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Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations

that manage money, including credit unions, 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]
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1 History of financial services 2 Banks 2.1 Banking services 2.2 Other types of bank services 3 Foreign exchange services 4 Investment services 5 Insurance 6 Other financial services 7 Financial crime 7.1 UK 8 Market share 9 See also 10 References 11 Further reading 12 External links

[edit]History

of financial services

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.[2] 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 theholding 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: 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) 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 internet banking system to facilitate the customers to view and operate their respective accounts through internet. 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 Accepting the deposits from customer and provide the credit facilities to them.

[edit]Other

types of bank services

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.[3] Private banks often provide more personal services, such as wealth management and tax planning, than normal retail banks.[4] 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: Currency exchange - where clients can purchase and sell foreign currency banknotes. Foreign Currency Banking - banking transactions are done in foreign currency. Wire transfer - where clients can send funds to international banks abroad.

[edit]Investment

services

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 US$100 trillion.[5] [edit]Insurance Main article: Insurance 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.[6] 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

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 pay off 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. [edit]Financial [edit]UK Fraud within the financial industry costs the UK (regulated by the FSA) an estimated 14bn a year and it is believed a further 25bn islaundered by British institutions.[7] [edit]Market

crime

share

The financial services industry constitutes the largest group of companies in the world in terms of earnings and equity market capitalization. However it is not the largest category in terms of revenue or number of employees. It is also a slow growing and extremely fragmented industry, with the largest company (Citigroup), only having a 3% US market share.[8] In contrast, the largest home

improvement store in the US, Home Depot, has a 30% market share, and the largest coffee house Starbucks has a 32% market share.

Page | 23 major trading partners, such as the Europe and Asia will also affect US and UKshares as what happens in these economies will have an impact on our own.When looking at economic data, we need to think not only how the wider economywill be affected but whether certain areas will be more affected than others. A risein interest rates is, for example, often bad news for house builders as people feelless confident about taking on debt. Retailers are often badly affected too as peoplespend less. Pharma ceutical companies are, however, usually unaffected as peoples demand for drugs is not influenced by the state of the economy.Companies whose profits are closely tied to the health of the economy are known as cyclical stocks. Those businesses that arent too affected by the economy arecalled defensive stocks. If economic conditions deteriorate you will often see investors shift from cyclical stocks to defensives. Thus, the economic health of anEconomy affects the Share Prices. PRESS and BROKING HOUSE RECOMMENDATIONS: The financial pages of most national newspapers and investment magazines usually contain share tips. Like analysts reports these tips can have a major influence on share prices. If a journalist recommends a share, the price will usuallyrise and if they write a negative story the price will fall. These moves usuallyhappen very quickly so if we follow the recommendation it often makes sense todo so as soon as possible.The Broking House also recommends BUY or SELL for particular shares based ontheir own research analysis. They display these recommendations in leading mediasuch as Television and News Papers. Thus, these recommendations affect the priceof shares and lead the market in the direction these recommendations take.

Page | 24 TECHNICAL INFLUENCES: Share prices can rise and fall for a variety of technical reasons that may havenothing to do with the actual outlook for an individual company or the outlook forthe market. It is, for example, a common occurrence for share prices to drop back after a strong rally. This happens because investors take profits on some of theshares that have risen in value, protecting their gains just in case the shares start toslip back. Investors often refer to this as market consolidation.Another technical reason for share prices to rise or fall is the quarterly adjustment in the FTSE 100 index. Shares that are expected to enter the FTSE 100 may experience a sharper rise than one would expect in the weeks beforehand whileshares that leave the index can fall more sharply. This happens because funds thatsimply track the index have to match the composition of the index. Someprofessional fund managers who hold the affected stocks also adjust theirportfolios as they do not want their holding to be too far above or below the companys weighting in the index. Share prices can also be affected by investors who use technical analysis to drivetheir investment techniques. Technical analysis, also known as Chartism, is simplythe study of past share price movements and stock market index trends, which arethen used to forecast how shares and stock markets will behave in future.Market makers can also influence prices. If they, for example, do not own enoughshares to balance their books they will have to buy more. Market makers alsoinfluence prices if the market is looking flat, reducing prices to attract buyers.Thus, technical reasons can also be a cause for the rise or fall in the prices of shares.

Page | 25 OTHER FACTORS: Some other factors which influence share prices are as follows: Change in Rates by RBI: Looking at the changing scenario, RBI keeps onchanging rates like Repo Rate, Reverse Repo Rate and Cash Reserve Ratio. These rates have a direct relation with the Banks perfor mance and in turn the share prices are linked with Banks Performance. Thus, a change in these rates or even a speculation of change in these rates affects share prices. Global Changes: Any change in the global economy or in other words globalchanges also affects Indian economy. Thus, the performance of an economy and itsbanks is affected by these global changes. For example: The recession was firstobserved in the USA and later on it caught its lead in other countries too. When itentered India, the share market crashed literally. So, a careful and logical investoralways keeps this in mind that what global changes affect the market and thusleads to rise or fall in share prices. Change in Government Policies: Keeping in mind the progress and well wishesabout the country, the government takes desired steps and keeps on reviewing itspolicies, rules and regulations and procedures. A change in FDI and FII inflowrestrictions, entry exit barriers for foreign banks in India, EXIM regulations,change in Basel Norms, etc form part of important government policies. Thus, achange in these policies affects the market scenario. For example: if governmentallows entry of foreign Banks in India, then the competition would rise and itmight happen that those foreign Banks may outperform and leave our own banksfar behind. Then in this case, the investors would be interested in investing in thoseforeign Banks and a government would never like that the funds are invested insome foreign banks rather than our own banks. Thus, some restriction wouldfollow and this will definitely affect the share prices.

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