Finance (Basic)
Ludek Benada
Department of Finance
Office 533
75970@mail.muni.cz

Other Financial Institutions
Financial institutions ... Institutions have to operate within established regulatory guidelines.
FIs provide financial services for clients (intermediaries...).
q

Types of OFIs
qDeposit-accepting institutions
qNon-bank financial companies
qPension funds
qInvestment funds
qHedge funds
qInsurance companies
qBrokers, Underwriters
q

Deposit-accepting Instituions
… accept and manage deposits and make loans (including banks, building societies, credit unions,
trust companies, mortgage loan companies)
Banking license!

Non-bank Financial Companies
NBFCs belong to FI are offering to clients banking services with the exception of taking deposits è
lower regulation.
q

Categories of NBFCs
qDevelopment finance institutions
qLeasing companies
qInvestment companies
qHouse finance companies
qVenture capital companies
qDiscount and guarantee houses
qCorporate development companies
q

Pension Funds
… provide public specific protection (income payments on retirement). Pension plan - employers,
unions, individuals. Some tax benefits, Investment of long-term securities with lower risk.

Collective Investment
… is a way of investing money alongside other investors in order to benefit from the advantages of
investing as a part of group of investors.
Adventatges of CI:
qProfessional management
qEconomies of scale
qDiversification

Mutual Funds
… are financial intermediaries that pool the financial resources of many small investors by selling
shares and using the proceeds to buy securities.
qOpen-end Fund
q
qClosed-end Fund

Hedge Funds
… special type of mutual fund with estimated assets of more than 500 billion dollars. Not for small
investors, minimum investment 100,000.00 and more (USD). The number of investors is limited as well
(e.g. no more then 100)

Insurance Companies
What is an insurance?
A protection in the case if an unexpected event occurs (risk will be realized).
What is a risk? è Deviation of E(x)

Categories of Insurance
qLife insurance – protection illness, accident, death.
q
qProperty and casualty insurance (Non-life insurance) – cover loses as a result of fire, accidents,
natural disasters.
q
q
q
q

Brokerage Firms
… FI that facilitates the buying and selling of financial assets between a buyer and a seller.
Serve to clients, which trade public stocks or securities.

Underwriters
… a firm that assumes financial risks on behalf of another. Typically for IPO. If there are not
enough investors the underwriter(s) should hold some securities themselves.

Globalization of FI
Fis expand internationally. Three main reasons: Expansion of multinational corporations encouraged
expansion of commercial banks to serve these foreign subsidiaries, There is less restriction in
regulation abroad, To create a „global image“.

Consolidation of FI
Recent years we can observe the trend to consolidate FI. A finance conglomerate may own every type
of financial institution. Typically banks offer non-banking services as well (insurance,
securities).




Thank you for your attention