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ORGANIZATIONAL SET UP OF Financial Institutions PowerPoint Presentation
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ORGANIZATIONAL SET UP OF Financial Institutions

ORGANIZATIONAL SET UP OF Financial Institutions

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ORGANIZATIONAL SET UP OF Financial Institutions

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  1. ORGANIZATIONAL SET UP OF Financial Institutions

  2. Functions of Financial Institutions • 1. Aids the flow of capital • 2. Credit allocation • 3. Provides economies of scale and scope • 4. Satisfies the needs of general public • 5. Provides specialization and expertise • 6. Assists asset transformation • 7. Offers INTERMEDIATION

  3. Intermediation • The process of transforming a secondary security into a primary security by a financial institution. • It relates to financial investments by savors

  4. Dis-intermediation • The process of reversing or rejecting the transfer of funds into the financial institutions. • This refers to the low deposit interest rates or high operating costs charge to customers.

  5. Illustration of Disintermediation • The removing of Middlemen • The dis- or re-channeling funds flow from the FI • Changing Role to the Servicing of Markets • Security Investments • Mutual Funds • Insurance

  6. Types of Intermediation • 1. Liquidity • 2. Maturity • 3. Denomination • 4. Risk

  7. Types of Financial Institutions • By Banking Business Nature: • Banks • Non-Banks • Non-Finance

  8. By Business Operations: • Thrift type • Contractual type • Investment type • Other type

  9. Thrift-type Financial Institutions • Banks: • Commercial Banks • Savings Banks • Investment Banks (Merchant Banks) • etc • Non-Banks: • Deposit-taking Company, Savings and Loan, Home Loans, Building Society, • Credit Unions

  10. Contract-type Financial Institutions • Insurance Companies: • Life Insurance • Accident and Healthy Insurance • Pension Funds: • Mandatory Providence Funds • Retirement Funds/Pension Funds

  11. Investment-type Financial Institutions • Investment Companies: • Closed-end Investment Companies - Investment Brokers • Open-end Investment Companies - Mutual Funds/Unit Trust • Real Estate Trust Investment Companies

  12. Other Financial Institutions • Finance Companies • Factors Companies • Lease Companies • Mortgage Companies • Credit Card Companies • Non-finance Financial Institutions: • General Electric, Ford Motors, Toyota Motors • wholesalers, Manufactures, Department Stores

  13. Why Financial Institutions? • Fulfill economic goals • Reduce transaction and information costs • Provide liquidity • Prevent risks • As transmission of monetary policy • Provide payment mechanism • Supply credit allocation

  14. Analysis of Financial Institutions • 1. Transaction Costs • 2. Information Asymmetry -- Moral Hazard • 3. Financial Risks • 4. Financial Innovation

  15. Solution • Information Asymmetry--Moral Hazard: • Information Symmetry and Full Disclosure • Regulation Reform • Financial Intermediation • Financial Risks: • Risk Management and Control • Burden Administration

  16. Solutions • Financial Innovations: • Enhance Internal Control-- • Planning, Control, and Administration • Tighten Asset Management and Quality • Modernized Operation System • Strengthen Regulation and Monitoring

  17. Duties of the Management of Financial Institutions • 1. Determining the optimal capital structure • Assets, Liabilities, and Capital • 2. Managing interest rate/currency/credit risks • 3. electing/Pricing investments and liabilities • Maturity Matching, Profit Making • 4. Operating effectively • Information Processing • Communication Technology