Академический Документы
Профессиональный Документы
Культура Документы
A financial market refers to a market place where buyers and sellers participate in the trade It is a
platform that facilitates traders to buy and sell financial instruments and securities. Financial Market
create an open and regulated system for companies to acquire large amounts of capital. This is done
through the stock and bond markets. Markets also allow these businesses to offset risk. They do this with
commodities, foreign exchange futures contracts, and other derivatives.
Since the markets are public, they provide an open and transparent way to set prices on everything traded.
They reflect all available knowledge about everything traded. This reduces the cost of obtaining
information because it's already incorporated into the price.
The sheer size of the financial markets provides liquidity. In other words, sellers can unload assets
whenever they need to raise cash. The size also reduces the cost of doing business. Companies don't have
to go far to find a buyer or someone willing to sell.
FUNCTIONS
Ensures liquidity: (Provides Liquidity to Financial Assets) Assets that buyers and sellers trade in the
financial market have high liquidity. It means that investors can easily sell those assets and convert them
into cash whenever they want. Liquidity is an important reason for investors to participate in trade. The
price of any goods or services is determined by the forces of demand and supply. Like goods and services,
the investors also try to discover the price of their securities. The financial market is helpful to the
investors in giving them proper price.
Saves time and money: (Reduces the Cost of Transactions) Financial markets serve as a platform
where buyers and sellers can easily find each other without making too much efforts or wasting time.
Also, since these markets handle so many transactions it helps them to achieve economies of scale. This
results in lower transaction cost and fees for the investors. Various types of information are needed while
buying and selling securities. Much time and money is spent in obtaining the same. The financial market
makes available every type of information without spending any money. In this way, the financial market
reduces the cost of transactions.
INTERBANK
Is the top-level foreign exchange market where banks exchange different currencies. The banks
can either deal with one another directly, or through electronic brokering platforms. The
Electronic Brokering Services(EBS) and Thomson Reuters Dealing are the two competitors in
the electronic brokering platform business.
Is an important segment of the foreign exchange market.
Is a public financial market in which financial instruments or commodities are traded for
immediate delivery. It contrasts with a futures market, in which delivery is de at a later date.
Settlement normally happens in T+2 working days.
Can be through an exchange or over-the-counter (OTC).
2. Forward Market
Is the informal over the counter financial market by which contracts for future delivery are
entered into.
Standardized forward contracts are called Futures Contracts and Traded on a futures
exchange.
Is highly customized.
Provides a network that enables financial institutions worldwide to send and receive information
about financial transactions in a secure, standardized and reliable environment.
Sells software and services to financial institutions much of it for use on the SWIFT NET
Network.
A Brief History of the Interbank Market
The interbank foreign exchange market developed after the collapse of the Bretton Woods
agreement and following the decision by U.S. President Richard Nixon to take the country off the gold
standard in 1971. Currency rates of most of the large industrialized nations were allowed to float freely at
that point, with only occasional government intervention. There is no centralized location for the market,
as trading takes place simultaneously around the world, and stops only for weekends and holidays.
The advent of the floating rate system coincided with the emergence of low-cost computer
systems that allowed increasingly rapid trading on a global basis. Voice brokers over telephone systems
matched buyers and sellers in the early days of interbank forex trading, but were gradually replaced by
computerized systems that could scan large numbers of traders for the best prices. Trading systems from
Reuters and Bloomberg allow banks to trade billions of dollar at once, with daily trading volume topping
$6 trillion on the market's busiest days.
Stock Exchange
What Is an Exchange?
Stock exchanges act as an agent for the economy by facilitating trade and disseminating
information. Below are some of the ways exchanges contribute:
1. Raising Capital
Through initial public offerings (IPO)Initial Public Offering (IPO)An Initial Public Offering
(IPO) is the first sale of stocks issued by a company to the public. Prior to an IPO, a company is
considered a private company, usually with a small number of investors (founders, friends,
families, and business investors such as venture capitalists or angel investors). Learn what an IPO
is or issuing of new shares, companies are able to raise capital to fund operations and expansion
projects. This provides companies with avenues to increase growth.
2. Corporate Governance
Companies that are publicly listed on a stock exchange must conform to reporting
Standards GAAP, or Generally Accepted Accounting Principles, is a commonly recognized
set of rules and procedures designed to govern corporate accounting and financial reporting.
GAAP is a comprehensive set of accounting practices that were developed jointly by the Financial
Accounting Standards Board (FASB) and the that are set by regulating bodies. This includes
having to regularly and publicly report their financial statements and earnings to their
shareholders.
The actions of a company’s management are constantly under public scrutiny and directly affect
the value of the company. Public reporting helps ensure that management will make decisions that
benefit the goals of the company and its shareholders, thereby acting efficiently.
3. Economic Efficiency
BOND MARKET
The bond market – often called the debt market or credit market, is a financial marketplace where
investors can trade in government-issued and corporate-issued debt securities, Governments typically
issue bonds in order to raise capital to pay down debts or fund infrastructural improvements. Publicly-
traded companies issue bonds when they need to finance business expansion projects, or maintain on-
going operations.
KEY TAKEAWAYS
The bond market broadly describes a marketplace where investors buy debt securities that are
brought to market by either governmental entities, or publicly-traded corporations.
National governments generally use the proceeds from bonds to finance infrastructural
improvements and pay down debts.
Companies issue bonds to raise capital needed to maintain operations, grow their product lines, or
open new locations.
Bonds are either issued on the primary market, which rolls out new debt, or on the secondary
market, in which investors may purchase existing debt via brokers or other third parties.
The bonds market is broadly segmented into two different silos: the primary market and the secondary
market. The primary market is frequently referred to as the "new issues" market, in which transactions
strictly occur directly between the bond issuers and the bond buyers. In essence, the primary market
yields the creation of brand new debt securities, that have never-before been offered to the public.
In the secondary market, securities that have already been sold in the primary market, are then bought and
sold at later dates. Investors can purchase these bonds from a broker, who acts as an intermediary between
the buying and selling parties. These secondary market issues may be packaged in the form of pension
funds, mutual funds, and life insurance policies, among many other product structures.
Corporation bonds: Companies issue corporate bonds to raise money for a sundry of reasons,
such as financing current operations, expanding product lines, or opening up new manufacturing
facilities. Corporate bonds usually describe longer-term debt instruments that provide a maturity
of at least one year.
Government bonds: National-issued government bonds entice buyers by paying out the face
value listed on the bond certificate, on the agreed maturity date, while also issuing periodic
interest payments along the way. This characteristic makes government bonds attractive for
conservative investors.
Municipal bonds: Municipal bonds, commonly abbreviated as "muni" bonds, are locally issued
by states, cities, special-purpose districts, public utility districts, school districts, publicly-owned
airports and seaports, and other government-owned entities, who seek to raise cash to fund
various projects.
Mortgage-backed bonds: These issues, which comprise pooled mortgages on real
estate properties, are locked in by the pledge of particular collateralized assets. They pay
monthly, quarterly or semi-annual interest.
Foreign Exchange
The process or mechanism by which the currency or one country is converted into the currency of
another country and thereby involves in the international transfer of money.
A market in which the currencies of different countries are traded against each other, just like the
trading of goods and services in an ordinary market.
- The trading volume in the foreign exchange market is generally very large
- The largest trading center are London, New York, Singapore and Tokyo
Derivatives Market
DERIVATIVES - the term derivetive stands for a contract whise price is derived from or is dependent
upon an underlying asset.
UNDERLYING ASSET- could be a financial asset such as currency, stock, and market index, an inetrest
bearing security or physical commodity.
SWAPS CONTACT- swaps are private agreements between two parties to exchange cash flows
in the future according to a prearranged formula. They can be regarded as portfolios of forward
contracts.
INSURANCE MARKET
The business of buying and selling insurance, and the companies that are involved in it;
they aim to stabilize the insurance market an increase competition so that insurance premiums can be
lowered.
The financial instruments used in capital markets include stocks and bonds, but the instruments used
in the money markets include deposits, collateral loans, acceptances, and bills of exchange. Institutions
operating in money markets are central banks, commercial banks, and acceptance houses, among others.
Based on the type of instruments being traded, financial markets can be divided in:
This is the market where different players who are looking for financing or looking to place their
money for the short term meet. In the finance world, short term is any period of up to a year. With some
exceptions, there are instruments that mature in a maximum of two years which are included on the
money market.
This is an extension of the money market, but is treated differently because the financial instruments
have a maturity of more than two years and some go as high as 50 years. There are instruments without
maturity who are traded on this market. This is the market where players are looking to borrow or lend
money for the long term.
Players on the money market and fixed income market can be divided into two types: lenders and
borrowers. The financial instruments traded on these markets pay interest on a regular basis and when
they mature they also pay the initial sum that was invested.
Equity markets
This is the market where various economical entities issue financial instruments in order to attract
capital. These instruments usually don’t pay any interest and neither do they bind the issuer to redeem
them at a future date. They offer a property right on the issuer and the right to collect dividends when the
issuer decides to distribute part of the profit.
Commodities market
This is the market where commodities are sold and bought, such as: wheat, corn, soy bean, oil, natural
gas, energy, copper, nickel, zinc, lead etc. It is a special financial market, because most of the transactions
are done through derivative financial instruments – which we will talk about later.
The precious metal market is part of the commodities market. In general, precious metals are traded
physically, not through derivative instruments.
FX market
Although money is considered a commodity, the FX market is treated differently. It’s the market
where money is bought and sold, currencies are quoted against each other and the price of one currency is
expressed in another currency. It is the most liquid market in the world with a daily transaction volume
estimated at around 3000 billion dollars.
The interbank system is an over the counter market where banks are the main players. OTC
transactions are not standardized. In other words, the parties involved in a transaction decide when to
trade, the sum of the trade, the maturity (if it is required) and the price. We can say that the instruments
traded on OTC are tailored according to their needs.
On this market the counterparties know each other, they know the details of the transaction, but they
don’t have access to the trading of other players on the market. For trading they use special electronic
systems but they sometimes use recorded confirmations by phone.
Private bank
Are the banks owned by either the individual or a general partner with limited partner. Private
banks are not incorporated. In any such case, the creditors can look to both the "entirety of the bank's
assets" as well as the entirety of the sole-proprietor's/general-partners' assets.
Private banking Is a type of banking and financial service provided by banks to high net worth
individuals who have enormous amounts of assets. In this sense, the term private refers to the private
customer service offered to such individuals.
Refer to those banks where most of the capital is in private hands. In India, there are two types of
private sector banks viz. Old Private Sector Banks and New Private Sector Banks. Old private sector
banks are those which existed in India at the time of nationalization of major banks but were not
nationalized due to their small size or some other reason. After the banking reforms, these banks got
license to continue and have existed in India along with new private banks and government banks.
As of March 2018, 22 commercial banks are in operation in the Philippines and they are listed below:
Bank of Commerce
BDO Private Bank, Inc.Philippine
Bank of Communications
Philippine Veterans Bank
Robinsons Bank Corporation
CTBC Bank (Philippines) Corporation
Maybank Philippines Incorporated
Bangkok Bank Public Co. Ltd. -Bank of America, N.A.
Bank of China Limited - Manila Branch
Citibank, N.A.
JP Morgan Chase Bank N.A.
KEB Hana Bank - Manila Branch
Mega International Commercial Bank Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd. -First Commercial Bank, Ltd.,
Manila Branch -Cathay United Bank Co., Ltd.,
Manila Branch -Shinhan Bank - Manila Branch
Sumitomo Mitsui Banking Corporation Manila Branch
Industrial Bank of Korea - Manila Branch
United Overseas Bank Ltd., - Manila Branch
Hua Nan Commercial Bank, Ltd., - Manila Branch
(i) Private sector has some clear cut objectives. The main objective is to maximise profit
(ii) Private sector plays an important role to reduce budgetary deficit of India. It helps the
government to curtail the public expenditure.
(iii) Private companies are free from political’ interferences. Hence, their main agenda to improve
work culture.
(iv) It helps to increase capital formation within the country. Thus, gross domestic production will
increase and hence national income will also rise.
(v) The increase in ‘private sector investment’ creates more job and employment opportunities
and generates higher level of income for the’ country.
(vi) All the profit making private sector units earned huge surpluses to raise additional resources
to enhance economic growth. This will eventually increase the net national product at factor
cost and real per capita income of the country. The additional rise in gross national product
helps the economy to overcome the problem of vicious circle of poverty.
(vii) Growth of private sector units help to reduce the absolute monopoly power of several public
sector units. Thus, it will create a friendly competitive environment within the country and
simultaneously improve the productivity of industrial units.
(viii) he main motto of the private sector is better work at higher pace. Hence, it improves both
quality and quantity of goods and services.
(ix) Private sector helps to raise the quality of life and hence standard of living of common people
will increase definitely.
Disputes of Private Sector:
There are several disputes of Private sector units. There are listed below:
1. Maximization of Profit:
The main aim of all the private sector units to maximise profit. They feel interested to invest only
those areas where the returns are more fast. Therefore they willing to invest more consumer goods
industries rather than capital goods industries. Private sector usually concentrates on low investment
and high profit industries. This sector does not give attention for infrastructural development of the
country.
The main attention of the private sector is to manufacture consumer goods for rich section of the
society. This sector pays huge attention for producing packets foods, electronic goods and gadgets,
automobiles, cosmetics etc. for elite section of the community. Thus private companies focusing on
the non-essential high profit making good-items. Hence, this sector ignores the production of mass
consumption essential items.
3. Monopolistic Tendency:
During the time of post-independence era, most of the private sector units took the undue
advantages of India’s capitalistic mixed economy pattern and try to develop monopolistic tendency
within the country. Few private companies become so vast and powerful that they started to control
the government plans and policies also. These tendencies also increased further after the liberalisation
of industrial licensing and introduction of free trade policy.
To increase the productivity and efficiency, private companies frequently imports technologies
from the international markets. These high-cost machineries and tools lead to huge deficit in India’s
balance of trade (BOT).
5. Internal Problems:
Most of the private sector units are suffering with varieties of internal conflicts. These companies
always try to exploit the workers by giving low wages and less benefit. These results to yearlong
conflicts between employees and employers. This will end with the shutdown of the factories.
Dunlop, Metal Box are the burning examples of this problem.
6. Scarcity of Finance:
In India the rate of capital formation is relatively low in compare to develop nations. Hence it
becomes a difficult task to arrange proper finance by the private companies. The common people are
interested to buy real estates and gold’s rather than the shares and bonds of the private sector units
which are very volatile. Moreover, huge inflationary pressure in India also enhanced the scarcity in
the financial market.
7. Indulge Mal-Practices:
Private companies always try to earn more profits. Thus, never hesitate to adopt malpractices in
their business policies. They usually cheated the innocent and ignorant consumers by giving eye-wash
and faulty explanation. Extracting the maximum consumer surpluses became the sole policy of large
number of business firms.
8. Low productivity:
According to RBI report from commercial banks, up to end of March 2003, there were 1.71 lakhs
of private companies suffering with low productivity and weakness. These low productivity are
mainly due to deficit demand, frequent power cuts, economic recession, lack of raw materials, biased
government policies towards public sector units, inefficient management, labour problems etc.
India adopted the policies of free trade and globalization after 1991. This paved the path for giant
multinational companies (MNCs) with huge capital stocks to enter the India market. It become
practically impossible for infant, domestic private industries to compete with them. Due to these
unfair competitions so many private sector units have already been gobbled by the MNCs.
The Islamic Bank is authorized to accept deposit from within the Philippines or abroad which shall
form under any of the placements:
1. Savings Account
2. Investment participation accounts
3. Current accounts, and other deposit liabilities
Deposits received with authorization to invest for a given period of time shall form part of general pool
placement allocated for investment portfolios of the Islamic band and may be added to its working capital
to be invested in any special projects in general areas of investments or commercial operations of the
bank.
A financial institution that does not have a full banking license or is not supervised by a national
or international banking regulatory agency. NBFI facilitate bank-related financial services, such as
investment, risk pooling, contractual savings, and market brokering. Operations of non-bank financial
institutions are often still covered under a country's banking regulations.
insurance firms
pawn shops
cashier's check issuers
check cashing locations
payday lending
currency exchanges
microloan organizations
Alan Greenspan
Has identified the role of NBFIs in strengthening an economy, as they provide "multiple
alternatives to transform an economy's savings into capital investment which act as backup facilities
should the primary form of intermediation fail."
Role in financial system:
Types:
1. Risk-pooling institutions
Insurance companies underwrite economic risks associated with illness, death, damage and other
risks of loss. In return to collecting an insurance premium, insurance companies provide a contingent
promise of economic protection in the case of loss.
Note that the individual holds equity in the CIV itself rather what the CIV invests in specifically.
The two most popular examples of contractual savings institutions are pension funds and mutual
funds.
open-end
closed-end funds.
3. Market makers
Are broker-dealer institutions that quote a buy and sell price and facilitate transactions for
financial assets. Such assets include equities, government and corporate debt, derivatives, and foreign
currencies. After receiving an order, the market maker immediately sells from its inventory or makes a
purchase to offset the loss in inventory.
4. Specialized sectorial financiers
They provide a limited range of financial services to a targeted sector. For example, real estate
financiers channel capital to prospective homeowners, leasing companies provide financing for equipment
and payday lending companies that provide short term loans to individuals that are Underbanked or have
limited resources.
Include brokers (both securities and mortgage), management consultants, and financial advisors,
and they operate on a fee-for-service basis. Their services include: improving informational efficiency for
the investors and, in the case of brokers, offering a transactions service by which an investor can liquidate
existing assets
A financial institution that does not have a full banking license or is not supervised by a national
or international banking regulatory agency. NBFI facilitate bank-related financial services, such
as investment, risk pooling, contractual savings, and market brokering.
Non-bank financial companies (NBFCs) offer most sorts of banking services, such as loans and
credit facilities, private education funding, retirement planning, trading in money
markets, underwriting stocks and shares, TFCs(Term Finance Certificate) and other obligations. These
institutions also provide wealth management such as managing portfolios of stocks and shares,
discounting services e.g. discounting of instruments and advice on merger and acquisition activities. The
number of non-banking financial companies has expanded greatly in the last several years as venture
capital companies, retail and industrial companies have entered the lending business. Non-bank
institutions also frequently support investments in property and prepare feasibility, market or industry
studies for companies. However they are typically not allowed to take deposits from the general public
and have to find other means of funding their operations such as issuing debt instruments.
NBFCs are not providing the cheque book or saving account and current account. It only takes fixed
deposit or time deposits.
Growth
Some research suggests a high correlation between a financial development and economic
growth. Generally, a market-based financial system has better-developed NBFIs than a bank-based
system, which is conducive for economic growth, linkages between bankers and brokers.
Stability
A multi-faceted financial system that includes non-bank financial institutions can protect
economies from financial shocks and enable speedy recovery when these shocks happen. NBFIs provide
“multiple alternatives to transform an economy's savings into capital investment, [which] serve as backup
facilities should the primary form of intermediation fail.
However, in the absence of effective financial regulations, non-bank financial institutions can
actually exacerbate the fragility of the financial system.
Since not all NBFIs are heavily regulated, the shadow banking system constituted by these
institutions could wreak potential instability. In particular, CIVs, hedge funds, and structured investment
vehicles, up until the financial crisis of 2007–2008, were entities that focused NBFI supervision on
pension funds and insurance companies, but were largely overlooked by regulators.
Because these NBFIs operate without a banking license, in some countries their activities are
largely unsupervised, both by government regulators and credit reporting agencies. Thus, a large NBFI
market share of total financial assets can easily destabilize the entire financial system. A prime example
would be the 1997 Asian financial crisis, where a lack of NBFI regulation fueled a credit bubble and asset
overheating. When the asset prices collapsed and loan defaults skyrocketed, the resulting credit crunch led
to the 1997 Asian financial crisis that left most of Southeast Asia and Japan with devalued currencies and
a rise in private debt.
Due to increased competition, established lenders are often reluctant to include NBFIs into
existing credit-information sharing arrangements. Additionally, NBFIs often lack the technological
capabilities necessary to participate in information sharing networks. In general, NBFIs also contribute
less information to credit-reporting agencies than do banks.
For continual growth and sustenance of NBFCs, it is important to have a regulation around them
while maintaining their innovativeness. An introduction of regulatory sandbox in different ecosystem will
help them achieve the desired results. Many countries have adopted Regulatory Sandbox and soon more
will adopt.
Risk-pooling institutions
Insurance companies underwrite economic risks associated with illness, death, damage and other
risks of loss. In return to collecting an insurance premium, insurance companies provide a contingent
promise of economic protection in the case of loss. There are two main types of insurance companies:
general insurance and life insurance. General insurance tends to be short-term, while life insurance is a
longer-term contract, which terminates at the death of the insured. Both types of insurance, life and
general, are available to all sectors of the community.
Although insurance companies do not have banking licenses, in most countries insurance has a
separate form of regulation specific to the insurance business and may well be covered by the
same financial regulator that also covers banks. There have also been a number of instances where
insurance companies and banks have merged thus creating insurance companies that do have banking
licenses.
Contractual savings institutions (also called institutional investors) give individuals the
opportunity to invest in collective investment vehicles (CIV) as a fiduciary rather than a principal role.
Collective investment vehicles pool resources from individuals and firms into various financial
instruments including equity, debt, and derivatives. Note that the individual holds equity in the CIV itself
rather what the CIV invests in specifically. The two most popular examples of contractual savings
institutions are pension funds and mutual funds.
The two main types of mutual funds are open-end and closed-end funds. Open-end funds generate
new investments by allowing the public to purchase new shares at any time, and shareholders can
liquidate their holding by selling the shares back to the open-end fund at the net asset value. Closed-end
funds issue a fixed number of shares in an IPO. In this case, the shareholders capitalize on the value of
their assets by selling their shares in a stock exchange.
Mutual funds are usually distinguished by the nature of their investments. For example, some
funds specialize in high risk, high return investments, while others focus on tax-exempt securities. There
are also mutual funds specializing in speculative trading (i.e. hedge funds), a specific sector, or cross-
border investments.
Pension funds are mutual funds that limit the investor’s ability to access their investments until a
certain date. In return, pension funds are granted large tax breaks in order to incentivize the working
population to set aside a portion of their current income for a later date after they exit the labor force
(retirement income).
Market makers
Market makers are broker-dealer institutions that quote a buy and sell price and facilitate
transactions for financial assets. Such assets include equities, government and corporate debt, derivatives,
and foreign currencies. After receiving an order, the market maker immediately sells from its inventory or
makes a purchase to offset the loss in inventory. The differential between the buying and selling quotes,
or the bid–offer spread, is how the market-maker makes a profit. A major contribution of the market
makers is improving the liquidity of financial assets in the market.
They provide a limited range of financial services to a targeted sector. For example, real estate
financiers channel capital to prospective homeowners, leasing companies provide financing for equipment
and payday lending companies that provide short term loans to individuals that are Underbanked or have
limited resources. for example Uganda Development Bank
1. Commercial Bank
A commercial bank is a type of a bank that provides services such as accepting deposits, making
business loans, and offering basic investment products that is operated as a business for profit.
It can also refer to a bank, or a division of a large bank, which deals with corporations or
large/middle-sized business to differentiate it from a retail bank and an investment bank.
Primary Functions
Commercial banks accept various types of deposits from public especially from its clients, including
saving account deposits, recurrent account deposits and fixed deposits. These deposits are returned
whenever the customer demands it or after a certain time period.
Commercial banks provide loans and advances of various forms, including an overdraft facility, cash
credit, bill discounting, money at call etc. They also give demand and term loans to all types of clients
against proper security. They also act as trustees for wills of their customers.
Core products and services
Accepting money on various types of Deposits Accounts
Lending money by overdraft and loans both secured and unsecured.
Providing transaction accounts
Cash management
Treasury management
Private equity financing
Issuing Bank drafts and Bank cheques
Processing payment via telegraphic transfer, EFTPOS, internet banking, or other payment
methods
TYPES OF COMMERCIAL BANKS
Commercial Banks
Private Bank. When the private individuals own more than 51% of the share capital, then that
banking company is a private one. However, these banks are publicly listed companies in a
recognized exchange.
Public Bank. When the government holds more than 51% of the share capital of publicly listed
banking company, then that bank is called as Public sector bank.
Foreign Bank. Banks set up in foreign countries, and operate their branches in home country are
called as foreign banks.
2. UNIVERSAL BANK
A universal bank is a bank that combines the three main services of banking under one roof. The
three services are wholesale banking, retail banking and investment banking.
It is also participates in many kinds of banking activities and is a commercial bank and an
investment bank as well as providing other financial services such as insurance.
THREE SERVICES
1. Wholesale Banking
Wholesale banking refers to banking services that are offered just to other institutional customers,
huge companies with strong balance sheets, government agencies, local governments, and pension
funds.
2. Retail Banking
Retail banking, also known as consumer banking, is the typical mass-market banking in which
individual customers use local branches of larger commercial banks. Services offered include savings
and checking accounts, mortgages, personal loans, debit/credit cards and certificates of deposit (CDs).
3. Investment Banking
An investment bank is a financial intermediary that specializes primarily in selling securities and
underwriting the issuance of new equity shares to raise capital funds. This is different from a
commercial bank, which specializes in deposits and commercial loans.
3. DEVELOPMENT BANK
Development banks are those financial institutions whose prime goal is to finance the primary
needs of society. Such funding results in the growth and development of social and economic sectors
of the nation. It is dedicated to fund new and upcoming businesses and economic development
projects by providing equity capital and/or loan capital.
It is financial institutions established to lend finance on subsidized interest rate. Such lending is
sanctioned to promote and develop important sectors like agriculture, industry, import-export,
housing and allied activities.
Community Development Banks- are local banks that deal primarily with individuals and small
organizations in their immediate area. They are private, nongovernment institutions and may be
affiliated with commercial banks.
Regional Development Banks- also known as multilateral development banks operate in various
parts of the world through the support of the national governments.
Banks
A bank is a financial institution which deals with deposits and advances and other related services. It
receives money from those who want to save in the form of deposits and it lends money to those who
need it.
Types of banks
1. Central Bank
Central banks are chiefly responsible for currency stability, controlling inflation and monetary policy, and
overseeing money supply.
2. Commercial Bank
Commercial banks are typically concerned with managing withdrawals and receiving deposits as well as
supplying short-term loans to individuals and small businesses. Consumers primarily use these banks for
basic checking and savings accounts, certificates of deposit (CDs), and home mortgages.
Investment
An investment is an asset or item acquired with the goal of generating income or appreciation. In an
economic sense, an investment is the purchase of goods that are not consumed today but are used in the
future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset
will provide income in the future or will later be sold at a higher price for a profit.
Houses
A house is a building in which people live, usually the people belonging to one family. A business or
organization. A house can also be a building or part of the building which is used by an organization.
Regulators