Financial Institutions Images

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are regulated by the government.

Some experts see a tendency of global homogenisation of financial institutions, which means that institutions tend to invest in similar areas and have similar investment strategies. The reason for this tendency sees economist Jayati Gosh in financial deregulation. Consequences might be that there will be no banks that serve specific target groups and e.g. small scale producers are left behind.

Financial institutions provide service as intermediaries of financial markets. They are responsible for transferring funds from investors to companies in need of those funds. Financial institutions facilitate the flow of money through the economy.

Standing Settlement Instructions (SSIs) are the agreements between two financial institutions which fix the receiving agents of each counterparty in ordinary trades of some type. These agreements allow traders to make faster trades since time used to settle the receiving agents is conserved. Limiting the trader to an SSI also lowers the likelihood of a fraud.