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Why do financial institutions exist?

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by

Kimberly Lewis

on 14 January 2014

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Transcript of Why do financial institutions exist?

Why do financial institutions exist?

Why do financial institutions exist?

What challenges would arise without a banking system?

paying bills with cash, no ATMs, keeping money safe, where to get a loan to go to college, buy a home, start a business). A well functioning banking system is crucial in today’s complex economy.








Answer..

provide products like checking and other accounts that help consumers manage money.
provide a safe place for individuals to hold money.
pool the deposits of many individuals in order to make loans to borrowers.
Banks create money by lending.





Financial markets . . .

bring together people who have money to lend and are willing to take risks to earn a return with people who want to borrow for a specific purpose
act as intermediaries by facilitating the interaction of borrowers and savers in financial markets
provides financial products and services to consumers.










provide products like checking and other accounts that help consumers manage money. They provide services and advice to help consumers meet their financial goals
provide a safe place for individuals to hold money, and they help channel money from savers to borrowers
banks, credit unions, and insurance companies are examples of financial institutions
Government protects consumers in financial markets through regulation and enforcement by agencies such as the Securities and Exchange Commission and the Federal Reserve System





The Money Tree

Banks are required by law to keep some of the money in cash that customers deposit in the vault or in the Federal Reserve Bank.


Reserve Requirement (rr)

Bank

Welcome to a Smalltown

$1,000



One Deposit in the Bank of Smalltown
Full transcript