Question

Define meaning and importance of financial institution

Answer 1

The definition of a financial institution typically describes an establishment that completes and facilitates monetary transactions, such as loans, mortgages, and deposits. ... Consumers can make an informed choice when choosing a bank to keep their money by knowing the core features of financial institutions.

Financial institutions in most countries operate in a heavily regulated environment because they are critical parts of countries' economies, due to economies' dependence on them to grow the money supply via fractional reserve lending. Regulatory structures differ in each country, but typically involve prudential regulation as well as consumer protection and market stability. Some countries have one consolidated agency that regulates all financial institutions while others have separate agencies for different types of institutions such as banks, insurance companies and brokers.

Countries that have separate agencies include the United States, where the key governing bodies are the Federal Financial Institutions Examination Council (FFIEC), Office of the Comptroller of the Currency - National Banks, Federal Deposit Insurance Corporation (FDIC) State "non-member" banks, National Credit Union Administration (NCUA) - Credit Unions, Federal Reserve (Fed) - "member" Banks, Office of Thrift Supervision - National Savings & Loan Association, State governments each often regulate and charter financial institutions.

Countries that have one consolidated financial regulator include: Norway with the Financial Supervisory Authority of Norway, Germany with Federal Financial Supervisory Authority and Russia with Central Bank of Russia.