NON-BANK FINANCIAL

INSTITUTIONS:

•Characteristics
•Role in the financial system
•Institutional and market issues
•Regulations
 Characteristics:

1. Risk -pooling
institutions
• GENERAL INSURANCE
-Insurance companies underwrite
economic risks associated with tends to be short-term
illness, death, damage and other
risks of loss. In return to
•  LIFE INSURANCE is a
collecting an insurance premium,
insurance companies provide a longer-term contract, which
contingent promise of economic terminates at the death of
protection in the case of loss. the insured
There are two main types of
insurance companies:
 Characteristics:
• Although insurance companies do
not have banking licenses, in
most countries insurance has a
separate form of regulation
specific to the insurance business
and may well be covered by the
same financial regulator that also
covers banks
2. Contractual savings
institutions
•  (also called institutional investors)
give individuals the opportunity to
invest in collective investment
vehicles (CIV) as a fiduciary rather
than a principal role. Collective
investment vehicles pool resources
from individuals and firms into
various financial instruments
including
 Debts
 Equity
 Derivative
 Characteristics:
3. Market makers

are broker-dealer institutions
that quote a buy and sell price
The differential between the
and facilitate transactions for
buying and selling quotes, or
financial assets. Such assets
the bid–offer spread , is how
include equities, government
the market-maker makes a
and corporate debt, derivatives,
profit. A major contribution of
and foreign currencies.
the market makers is improving
After receiving an order, the the liquidity of financial assets
market maker immediately sells in the market.
from its inventory or makes a
purchase to offset the loss in
inventory.
 Characteristics:
4. Specialized sectorial
financier
-They provide a limited
range of financial services
to a targeted sector.
•  real estate financiers
-channel capital to
prospective homeowners
• leasing companies 
-provide financing for
equipment 
• payday lending
-companies that provide
short term loans to
individuals that
are Underbanked or
have limited resources.
 Characteristics:
5. Financial service providers

-include brokers (both securities and mortgage),

management consultants, and financial advisors,
and they operate on a fee-for-service basis. Their
services include: improving informational
efficiency for the investors and, in the case of
brokers, offering a transactions service by which
an investor can liquidate existing assets.