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B. Non Bank Financial Institution

This document discusses non-bank financial institutions (NBFIs). It defines NBFIs as financial institutions that provide banking services without a banking license. The document then discusses the role of NBFIs in allocating resources and enhancing competition by tailoring services. It provides examples of NBFIs like insurance companies, market makers, financial service providers, and specialized lenders. Finally, it outlines the functions of NBFIs in developing sectors, creating jobs, and mobilizing savings and the classification of private and government NBFIs.

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Erica Gallur
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126 views13 pages

B. Non Bank Financial Institution

This document discusses non-bank financial institutions (NBFIs). It defines NBFIs as financial institutions that provide banking services without a banking license. The document then discusses the role of NBFIs in allocating resources and enhancing competition by tailoring services. It provides examples of NBFIs like insurance companies, market makers, financial service providers, and specialized lenders. Finally, it outlines the functions of NBFIs in developing sectors, creating jobs, and mobilizing savings and the classification of private and government NBFIs.

Uploaded by

Erica Gallur
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Banking and

Financial
Institution
Objectives:
1. Understand what is Non-bank financial
institutions and its functions
2. Discuss the role of NBFI in the industry
3. To be able to learn the different types of NBFI
4. Discuss the classification of NBFI

Banking and Financial


Institution
B. Non-Bank Financial Institutions
Definition of Non-Bank Financial
Institution

A financial institution that does not have a full banking


license or is not supervised by a national or international
banking regulatory agency.

Non-banking financial institutions, are financial institutions


that provide banking services, but do not hold a banking
license. These institutions are not allowed to take deposits
from the public.

Banking and Financial


Institution
The role of Non-Bank Financial Institutions in the wider industry

• For most people, the bank is the first port of call when seeking out
financial aid or advice. However, many people also find that the services
offered by the bank don’t adequately meet their requirements, leaving
them at a loss for what to do next

• While banks tend to offer a set of financial services as part of a clear


packaged deal, NBFIs unbundle these offers and tailor their services to
meet the needs of the specific client. Therefore, many people who can’t
find help at the bank can find it with an NBFI

• The role of NBFIs is generally to allocate surplus resources to individuals


and companies with financial deficits, allowing them to supplement
banks. By unbundling financial services, targeting them and specializing in
the needs of the individual, NBFIs work to enhance competition in the
financial sector

Banking and Financial


Institution
NBFIs offer most kinds of banking services, often
including:
» Loans
» Credit facilities
» Retirement planning
» Education funding
» Underwriting stocks and shares
» Money market trading
» TFCs (Term Finance Certificates)
» Wealth management
» Portfolio of stocks and shares management
» Discounting services

Banking and Financial


Institution
B. Non-Bank Financial Institution
Types of Non-Bank Financial
Institution

• Risk Pooling Institution

• Market Makers

• Financial Service Providers

• Contractual Savings Institution

• Specialized sectorial financiers

Banking and Financial


Institution
Risk Pooling Institution
• refers to an organization that provides a service,
while at the same time spreading financial risk
among a large number of entities. Insurance
companies are considered risk pooling
institutions
• is the concept that a financial institution can
lower the probability of a catastrophic financial
event by aggregating customers across many
different dimensions

Banking and Financial


Institution
Market Makers
• refers to a firm or individual who actively quotes
two-sided markets in a particular security, providing
bids and offers (known as ask) along with the
market size of each
A two-sided market exists when both buyers and
sellers meet to exchange a product or service, creating
both bids to buy and offers (asks) to sell
• Market makers provide liquidity and depth to
markets and profit from the difference in the
bid-ask spread. They may also make trades for their
own accounts, which are known as principal trades

Banking and Financial


Institution
Financial Service Providers
• a person engaged in the business of providing
financial services in terms of authorisation issued or
registration granted by a financial sector regulator
• any provider of Consumer Financial Products or
Services for the retail market regardless of the
organization’s corporate form and primary business
lines, whether or not it is prudentially licensed, and
whether it is run for private gain or for charitable
purposes, including without limitation, public and
private banks, credit unions, microfinance

Banking and Financial


Institution
Contractual Savings Institution
• obtain funds under long-term contractual arrangements
and invest the funds in the capital markets such as the
best forex trading markets
• These institutions are characterized by a relatively
steady inflow of funds from contractual commitments
with their insurance policy holders and pension fund
participants
• Thus liquidity is usually not a problem in the
management of these institutions they are able to invest
in long-term securities such as bonds and in some cases
in common stock or participate in forex trading tips

Banking and Financial


Institution
Specialized sectorial financiers
• provide a limited range of financial services to a
targeted sector
• For example, real estate financiers channel
capital to prospective homeowners, leasing
companies provide financing for equipment
and payday lending companies that provide
short-term loans to individuals that
are Under-banked or have limited resources

Banking and Financial


Institution
B. Non-Bank Financial Institution
Function of Non-Bank
Financial Institutions
• Development of sectors like Transport & Infrastructure.
• Substantial employment generation
• Help and increase wealth creation.
• Broad base economic development
• To finance economically weaker sections
• Brokers of loanable funds
• Mobilization of savings
• Channelization of funds into investment
• Stabilize the capital market
• Provide Liquidity

Banking and Financial


Institution
B. Non-Bank Financial Institution
Classification of Non-Bank
Financial Institutions

Insurance Firm
Private Non-Bank Pawnshop
Financial
Institutions Cashier’s check issuers
Lending companies

GSIS
Government SSS
Non-Bank
Financial Philhealth

Banking and Financial


Institutions
HDMF

Institution

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