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Chapter no. 4: Other financial institutions

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Content
§Financial institution - definition
§Short revision of banks
§Other types of financial institutions
§Insurance companies
§Non-banking institutions (providing loans)
§Investment companies
§Conclusion, comments, discussion

Financial institution
§financial institution (FI) is a company engaged in the business of dealing with monetary
transactions, such as deposits, loans, investments and currency exchange
§Types:
§Banks (commercial)
§Investment companies
§Insurance companies
§Mutual funds
§Etc.
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Short revision of banks
§Functions of banks:
§Loans provision
§Deposits accepting
§Help and assistance with investments
§(Information provision)
§Commercial banks x Central or national banks
§Nominal and real interest rate
§Simple interest and compound interest
§Monetary policy
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Insurance companies
§= pool risk by collecting premiums from a large group of people who want to protect themselves
against a particular loss
§Life insurance products vs. Non-life insurance products
§
§Principles of insurance:
§Principle of good faith
§Principle of indemnity
§Principle of subrogation
§
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Investment companies
§An investment company is a corporation or a trust through which individuals invest in diversified,
professionally managed portfolios of securities by pooling their funds with those of other
investors
§
§Indirect finance – why?
§Broker
§Traiding on customer‘s account
§Dealer
§Trades for its own account
§
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Non-banking institutions
§In some cases such institutions might be (when it comes to their main goal) very similar to banks
§Characteristic features:
§Less organised
§More expensive
§More risky (from the point of the institutions)
§For clients failing to show their creditworthiness to banks
§Usually faster
§Unpleasant ratio of those who fail to pay off their liabilities
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Stock Exchange market
§= A stock exchange is a place or organization by which stock traders (people and companies) can
trade stocks
§Strongly regulated market
§Various types of involved institutions:
§Companies
§Pension funds
§Investment companies
§Insurance companies
§Mutual funds
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Important (additional terms)
§Bankruptcy
§Externalities
§Mortgage
§Junk bonds
§IPO
§Flotation
§Subrogation
§Creditworthiness
§Direct x Indirect finance
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Thank you for your attention
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References
§GITMAN, Lawrence J. a Jeff MADURA. Introduction to finance. 1st d. Boston: Addison-Wesley, 2001.
ISBN 0-201-63537-2.
§Broker-Dealer Definition | Investopedia. Investopedia [online]. [cit. 2016-09-24]. Dostupné z:
http://www.investopedia.com/terms/b/broker-dealer.asp
§Types Of Financial Institutions And Their Roles - Complete Guide To Corporate Finance |
Investopedia. Investopedia [online]. [cit. 2016-10-21]. Dostupné z:
http://www.investopedia.com/walkthrough/corporate-finance/1/financial-institutions.aspx
§7 Most Important Principles of Insurance. Homepage | YourArticleLibrary.com: The Next Generation
Library [online]. [cit. 2016-10-11]. Dostupné z:
http://www.yourarticlelibrary.com/insurance/7-most-important-principles-of-insurance/7536/
§
§
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