Financial Institutions

A financial institution refers to a type of private institution which is owned by the shareholders or a public institution that is owned by the Government of the country. The institutions normally collects and handles the funds of the public and other institutions. It also serves as a channel between the borrower of funds and the supplier of funds. The two main types of financial institutions are banks and the credit institutions. These organizations pay interest on your deposits by investing them in other schemes. Then there are also the insurance companies that collect funds from you in the form of premium by selling the policies and shares to the public. They then provide returns in the form of periodic benefits.
    
In terms of financial economics a financial institution is an organization that offers financial services to its clients or to its members. Today the most important function of the financial institution is to act as a financial intermediary. Many of the institutions are regulated by the government of the country. The brokers, undertakers and investment funds also form a part of the financial institutions. As mentioned before, the financial institution act as intermediaries for the debt and the capital markets. They are also responsible for moving funds from the investors to the companies who then give them dividends in return.

In fact, it is because of the financial institutions and their activities that the economy of the nation progresses. They also facilitate the flow of money in the economy. To do that, the savings of the people are put together to mitigate the risk to provide funds for loans. This is in fact the primary means of revenue for the financial institutions. In case the yield curve becomes inverse, the firms in that area will offer additional money generating services which include underwriting of securities and prime brokerage.
    
As mentioned before, the governments play a critical role in terms of financial institutions as they regulate their activities. Some of the vital governing bodies in different countries are FFIEC in the United States. Then there are the state governments who regulate the activities of the local financial institutions. For example, in Norway you will find Financial Authority of Norway while in Hong Kong you will find Hong Kong Monetary Authority. Similarly in Russia you will find the Central Bank of Russia.