Non Bank Financial Institution Definition: A non-bank financial institution (NBFI) is a financial institution that does not have a complete banking license and is not administered by a national or international banking regulatory agency. NBFIs make easy bank-related financial services, such as investment, contractual savings, risk pooling & market brokering. Examples: Examples consist of insurance firms, check cashing locations, pawn shops, currency exchange, cashier’s check issuers, payday lending, & microloan organizations. Alan Greenspan has identified the role of NBFIs in intensification an economy, as they facilitate “multiple alternatives to transform an economy’s savings into capital investment act as backup facilities should the primary form of intermediation fail”. Types:
An investment company is a corporation or a trust through which individuals invest in diversified, professionally managed portfolios of securities by pooling their funds with those of other investors. Types:
Role of Financial Institutions:
A few researches recommend elevated correlation b/w a financial development and economic growth. Usually, a market-based financial system has improved developed NBFIs than a bank based structure which is encouraging for economic growth.
A multi-faceted financial system that comprises of non-bank financial institutions can protect economies from financial shocks and allow speedy recovery when these shocks occur. Other Types:
Insurance companies endorse economic risks linked with illness, death, damage and other risks of loss. In return to collecting an insurance premium, insurance companies offer a dependent promise of economic protection in the case of loss. There are two major types of insurance companies:
General insurance be likely to be short-term, whereas life insurance is a longer-term contract, which cease at the death of the insured. Both kinds of insurance life and general are accessible to all sectors of the district.
Contractual savings institutions provide individuals the chance to invest in collective investment vehicles (CIV) as a fiduciary rather than a principal role. Collective investment vehicles pool means from individuals and firms into diverse financial instruments together with equity, debt, and derivatives. The two main types
Open-end funds produce original investments by allowing the public to buy new shares at any time and shareholders can liquidate their holding by selling the shares back to the open-end fund at the net asset value. Closed-end funds release a predetermined number of shares in an IPO. In this instance the shareholders capitalize on the value of their assets by selling their shares in a stock exchange.
Market makers are broker dealer institutions that quote a buy and sell price and provide transactions for financial assets. Such assets contain equities, government and corporate debt, derivatives, and foreign currencies. As soon as receiving an order the market maker without delay sells from its inventory or makes a purchase to offset the loss in inventory. The degree of difference between the buying and selling quotes, or the bid-offer spread is how the market maker creates profit. A main contribution of the market makers is getting better the liquidity of financial assets in the market.
They offer a restricted range of financial services to a targeted sector. For instance, real estate financiers channel capital to prospective homeowners, leasing companies offer financing for equipment and payday lending companies that offer short term loans to individuals that are under banked or have limited resources.
Financial service contributor includes broker’s securities and mortgage, management consultants, and financial advisors, and they function on a fee for service basis. Their services contain enhancing informational efficiency for the investors & in the case of brokers, providing a transactions service by which an investor can liquidate existing assets. Purpose and Scope: The purpose is to provide the Financial Crimes Enforcement Network (FinCEN) with factual profiles of five sectors of non-bank financial institutions (NBFIs), based upon their size, services, geographic and transaction attributes. FinCEN has regulatory responsibilities for a wide variety of financial institutions, and needs current and detailed information on those financial institution industry elements subject to its regulatory authority. Senior policy makers need to make regulatory decisions based on the best available information, so as to ensure that their public responsibilities are discharged fairly and effectively. In the near future, FinCEN will be proposing significant changes to its regulatory requirements relating to certain “non-bank financial institutions” (identified below) and will need basic information concerning the size, extent, revenue derived and nature of the businesses that offer these financial services to the public. In order to provide reliable information, we:
The five NBFI sectors covered by the study are:
List of Non-Bank Financial Institution in Pakistan: A. Development Finance Institution:
B. Leasing Companies:
C. Investment Banks:
D. Modaraba Companies:
E. Discount & Guarantee Houses:
F. House Finance Companies:
G. Venture capital Company:
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