to
policyholders. unpredictable
cash out-flows.
- SUPERANNUATION FUNDS
- Obtain funds from employer and
employee contributions during
their working years and provide
financial resources to be used in
retirement - invest such funds n
variety of financial instruments i.e.
corporate bonds and equities.
- Help workers to plan their retirement years in an
orderly and systematic manner - long term funds and
outflow highly predictable therefore able to invest in
higher-yielding long-term securities.
- Help workers to plan their retirement years in an
orderly and systematic manner - long term funds and
outflow highly predictable therefore able to invest in
higher-yielding long-term securities.
- Obtain funds from employer and
employee contributions during
their working years and provide
financial resources to be used in
retirement - invest such funds n
variety of financial instruments i.e.
corporate bonds and equities.
- MANAGED FUNDS
- Trusts; Sell equity share to investors and use the money
they receive to purchase investment assets i.e. stocks
and bonds - not fixed, fluctuates as price of stocks
change.
- Provide small investors with access to reduce
investment risk -Results from diversification,
economics in scale in transactions costs,
professional financial managers.
- Provide small investors with access to reduce
investment risk -Results from diversification,
economics in scale in transactions costs,
professional financial managers.
- Specialised in particular sectors.
- Trusts; Sell equity share to investors and use the money
they receive to purchase investment assets i.e. stocks
and bonds - not fixed, fluctuates as price of stocks
change.
- SECURITISERS
- -- Process of pooling
assets and turning them
into tradable security -
enable value of asset to
be realised immediately.
- Obtain funds from capital markets by pooling and selling issued loans - generate income from this securities and receive interests.
- Low operating costs - able to compete with much larger banks - provide interest rates and fees = high growth rates
- Low operating costs - able to compete with much larger banks - provide interest rates and fees = high growth rates
- Obtain funds from capital markets by pooling and selling issued loans - generate income from this securities and receive interests.
- -- Process of pooling
assets and turning them
into tradable security -
enable value of asset to
be realised immediately.
- LIFE INSURANCE COMPANIES
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