Types of Financial Institutions & Experts (Complete List)
Financial institutions play an important role in the global economy and financial system by facilitating transactions, providing financial products and services, and promoting economic growth and stability.
These entities come in various types and serve different purposes, from commercial banks and credit unions to insurance companies and investment firms.
Moreover, numerous professionals work within these institutions, such as financial advisors, brokers, and planners, to name a few.
Below we provide an overview of the various types of financial institutions and professionals operating in the finance industry today.
Key Takeaways – Types of Financial Institutions & Experts
- Financial Institutions’ Role: Financial institutions are essential for global economic activities, offering services, products, and stability that support transactions, growth, and economic well-being.
- Diverse Types and Professionals: Financial institutions vary widely, from banks and credit unions to insurance companies and investment firms. Professionals like financial advisors and brokers play roles within these institutions.
- Financial Landscape: Understanding the different types of financial institutions and professionals is important for understanding the financial ecosystem that drives economies worldwide.
Banks
A bank is a financial institution that accepts deposits, offers loans, and provides other financial services, such as wealth management and currency exchange.
List of Banks in the Arab World
In the Arab World, notable banks include National Bank of Abu Dhabi, Al Rajhi Bank, and Arab Bank among many others.
List of Banks in Africa
In Africa, examples of prominent banks are Absa Group, Ecobank, and Standard Bank Group to name a few.
List of Banks in the Americas
In the Americas, banks such as JPMorgan Chase, Bank of America, and Citigroup are well-known.
List of Banks in Asia
In Asia, some famous banks are Industrial and Commercial Bank of China, Japan Post Bank, and HDFC Bank among others.
List of Banks in Europe
Europe boasts banks like HSBC, BNP Paribas, and Deutsche Bank among others.
List of Banks in Oceania
In Oceania, some notable banks are National Australia Bank, Westpac, and ANZ Bank.
List of International Banking Institutions
International banking institutions are those with operations in multiple countries. These include HSBC, Citigroup, and Deutsche Bank among others.
Types of Banks
There are many types of banks, each serving different purposes and clientele.
Advising Bank
An advising bank is involved in international trade transactions, specifically in the issuing and receiving of letters of credit.
Central Bank
The central bank controls the money supply in a country and is usually in charge of monetary policy.
List of Central Banks
Some of the world’s prominent central banks are the Federal Reserve (US), the European Central Bank (Eurozone), the Bank of Japan (BOJ), People’s Bank of China (PBOC), and the Bank of England (UK).
Commercial Bank
A commercial bank provides services to businesses and individuals, including savings accounts, checking accounts, and loans.
Community Development Bank
Community development banks focus on providing services to low-income communities to spur economic development.
Cooperative Bank
Cooperative banks are owned by the customers and operate on the principles of cooperation, sharing, democracy, equality, and social responsibility.
Custodian Bank
A custodian bank holds and protects the securities and assets of individual and institutional clients.
Depository Bank
A depository bank provides financial services such as accepting deposits and making loans.
Ethical Bank
Ethical banks are those that prioritize the public good and ethical considerations over profit-making.
Investment Bank
Investment banks provide a variety of services to corporations, including underwriting, mergers and acquisitions advice, and asset management.
Islamic Banking
Islamic banking operates under the principles of Islamic law (Sharia law), which prohibits practices like charging interest.
Merchant Bank
A merchant bank provides capital to companies in the form of share ownership instead of loans.
Microcredit
Microcredit institutions provide small loans to low-income individuals or groups to help them start or expand a small business.
Mutual Savings Bank
A mutual savings bank is owned by its depositors and focuses primarily on savings accounts and mortgage loans.
National Bank
A national bank operates across the country and is chartered and regulated by the government.
Offshore Bank
Offshore banks are located outside the depositor’s country of residence and are used for tax advantages and privacy.
Private Bank
Private banks provide personalized financial services to high-net-worth individuals.
Savings Bank
A savings bank is a financial institution whose primary purpose is accepting savings deposits and paying interest on those deposits.
Swiss Bank
Swiss banks are known for their strong privacy and confidentiality practices.
But Swiss banks are less secretive than before due to international pressure and agreements.
They now cooperate more on global tax matters and share financial information to combat tax evasion.
Bank Holding Company
A bank holding company is a corporation that owns one or more subsidiary banks.
Building Society
A building society is a type of financial institution that provides banking and other financial services, particularly mortgage lending.
Broker
A broker acts as an intermediary in financial transactions, particularly in the buying and selling of securities, commodities, and insurance policies.
Types of Brokers
Different types of brokers include:
Broker-Dealer
A broker-dealer is a person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction.
Brokerage Firm
A brokerage firm is a company that facilitates the buying and selling of financial securities between a buyer and a seller.
Commodity Broker
A commodity broker is a firm or individual who executes orders to buy or sell commodity contracts on behalf of clients.
Insurance Broker
An insurance broker is a professional who represents consumers in their search for the best insurance policy for their needs.
Prime Brokerage
A prime brokerage is a bundled group of services that investment banks and other financial institutions offer to hedge funds and other large investment clients.
Retail Broker
A retail broker helps individuals investors trade securities, usually for a commission or fee.
Stockbroker
A stockbroker is a professional individual or firm who buys and sells stocks and other securities on behalf of clients.
Clearing House
A clearing house is a financial institution formed to facilitate the exchange of payments, securities, or derivatives transactions.
Commercial Lender
A commercial lender is a financial institution that lends money to businesses for various purposes such as operations, acquisitions, and expansions.
Community Development Financial Institution
A community development financial institution (CDFI) provides financial services in low-income, underserved communities.
Credit Rating Agency
A credit rating agency assesses the creditworthiness of debt securities issued by corporations and governments.
In the US there are the Big 3 credit rating agencies (bolded below), and there are many more globally.
Here are some of the major credit rating agencies:
- Standard & Poor’s (S&P)
- Moody’s Investors Service
- Fitch Ratings
- DBRS (previously known as Dominion Bond Rating Service)
- AM Best
- Japan Credit Rating Agency (JCR)
- China Chengxin International Credit Rating Co. Ltd.
- CRISIL (Credit Rating Information Services of India Limited)
These agencies evaluate the creditworthiness of borrowers, including governments, corporations, and financial institutions.
Credit Union
A credit union is a member-owned financial cooperative that provides traditional banking services to its members.
Diversified Financial
Diversified financial institutions provide a wide range of financial services beyond traditional banking, such as insurance and investment services.
Edge Act Corporation
An Edge Act Corporation is a subsidiary of a US bank that engages in international banking operations.
Export Credit Agencies
Export credit agencies (ECAs) provide trade financing, including export credits, to businesses in their home countries.
Financial Advisor
A financial advisor provides advice to clients on financial matters such as investment, insurance, tax planning, and retirement planning.
Financial Intermediary
A financial intermediary is an institution that serves as a middleman between two parties in a financial transaction.
Financial Planner
A financial planner helps individuals and businesses create a program to meet long-term financial goals.
Futures Exchange
A futures exchange is a marketplace where futures contracts are traded.
List of Futures Exchanges
Some of the notable futures exchanges are the Chicago Mercantile Exchange (CME), the New York Mercantile Exchange (NYMEX), and the Euronext.
Government Sponsored Enterprise
Government-sponsored enterprises (GSEs) are financial services corporations created by the United States Congress to enhance the flow of credit to targeted sectors of the economy (e.g., mortgages and residential housing).
Hard Money Lender
A hard money lender provides loans based on the value of the underlying asset, rather than the borrower’s credit score.
Hedge Funds
These are typically private investment partnerships that use advanced investment strategies to generate high returns.
Independent Financial Advisor
An independent financial advisor (IFA) provides unbiased advice on financial matters and recommends suitable financial products from the entire market.
Industrial Loan Company
An industrial loan company (ILC) is a type of financial institution in the U.S. that lends money, and may be owned by non-financial institutions.
Insurance Company
An insurance company provides coverage, in the form of compensation resulting from loss, damages, injury, treatment or hardship in exchange for premium payments.
Investment Advisor
An investment advisor (also known as a stock broker) is an individual or a firm that is in the business of giving advice about securities to clients.
Investment Company
An investment company is a corporation or trust engaged in the business of investing the pooled capital of investors in financial securities.
Investment Trust
An investment trust is a form of collective investment found mostly in the United Kingdom.
Large and Complex Financial Institutions
Large and complex financial institutions (LCFIs) are financial institutions with sizable, multinational operations, and they are complex in terms of the variety of financial services they provide.
Mutual Fund
A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities.
Non-Banking Financial Company
A non-banking financial company (NBFC) is a company registered under the Companies Act, engaged in the business of loans and advances, acquisition of shares, and other marketable securities.
Private Equity Firms
These firms invest in companies with the goal of improving their value and selling them for a profit.
Savings and Loan Association
A savings and loan association (S&L) is a financial institution that specializes in savings deposits and mortgage loans.
Stock Exchange
A stock exchange is a marketplace where securities, such as stocks and bonds, are bought and sold.
List of Stock Exchanges
Notable stock exchanges include the New York Stock Exchange (NYSE), the NASDAQ, and the London Stock Exchange (LSE).
Trust Company
A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business for the purpose of administration, management, and the eventual transfer of assets to a beneficial party.
FAQs – Types of Financial Institutions & Experts
What are the main types of financial institutions?
The main types of financial institutions include banks (commercial, investment, etc.), credit unions, insurance companies, brokerage firms, and investment companies.
What are the different types of banks?
Banks come in various types, including central banks, commercial banks, investment banks, savings banks, and more.
Each type of bank serves a unique role in the economy.
What is the role of a financial advisor?
A financial advisor provides advice to clients on financial matters such as investment, insurance, tax planning, and retirement planning.
What’s the difference between a financial advisor and a financial planner?
A financial advisor is a broad term for professionals who offer financial guidance.
A financial planner specifically helps clients create a comprehensive financial plan, often focusing on long-term goals like retirement.
Both can offer investment advice, but planners typically delve deeper into holistic financial planning.
How does a broker work?
A broker acts as an intermediary in financial transactions, helping individuals and companies buy and sell securities, commodities, currencies, and insurance policies.
What are stock exchanges?
Stock exchanges are marketplaces where securities, such as stocks and bonds, are bought and sold.
Examples of prominent stock exchanges include the New York Stock Exchange and the NASDAQ.
What is a non-banking financial company (NBFC)?
A non-banking financial company (NBFC) is a company registered under the Companies Act, engaged in the business of loans and advances, acquisition of shares, and other marketable securities.
Conclusion
The diverse world of financial institutions and professionals serves as the backbone of the global economy.
These entities and individuals provide the financial services, advice, and resources that enable businesses, governments, and individuals to thrive and grow.
By understanding the roles and functions of these different institutions and professionals, we gain insight into the intricate web of transactions, investments, and financial management practices that underpin our economic systems.