The Roles Of Financial Institutions Writing Assignment

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The Roles of Financial Institutions
Financial institutions are companies that offer services as financial markets' intermediaries. There are three main types of financial institutions, which comprise of depository institutions that include banks and mortgage loan firms. Another kind of financial institutions is contractual institutions, which are insurance firms and pension funds companies. The third type of financial institutions is investment institutions that include brokerage firms and investment banks (Cornett and Saunders, 11).
The roles of depository institutions include receiving deposits, and managing them and giving loans. The organization package money from deposits to provide loans to borrowers depending on the amounts and maturity period they desire. In Chapter 7, the firms accept risks on the loans because they know about evaluating the creditworthiness of their customers (Cornett and Saunders, 221). These institutions diversify their credits among various borrowers and therefore, can absorb defaulted loans. According to Christina and Emily, financial organizations are accessing data of their clients from the customer's debit and credit cards. Banks use this information to make decisions on how to use various opportunities to tap the depositors from other organizations where they might be engaged.
As identified in Chapter 1, life assurance firms sell policies that protect the policyholder's beneficiaries against financial risks, which come after the death of the assured (Cornett and Saunders, 11). Fire and casualty insurance companies cover policyholders against the risk of loss from eventualities such as accidents and fire. On the other hand, pension and retirement funds offer retirement earnings in the form of annuities to people covered by them. These institutions collect contributions from employers and workers, which are either automatically withheld from pay slips or made willingly.
Investment institutions collect money by issuing and selling stocks to shareholders. There are two types: open-end and closed-end companies. Open-end corporation funds such as mutual funds issue new stocks each period a stockholder wishes to purchase the shares. On the other hand, as discussed in chapter 17, close-end firms sell a limited ...