types of financial intermediaries

Depository Institutions

Financial institutions that accept deposits from individuals and provide loans funds are liquid

types of financial intermediaries

depository institutions (banks), contractual savings institutions, and investment intermediaries

regulation of financial intermediaries

increase info available to investors and to ensure the soundness of the financial system

Federal Reserve System (the fed)

regulates all depository institutions examines the books of commercial banks that are in the system; sets the reserve requirement

Federal Deposit Insurance Corporation (FDIC)

regulates depository institutions provides insurance of up to 250000 for each depositor

Securities and Exchange Commission (SEC)

regulates financial markets and exchanges requires disclosure of information; restricts insider trading

Ensuring the Soundness of Financial Intermediaries

restriction on entry: tight regulations governing on who is allowed to set up a financial intermediary, only those with good credential and large amounts of initial funds disclosure restrictions on assets and risky activities deposit insurance limits on competition restrictions on interest rates

financial panic

The widespread collapse of financial markets and intermediaries because investors pull their funds

Saving and loan associations and mutual saving banks

a depository institution primary liability: deposits Primary asset: mortgages used to be primarily mortgages, but less restrictions blur the line between these institutions and commercial banks

commercial banks

a depository institution that raises funds primarily by issuing checkable deposits, saving deposits, and time deposits. Use the funds to make loans and buy US gov bonds. Largest financial intermediary and have the most diversified portfolio

credit unions

a depository institution which are very small and cooperative liabilities: assets assets: consumer loans

Investment Intermediaries

finance companies (commercial paper... short term debt instruments) , mutual funds, money market mutual funds (they have a deposit feature, but still an investment), hedge funds (less regualtion b/c fewer partnerships), and investment banks (can't accept deposits

Contractual Savings Institutions

financial intermediaries that acquire funds at periodic intervals on a contractual basis (insurance pension funds) regular funds so they can invest in long term securities