A financial institution is a company that deals with financial and monetary transactions such as deposits, loans, investments, and currency exchange. Financial institutions are intermediaries that provide services for different types of financial monetary transactions. There are three major types of financial institutions:
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Depository institutions: These are deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies.
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Contractual institutions: These are insurance companies and pension funds.
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Investment institutions: These are investment banks, underwriters, and other different types of financial entities managing investments.
Financial institutions are vital to a functioning capitalist economy in matching people seeking funds with those who can lend or invest it. They help keep capitalist economies running by offering a wide range of business operations within the financial services sector including banks, insurance companies, brokerage firms, and investment dealers. Financial institutions vary by size, scope, and geography. When choosing a financial institution, it is important to make sure the bank meets certain criteria such as digital banking options, financial expertise, excellent customer service, and flexible investment options.
