Non-bank financial institution
Encyclopedia
A non-bank financial institution (NBFI) is a financial institution
that does not have a full bank
ing license or is not supervised by a national or international banking regulatory agency. NBFIs facilitate bank-related financial services, such as investment
, risk pool
ing, contractual savings
, and market brokering
. Examples of these include insurance firms
, pawn shops, cashier's check
issuers, check cashing
locations, currency exchange
s, and microloan organizations. Alan Greenspan
has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment [which] act as backup facilities should the primary form of intermediation fail."
, approximately 30% total assets of South Korea's financial system was held in NBFIs as of 1997. In this report, the lack of regulation in this area was claimed to be one reason for the 1997 Asian Financial Crisis.
.
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
that does not have a full bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
ing license or is not supervised by a national or international banking regulatory agency. NBFIs facilitate bank-related financial services, such as investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
, risk pool
Risk pool
A risk pool is one of the forms of risk management mostly practiced by insurance companies. Under this system, insurance companies come together to form a pool, which can provide protection to insurance companies against catastrophic risks such as floods, earthquakes etc. The term is also used...
ing, contractual savings
Collective investment scheme
A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
, and market brokering
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
. Examples of these include insurance firms
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
, pawn shops, cashier's check
Cashier's check
A cashier's check is a check guaranteed by a bank. They are treated as guaranteed funds and are usually cleared the next day. It is the customer's right to request "next-day availability" when depositing a cashier's check in person...
issuers, check cashing
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
locations, currency exchange
Currency exchange
Currency exchange can refer to:* Bureau de change* Foreign exchange market...
s, and microloan organizations. Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment [which] act as backup facilities should the primary form of intermediation fail."
In Asia
According to the World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, approximately 30% total assets of South Korea's financial system was held in NBFIs as of 1997. In this report, the lack of regulation in this area was claimed to be one reason for the 1997 Asian Financial Crisis.
In the United States
In 1996, the NBFI sector accounted for approximately $200 billion in transactions in the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
See also
- Alternative financial servicesAlternative financial servicesAlternative financial services are financial services provided outside traditional banking institutions, on which many low-income individuals depend. In developing countries, these services often take the form of microfinance...
- Financial economicsFinancial economicsFinancial Economics is the branch of economics concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment"....
- Non-banking financial companyNon-banking financial companyNon-bank financial companies are financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. These institutions are not allowed to take deposits from the public. Nonetheless, all operations of these...