Financial services

Last updated

Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises. [1] Financial services companies are present in all economically developed geographic locations and tend to cluster in local, national, regional and international financial centers such as London, New York City, and Tokyo.

Contents

History

Change in access to a financial account or services between 2005 and 2014 by country Access to a financial account or services, OWID.svg
Change in access to a financial account or services between 2005 and 2014 by country

The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge. [3]

Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g. Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.

Banks

Commercial banking services

A commercial bank is what is commonly referred to as simply a bank. The term "commercial" is used to distinguish it from an investment bank, a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).

The primary operations of commercial banks include:

The United States is the largest location for commercial banking services.

Investment banking services

New York City and London are the largest centers of investment banking services. NYC is dominated by U.S. domestic business, while in London international business and commerce make up a significant portion of investment banking activity. [4]

Foreign exchange services

Foreign exchange services are provided by many banks and specialist foreign exchange brokers around the world. Foreign exchange services include:

London handled 36.7% of global currency transactions in 2009 – an average daily turnover of US$1.85 trillion – with more US dollars traded in London than New York, and more Euros traded than in every other city in Europe combined. [5] [6] [7] [8] [9]

Investment services

New York City is the largest center of investment services, followed by London. [11]

Insurance

The United States, followed by Japan and the United Kingdom are the largest insurance markets in the world. [13]

Other financial services

Financial exports

A financial export is a financial service provided by a domestic firm (regardless of ownership) to a foreign firm or individual. While financial services such as banking, insurance and investment management are often seen as a domestic service, an increasing proportion of financial services are now being handled abroad, in other financial centres, for a variety of reasons. Some smaller financial centres, such as Bermuda, Luxembourg, and the Cayman Islands, lack sufficient size for a domestic financial services sector and have developed a role providing services to non-residents as offshore financial centres. The increasing competitiveness of financial services has meant that some countries, such as Japan, which were once self-sufficient, have increasingly imported financial services.

The leading financial exporter, in terms of exports less imports, is the United Kingdom, which had $95 billion of financial exports in 2014. [14] The UK's position is helped by both unique institutions (such as Lloyd's of London for insurance, the Baltic Exchange for shipping etc.) [15] and an environment that attracts foreign firms; [16] many international corporations have global or regional headquarters in the London and are listed on the London Stock Exchange, and many banks and other financial institutions operate there or in Edinburgh. [17] [18]

See also

Related Research Articles

An investment bank is a financial services company or corporate division that engages in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.

Citigroup American multinational investment bank and financial services corporation

Citigroup Inc. or Citi is an American multinational investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking giant Citicorp and financial conglomerate Travelers Group in 1998; Travelers was subsequently spun off from the company in 2002. Citigroup owns Citicorp, the holding company for Citibank, as well as several international subsidiaries. Citi is incorporated in NY.

A merchant bank is historically a bank dealing in commercial loans and investment. In modern British usage it is the same as an investment bank. Merchant banks were the first modern banks and evolved from medieval merchants who traded in commodities, particularly cloth merchants. Historically, merchant banks' purpose was to facilitate and/or finance production and trade of commodities, hence the name "merchant". Few banks today restrict their activities to such a narrow scope.

A financial intermediary is an institution or individual that serves as a middleman among diverse parties in order to facilitate financial transactions. Common types include commercial banks, investment banks, stockbrokers, pooled investment funds, and stock exchanges. Financial intermediaries reallocate otherwise uninvested capital to productive enterprises through a variety of debt, equity, or hybrid stakeholding structures.

Underwriting services are provided by some large financial institutions, such as banks, or insurance or investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee. An underwriting arrangement may be created in a number of situations including insurance, issues of security in a public offering, and bank lending, among others. The person or institution that agrees to sell a minimum number of securities of the company for commission is called the Underwriter.

Prime brokerage is the generic name for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return. The prime broker provides a centralized securities clearing facility for the hedge fund so the hedge fund's collateral requirements are netted across all deals handled by the prime broker. These two features are advantageous to their clients.

Piper Sandler Companies is an American multinational independent investment bank and financial services company, focused on mergers and acquisitions, financial restructuring, public offerings, public finance, institutional brokerage, investment management and securities research. Through its principal subsidiary, Piper Jaffray & Co., the company targets corporations, institutional investors, and public entities.

Mediobanca is an Italian investment bank founded in 1946 at the initiative of Raffaele Mattioli and Enrico Cuccia to facilitate the post-World War II reconstruction of Italian industry. Cuccia led Mediobanca from 1946 to 1982. Today, it is an international banking group with offices in Milan, Frankfurt, London, Madrid, Luxembourg, New York and Paris.

The main elements of Japan's financial system are much the same as those of other major industrialized nations: a commercial banking system, which accepts deposits, extends loans to businesses, and deals in foreign exchange; specialized government-owned financial institutions, which fund various sectors of the domestic economy; securities companies, which provide brokerage services, underwrite corporate and government securities, and deal in securities markets; capital markets, which offer the means to finance public and private debt and to sell residual corporate ownership; and money markets, which offer banks a source of liquidity and provide the Bank of Japan with a tool to implement monetary policy.

Cowen Inc., is an American multinational independent investment bank and financial services company that operates through two business segments: a broker-dealer and an investment management division. The company's broker-dealer division offers investment banking services, equity and credit research, sales and trading, prime brokerage, global clearing and commission management services. Cowen's investment management segment offers actively managed alternative investment products. Founded in 1918, the firm is headquartered in New York and has offices worldwide. As of 2018, Cowen managed US$11 billion in alternative investment strategies.

Sell side is a term used in the financial services industry. The three main markets for this selling are the stock, bond, and foreign exchange market. It is a general term that indicates a firm that sells investment services to asset management firms, typically referred to as the buy side, or corporate entities. One important note, the sell side and the buy side work hand in hand and each side could not exist without the other. These services encompass a broad range of activities, including broking/dealing, investment banking, advisory functions, and investment research.

Safra Group International network of companies controlled by the Safra family

The J.Safra Group is an international network of companies controlled by the Safra family, comprising banking and financial institutions and industrial operations. It is present in the US, Europe, the Middle East, Latin America, Asia and the Caribbean.

Stifel Financial Corp. is an American multinational independent investment bank and financial services company created under its present name in July 1983 and listed on the New York Stock Exchange on November 24, 1986. Its predecessor company was founded in 1890 as the Altheimer and Rawlings Investment Company and is headquartered in downtown St. Louis, Missouri.

EFG Hermes Holding S.A.E. is an Egyptian financial services company present in the Middle East, North Africa, Sub-Saharan Africa, and South Asia regions and specializes in securities brokerage, asset management, investment banking, private equity and research in addition to finance lease, factoring, microfinance, Financial technology, mortgage, and insurance. EFG Hermes serves a range of clients including sovereign wealth funds, endowments, corporations, financial institutions, high-net-worth clients and individual customers. EFG Hermes is listed on the Egyptian Exchange (EGX) and London (LSE) stock exchanges. EFG Hermes has offices in Egypt, the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), Pakistan, Oman, Kuwait, Jordan, Kenya, Nigeria, UK, United States and Bangladesh with over 4500 people from 25 nationalities. They serve clients from the Middle East, North Africa, Europe and the United States.

Haitong Securities is a major securities firm in China, providing services in stocks and futures brokerage, as well as investment banking, corporate finance, M&A, asset management, mutual fund, and private equity.

TP ICAP inter-dealer money broker

TP ICAP plc is a global firm of professional intermediaries that operates in the world's financial, energy and commodities markets. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

The most important difference between non-banking financial companies and banks is that NBFCs don't take demand deposits. A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFI facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, 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."

Bank Financial institution that accepts deposits

A bank is a financial institution that accepts deposits and recurring accounts from the people and creates Demand Deposit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Guosen Securities

Guosen Securities Company Limited is a Chinese state-owned financial services company headquartered in Shenzhen, China, with more than 70 branches and 11,500 employees nationwide. It has offices in 47 major cities in China including Shenzhen, Beijing, Guangzhou, Foshan, Nanjing, Shanghai, Tianjin and Hong Kong. Guosen Securities provides sales and trading, investment banking, research, asset management, private equity, and other financial services with both institutional and retail clients in China and Hong Kong. It also operates a trading platform called GuoXin TradingStation.

Mellat Investment Bank financial services company

Mellat Investment Bank, also known as MellatIB is an Iranian investment banking firm based in Tehran. The company offers investment banking services. Mellat Investment Bank is a private joint stock company.

References

  1. "Financial Services: Getting the Goods". IMF. 28 March 2012. Retrieved 8 September 2015.
  2. "Access to a financial account or services". Our World in Data. Retrieved 15 February 2020.
  3. "Bill Summary & Status 106th Congress (1999 - 2000) S.900 CRS Summary - Thomas (Library of Congress)" . Retrieved 2011-02-08.
  4. Roberts, Richard (2008). The City: A Guide to London's Global Financial Centre. Economist. p. 2.
  5. "Research and statistics FAQ". The City of London. Archived from the original on 26 September 2011. Retrieved 23 February 2012.
  6. "Triennial Central Bank Survey - Foreign exchange and derivatives market activity in 2004" (PDF). Bank for International Settlements. March 2005. Retrieved 2018-03-05.
  7. "Key facts Archived 4 June 2012 at Archive.today ", Corporation of London. Retrieved 19 June 2006.
  8. European Central Bank (July 2017) "The international role of the euro". European Central Bank. p. 28.
  9. Chatsworth Communications (April 6, 2016) "London's leading position as a USD 2.2 trillion hub for FX trading would be harmed by a Brexit, according to poll of currency market professionals". Chatsworth Communications.
  10. "Prudential: Securities Processing Primer" (PDF). cm1.prusec.com. Archived from the original (PDF) on 2007-03-16. Retrieved 2010-12-05.
  11. "Asset Management in the UK 2016-2017" (PDF). The Investment Management Association. September 2017. p. 12. Archived from the original (PDF) on 6 March 2018. Retrieved 5 March 2018.
  12. "Price comparison sites face probe". BBC News. 2008-01-22. Retrieved 2009-02-06.
  13. "UK Insurance & Long Term Savings Key Facts 2015" (PDF). Association of British Insurers. September 2015. Retrieved 5 March 2018.
  14. "UK trade surplus in financial services highest ever". TheCityUK. 21 July 2015. Retrieved 5 June 2015.
  15. Clark, David (2003). Urban world/global city. Routledge. pp. 174–176. ISBN   0415320976 ; Shubik, Martin (1999). The theory of money and financial institutions. MIT Press. p. 8. ISBN   0262693119.
  16. Roberts, Richard (2008). The City: A Guide to London's Global Financial Centre. Economist. pp. 1–22.
  17. "UK's financial services trade surplus biggest in the world, dwarfing its nearest rivals". TheCityUK. 3 July 2014. Retrieved 5 June 2015.
  18. "Special report on services exports" (PDF). EY Item Club. June 2014. Retrieved 8 September 2015.

Further reading