financial intermediaries Essay

Submitted By romeodc47
Words: 1851
Pages: 8

Mutual Savings Banks
As a depository institution, mutual savings banks are similar to savings and loans banks. These financial institutions issue deposit accounts that become liabilities when the bank grants loans. By granting loans, the financial institution can acquire assets through interest rates and charges. With the depositors owning the financial institution, mutual savings banks grant mainly mortgage loans.
Credit Unions
Operated and owned by company employees through a one-member/one-vote association, credit unions are many ways similar to banks. These financial institutions, also known as thrift institutions, offer deposit accounts to members and uses the deposited funds for the members to take out loans. Most loans credit unions issue involve commercial loans for the purpose of buying cars and large ticket items.

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Life Insurance Companies
Life insurance companies obtain funds through issuing contracts and collecting on policy premiums. These contractual savings institutions collect the premiums on periodic or regular intervals based on the contract terms. The life insurance company uses the collected funds to buy mortgages and corporate bonds along with some stocks.
Finance Companies
As an investment intermediary, finance companies sell commercial papers, bonds and stocks between sellers and buyers. These companies make consumer loans and business loans based on risk-sharing and monitoring investment borrowers.
Mutual Funds
Mutual fund companies sells shares to individuals while using the profits to buy bonds and stocks. These investment intermediaries allow for individual investors to pool their resources. In this manner, the individual investor can create a more diversified portfolio of assets through mutual fund companie

Read more: inancial intermediaries are those entities with "low-cost" money (banks, credit unions, savings & loan associations, mutual and pension funds and insurance companies) that act as providers of money (as loans or investments) to those needing funding. They have developed a sophisticated network to allow them to have these funds available and deliver them as quickly and efficiently as electronically possible.

Read more: inancial intermediaries perform as provider of funds to those who need money. From banks, credit unions, savings & loans, mutual funds, insurance companies and pension funds, financial intermediaries provide funds for all manner of borrowers and investors. Whether it's a bank providing a personal loan, a mortgage lender or financial entities creating investment markets, financial intermediaries keep the flow of funds moving.
Individuals and businesses often need funds for working capital, asset purchases (homes, cars, equipment, buildings and computer systems) and the financial intermediary network serves as the source of this money. Borrowing from savers (depositors in banks and credit unions), financial intermediaries provide monies at a reasonable cost to those who need them. Their network, a finely tuned money machine, eliminates most difficulties for those needing funds.
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Financial intermediaries exercise great power and control over the country's economy. In theory, their network allows the country's financial transactions and money movement to keep funds flowing. At most times, this theory is the reality. However, they can also enhance the effects of a negative economy by refusing to become players in the global financial game. When regional, national or global economic problems occur,