Financial institutions, their types, objectives, development, activities, problems. Financial institutions are ...

The financial system of any country has a key element - financial institutions. These are institutions that deal with the transfer of money, lending, investing, borrowing money using various financial instruments.

Goals and objectives

The main task of the financial institution is to organize an effective transfer of funds from savers to borrowers. That is, all transactions are conducted between those who have money and those who need them. The objectives of financial institutions are as follows:

• Save financial resources;
• To mediate with borrowers;
• To make financial transformations;
• Transfer of risk;
• Organize currency transactions;
• Promote liquidity;
• Organize operations to change the organizational and legal forms of companies.

Let's consider each goal in more detail.

What is the benefit?

Financial institutions are organizations whose task is to accumulate funds that will subsequently be rationally used. This way of accumulating funds is more profitable and safe.

Mediation is the main function of financial institutions, since it is not only the accumulation of money that is important, but also their rational use in the future. It turns out that financial institutions are intermediaries between the savings agent and the borrower, the latter taking the funds for certain obligations related to the return of the money received. Financial intermediation has a number of advantageous moments:

1. Not all savers can themselves deal with financial transactions and make a really profitable decision.
2. Turning to financial companies, the consumer saves time, energy, nerves and can engage in basic business.
3. The received money resources work more effectively.
4. Thanks to financial intermediaries, it is possible to accumulate large amounts of cash that are invested in profitable projects that are potentially interesting to large investors.

The main thing - the purity of operations

Financial institutions are an opportunity to make short-term monetary assets long-term. In this case, an important role is played by several points:

• Settlements with short-term investors should be performed carefully, so that all the funds taken are returned on time;
• When there are too many investors, there is a leveling of fluctuations in the amount of money.

Applying to such organizations is advantageous for the reason that any financial transactions are risky by nature, and therefore everyone wants to avoid risks and make the right decision.

Currency operations

The activities of financial institutions are directed, among other things, to conducting currency transactions involving many companies, especially those that plan to enter the international market. Currency operations are interesting to joint ventures that help to find foreign investors or open a foreign office.

Any company that conducts its business in the financial market applies to the relevant institutions for funds. And an important role in this process is the creation of an insurance stock of funds that can be used in difficult situations, with accounts payable, for example. To insure ourselves against such problems, we need financial institutions whose role is high.

Types and features

There are several types of financial institutions:

• Commercial banks;
• Non-bank financial institutions;
• Investment institutions.

All types of financial institutions operate with an emphasis on accumulating free cash and subsequently investing them in the economy of the country. But, on the other hand, every financial institution works in its own way.

Banks

The main investment potential is concentrated in the institutions of the banking system, whose opportunities are exceptional. It is in banks that financial resources accumulate , which are subsequently distributed to those sectors and industries that are most dynamically developing. At the heart of the modern banking system are commercial banks that carry out operations in different areas of the financial market. But as banking services become more specialized, investment banks became popular as the main financial institutions, which focus on mobilizing long-term capital and providing funds through issuing and offering shares, securities, and long-term loans.

All investment banks are divided into two types - the first provide services in the sphere of trade and placement of securities, the latter focus on the issuance of loans (long-term and medium-term). The first type of bank is popular in England, Canada, the United States, Australia, and they can not accept the contributions of the population and organizations. The second type of investment banks is common in Western Europe. They are engaged in lending to various sectors of the economy, the implementation of projects of different focus.

Equally common are financial institutions such as mortgage banks. Their task is to carry out credit operations related to the attraction and placement of funds on a long-term basis by pledging land and buildings. As resources of mortgage banks are used funds that are involved in the issuance of bonds, mortgage bonds.

Non-banking organizations

Non-bank financial and credit institutions are pawnshops, credit partnerships, credit unions, pension funds and insurance companies. Let us describe the characteristics of each species in a few words:

• Pawnshops give out loans on the security of movable property, they can be public, communal, private and mixed. Pawnshops operate without a loan agreement with the client and without collateral.
• Credit partnerships are designed for credit and settlement services to its members, and the capital is the funds received when buying units and paying mandatory insurance premiums.
• Credit unions are special cooperatives that are collected by individuals. They can engage in attracting deposits, providing loans to provide audit and advisory services.
• Insurance companies implement insurance policies, and the funds received for this are placed in government or corporate securities.
• Private pension funds are independent companies whose resources are regular contributions of employees, deductions of firms.

A separate group is allocated investment financial institutions that operate on the securities market without other activities.

Problems and prospects

The financial system is the basis for the development of the economy of any country. They not only allow us to judge the investment climate of a specific state, but also allow to form it and thus meet its quality. Today there is a need for the formation of effective methods of financing enterprises. But because of the financial crisis in Russia, confidence in financial institutions is not so high, and the banking system itself is not highly technological. Modern development of financial institutions has certain prospects, if there will be growth of economy, but for this it is necessary to develop and modernize fixed assets, attracting investments to that.