Financial Institutions Overview

Financial Institutions

• Commercial Banks: Companies accepting deposits, making loans, earning profits, and paying interest to depositors. Examples include CIMB, Maybank, and Public Bank.
• Savings and Loan Associations (S&Ls): Institutions primarily for home mortgages. Also called thrift institutions, they encourage savings.
• Mutual Savings Banks: Financial institutions where depositors share in profits, receiving dividends. Profits are distributed proportionally among depositors.
• Credit Unions: Nonprofit, cooperative institutions owned and run by members, usually employees of a particular organization. They aim to promote thrift and provide members with savings and borrowing options.

Nondeposit Institutions

• Pension Funds: Pools of funds managed to provide retirement income to members. Public pension funds are for state and local government employees, while private pension funds are operated by employers, unions, and other private groups. Examples include Employees Provident Fund (EPF).
• Insurance Companies: Nondeposit institutions that invest funds collected as premiums charged for insurance coverage. They invest in stocks, real estate, and other assets.
• Finance Companies: Institutions specializing in making loans to businesses and consumers. Commercial finance companies provide funds to businesses, while consumer finance companies focus on loans to individuals.
• Securities Investment Dealers (Brokers): Financial institutions buying and selling stocks and bonds for investors and their own accounts. They facilitate stock and bond transactions and hold large funds for their transfer.

Growth of Financial Services

• Individual Retirement Accounts (IRAs): Tax-deferred pension funds for wage earners and their spouses to supplement other retirement funds. Trust services are offered by banks to manage estates, investments, and other assets for an individual.
• Trust Services: Management of estates, investments, and/or other assets for individuals. Trust departments handle monthly bill payments and manage investment portfolios.
• Private Retirement Schemes (PRS): Voluntary long-term savings schemes for retirement, designed to allow for more savings through tax incentives and special accounts with different withdrawal conditions.

International Services

• Letters of Credit: Bank promises to pay a designated firm a certain amount of money under specific conditions.
• Banker's Acceptance: Bank promises to pay a designated firm a certain sum at a future date.

Electronic Funds Transfer

• Electronic Funds Transfer (EFT): Communication of fund transfer information electronically.
• Automated Teller Machines (ATMs): Electronic machines allowing bank customers to conduct various account activities 24/7.

Regulation of the Banking System

• Federal Deposit Insurance Corporation (FDIC): Federal agency guaranteeing the safety of deposits up to a certain amount in insured financial institutions. They aim to restore public confidence in banks by supervising banks and insuring deposits of banks and thrift institutions.
• Perbadanan Insurans Deposit Malaysia (PIDM): Entity responsible for regulating and supervising banks and insurance in Malaysia; it maintains the right to examine the operations of banks and thrift institutions.
• Federal Reserve System (Fed): The nation's central bank regulating many aspects of financial operations in the U.S.

International Bank Structure

• World Bank: UN agency providing financial services for development and improvements in underdeveloped countries.
• International Monetary Fund (IMF): Organization of about 150 nations that pools resources to promote stable exchange rates and provide temporary loans to countries facing short-term negative trade balances.

Explore the various types of financial institutions, including commercial banks, savings and loan associations, mutual savings banks, and credit unions. This quiz also covers nondeposit institutions like pension funds, providing a comprehensive understanding of their roles in the economy.