Financial services refer to services provided by the finance industry.

The
finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States.[1]

[edit] History of financial services

[edit] In the United States
The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge.[citation needed] Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.

[edit] Banks
Main article: Bank A "commercial bank" is what is commonly referred to as simply a "bank". The term "commercial" is used to distinguish it from an "investment bank," a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).

[edit] Banking services

The primary operations of banks include:
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Keeping money safe while also allowing withdrawals when needed Issuance of checkbooks so that bills can be paid and other kinds of payments can be delivered by post Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home, property or business)

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Issuance of credit cards and processing of credit card transactions and billing Issuance of debit cards for use as a substitute for checks Allow financial transactions at branches or by using Automatic Teller Machines (ATMs) Provide wire transfers of funds and Electronic fund transfers between banks Facilitation of standing orders and direct debits, so payments for bills can be made automatically Provide overdraft agreements for the temporary advancement of the Bank's own money to meet monthly spending commitments of a customer in their current account. Provide Charge card advances of the Bank's own money for customers wishing to settle credit advances monthly. Provide a check guaranteed by the Bank itself and prepaid by the customer, such as a cashier's check or certified check. Notary service for financial and other documents

[edit] Other types of bank services

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Private banking - Private banks provide banking services exclusively to high net worth individuals. Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking services.[2] Private banks often provide more personal services, such as wealth management and tax planning, than normal retail banks.[3] Capital market bank - bank that underwrite debt and equity, assist company deals (advisory services, underwriting and advisory fees), and restructure debt into structured finance products. Bank cards - include both credit cards and debit cards. Bank Of America is the largest issuer of bank cards.[citation needed] Credit card machine services and networks - Companies which provide credit card machine and payment networks call themselves "merchant card providers".

[edit] Foreign exchange services

Foreign exchange services are provided by many banks around the world. Foreign exchange services include:
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Currency Exchange - where clients can purchase and sell foreign currency banknotes. Wire transfer - where clients can send funds to international banks abroad. Foreign Currency Banking - banking transactions are done in foreign currency.

[edit] Investment services

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Asset management - the term usually given to describe companies which run collective investment funds. Also refers to services provided by others, generally registered with the Securities and Exchange Commission as Registered Investment Advisors. Hedge fund management - Hedge funds often employ the services of "prime brokerage" divisions at major investment banks to execute their trades.

Custody services - the safe-keeping and processing of the world's securities trades and servicing the associated portfolios. Assets under custody in the world are approximately $100 trillion..[4]

[edit] Insurance
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Insurance brokerage - Insurance brokers shop for insurance (generally corporate property and casualty insurance) on behalf of customers. Recently a number of websites have been created to give consumers basic price comparisons for services such as insurance, causing controversy within the industry.[5] Insurance underwriting - Personal lines insurance underwriters actually underwrite insurance for individuals, a service still offered primarily through agents, insurance brokers, and stock brokers. Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance and annuities, life insurance, retirement insurance, health insurance, and property & casualty insurance. Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic losses.

[edit] Other financial services

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Intermediation or advisory services - These services involve stock brokers (private client services) and discount brokers. Stock brokers assist investors in buying or selling shares. Primarily internet-based companies are often referred to as discount brokerages, although many now have branch offices to assist clients. These brokerages primarily target individual investors. Full service and private client firms primarily assist and execute trades for clients with large amounts of capital to invest, such as large companies, wealthy individuals, and investment management funds. Private equity - Private equity funds are typically closed-end funds, which usually take controlling equity stakes in businesses that are either private, or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets Venture capital is a type of private equity capital typically provided by professional, outside investors to new, high-potential-growth companies in the interest of taking the company to an IPO or trade sale of the business. Angel investment - An angel investor or angel (known as a business angel or informal investor in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital. Conglomerates - A financial services conglomerate is a financial services firm that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, retail banking, wholesale banking, investment banking, etc. A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses

are aggregated i.e. bad things don't always happen at the same time. As a consequence, economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its parts. Debt resolution is a consumer service that assists individuals that have too much debt to pay off as requested, but do not want to file bankruptcy and wish to payoff their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards or in some cases merchant accounts. There are many services/companies that can assist with this. These can include debt consolidation, debt settlement and refinancing.

Financial system is the system that allows the transfer of money between
savers and borrowers.[1] It comprises a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions. Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow intertemporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely.[2]

[edit] Financial Controls and Monitoring

Financial controls and monitoring methods have a dual role in supporting internal needs and external requirements.There are ve key aspects to nancial controls and monitoring. These include:
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Accounting Records (or Accounts Receivable and Payable):

Establish a process that records every nancial transaction by maintaining paper les, an electronic database, and copying all records in a virtual library. Your organization needs to be able to demonstrate what funds were received and how funds were spent. Accounting records should be consistent. Choose a method and regular schedule for tracking income and expenses that works for your organization. This is important in case the organization is audited or if a funder requests information for a specic item or transaction. A system should also be developed to track donations from individuals to keep donors updated of the organizations progress or to solicit annual and repeat contributions. A separate accounting system should be developed for funding from foundations with the original proposal and budget, dates of receipt of funds, notes

on allowable expenditures, and reporting requirements so that you can respond to funders requests for nancial records or in case of audits.
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Financial Planning:

Financial planning converts your organizations objectives into a budget. The budget serves as a critical planning guide for your staff and governing board. It is a public record for funders of how you intend to spend the funds received. Financial planning allows you to review your organization, examining successes and challenges in the past. Planning also enables you to make projections and set targets, informing strategies for future success.
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Financial Monitoring and Reporting:

Drawing from the information in the accounting records, your organization can create internal reports that help monitor progress by comparing budgets to actual expenses. Frequent reviews and monitoring allows the governing board and staff to measure your organizations progress and helps inform decision-making about the organizations or a projects future. Internal reports, sometimes called management reports allow you to be forward thinking as you assess the nancial status of the organization and what will be needed to realize your goals. Accounting records are also the source for creating external nancial reports that demonstrate to funders and other stakeholders how funds have been spent. Funders may require nancial reports at the completion of the project or periodically during the projects implementation.
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Governing Board:

A governing board, whether comprised by a board of directors or leadership from the community, serves as stewards of an organizations resources. Governing boards should participate in approving budgets, nancial monitoring and reviews, and agree upon and ensure that internal controls are implemented. The board treasurer who has skills in accounting should be the lead person in working with the staff in ensuring nancial accountability.
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Internal Controls:

Controls are organizational practices that help safeguard your assets and ensure that money is being handled properly. Controls help detect errors in accounting, prevent fraud or theft, and help support the people responsible for handling your organizations nances.

Reserve Bank of India (RBI, Hindi: ) is the central banking system of India and controls the monetary policy of the rupee as well as US$300.21 billion (2010)[1] of currency reserves. The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934[2] and plays an important part in the development strategy of the government. It is a member bank of the Asian Clearing Union. Established 1 April 1935 Governor Duvvuri Subbarao

Main Functions

Reserve Bank of India regional office, Delhi entrance with the Yakshini sculpture depicting "Prosperity through agriculture".[24]

The RBI Regional Office in Delhi.

The RBI Regional Office in Kolkata.

[edit] Monetary Authority

The Reserve Bank of India is the main monetary authority of the country and beside that the central bank acts as the bank of the national and state governments. It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. The national economy depends on the public sector and the central bank promotes an expansive monetary policy to push the private sector since the financial market reforms of the 1990s.[25] The institution is also the regulator and supervisor of the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objectives are to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective addressing of complaints by bank customers. The RBI controls the monetary supply, monitors economic indicators like the gross domestic product and has to decide the design of the rupee banknotes as well as coins.[26]

[edit] Manager of exchange control

The central bank manages to reach the goals of the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

[edit] Issuer of currency

The bank issues and exchanges or destroys currency and coins not fit for circulation.The Objectives are giving the public adequate supply of currency of good quality and to provide loans to commercial banks to maintain or improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development, because both objectives are diverse in themselves.

[edit] Developmental role

The central bank has to perform a wide range of promotional functions to support national objectives and industries.[6] The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of this problems are results of the dominant part of the public sector.[27]

[edit] Related functions

The RBI is also a banker to the Government and performs merchant banking function for the central and the state governments. It also acts as their banker. The National Housing Bank (NHB) was established in 1988 to promote private real estate acquisition.[28] The institution maintains banking accounts of all scheduled banks, too. There is now an international consensus about the need to focus the tasks of a central bank upon central banking. RBI is far out of touch with such a principle, owing to the sprawling mandate described above. The recent financial turmoil world-over, has however, vindicated the Reserve Bank's role in maintaining financial stability in India.

[edit] RBI has various tools to control which are listed below
(a) Bank Rate: RBI (Reserve Bank of India) lends to the commercial banks through its discount window to help the banks meet depositors demands and reserve requirements. The interest rate the RBI charges the banks for this purpose is called bank rate. If the RBI wants to increase the liquidity and money supply in the market, it will decrease the bank rate and if it wants to reduce the liquidity and money supply in the system, it will increase the bank rate. (b) Cash Reserve Requirements (CRR): Every commercial bank has to keep certain minimum cash reserves with RBI. RBI can vary this rate between 3% and 15%. RBI uses this tool to increase or decrease the reserve requirement depending on whether it wants to affect a decrease or an increase in the money supply. An increase in CRR will make it mandatory on the part of the banks to hold a large proportion of their deposits in the form of deposits with the RBI. This will reduce the size of their deposits and they will lend less. This will in turn decrease the money supply. (c) Statutory Liquidity Requirements (SLR): Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash and approved securities. RBI has stepped up liquidity requirements for two reasons: - Higher liquidity ratio forces commercial banks to maintain a larger proportion of their resources in liquid form and thus reduces their capacity to grant loans and advances thus it is an anti-inflationary impact. A higher liquidity ratio diverts the bank funds from loans and advances to investment in government and approved securities. In well developed economies, central banks use open market operations- buying and selling of eligible securities by central bank in the money market- to influence the volume of cash reserves with commercial banks and thus influence the volume of loans and advances they can make to the commercial and industrial sectors. In the open money market, government securities are traded at market related rates of interest. The RBI is resorting more to open market operations in the more recent years. Generally RBI uses three kinds of selective credit controls: a) Minimum margins for lending against specific securities. b) Ceiling on the amounts of credit for certain purposes. c) Discriminatory rate of interest charged on certain types of advances.

Direct credit controls in India are of three types: a) Part of the interest rate structure i.e. on small savings and provident funds, are administratively set. b) Banks are mandatorily required to keep 25% of their deposits in the form of government securities. c) Banks are required to lend to the priority sectors to the extent of 40% of their advances.

The is an international financial institution that provides loans[2] to developing countries for capital programmes. The World Bank has a stated goal of reducing poverty. By law, all of its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment.[3] The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) The World Bank is one of five institutions created at the Bretton Woods Conference in 1944. The International Monetary Fund, a related institution, is the second. Delegates from many countries attended the Bretton Woods Conference. The most powerful countries in attendance were the United States and United Kingdom, which dominated negotiations.[5] Although both are based in Washington, D.C., the World Bank is, by custom, headed by an American, while the IMF is led by a European. y y y y y y 4 Voting power 5 Poverty reduction strategies 6 Clean Technology Fund management 7 Clean Air Initiative 8 United Nations Development Business 9 Criticism
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World Bank

9.1 Knowledge production 9.2 Structural adjustment 9.3 Water privatization 9.4 Sovereign immunity 9.5 Environmental strategy

The International Monetary Fund (IMF) is the

intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policies[1][2] on other countries as a condition for loans, restructuring or aid.[3] It also offers loans with varying levels of conditionality, mainly to poorer countries. Its headquarters are in Washington, D.C., United States. The IMF's relatively high influence in world affairs and development has drawn heavy criticism from some sources

The

Asian Development Bank (ADB) is a regional development

bank established on 22 August 1966 to facilitate economic development of countries in Asia.[2] The bank admits the members of the UN Economic Commission for Asia and the Far East (now UNESCAP) and nonregional developed nations.[2] From 31 members at its establishment, ADB now has 67 members - of which 48 are from within Asia and the Pacific and 19 outside. ADB was modeled closely on the World Bank, and has a similar weighted voting system where votes are distributed in proportion with member's capital subscriptions. At present, both USA and Japan hold 552,210 shares - the largest proportion of shares at 12.756 percent each

Asian Development Bank

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Asian Development Bank

ADB logo Motto Fighting poverty in Asia and the Pacific

Formation Type Legal status

22 August 1966 Regional organization Treaty

Purpose/focus Crediting Mandaluyong City, Metro Manila, Philippines

Headquarters

Region served Asia-Pacific Membership President Main organ Staff Website 67 countries Haruhiko Kuroda Board of Directors[1] 2,500+ http://www.adb.org

Asian Development Bank member states Outside regions Asia-Pacific region

Foreign exchange market

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Foreign exchange

Exchange rates Currency band Exchange rate Exchange rate regime Fixed exchange rate Floating exchange rate Linked exchange rate Markets Foreign exchange market Futures exchange Retail forex Products Currency Currency future Non-deliverable forward Forex swap Currency swap Foreign exchange option Historical agreements Bretton Woods Conference Smithsonian Agreement Plaza Accord Louvre Accord See also Bureau de change / currency exchange (office) The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.[1]

The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries.[2] In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system. The foreign exchange market is unique because of
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its huge trading volume, leading to high liquidity; its geographical dispersion; its continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday; the variety of factors that affect exchange rates; the low margins of relative profit compared with other markets of fixed income; and the use of leverage to enhance profit margins with respect to account size.

As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements,[3] as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.