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CHAPTER 13
NONDEPOSITORY FINANCIAL INSTITUTIONS
A)LIFE INSURANCE COMPANIES
B) PENSION FUNDS
They aim to enable retirees to maintain a decent standard of living.
Most pension fund assets are in employer-sponsored plans.
C)PROPERTY AND CASULATY INSURANCE COMPANIES
Offer coverage for automobile accidents, fire, theft, personal neglicence, malpractice etc.
Losses can be anexpected and hghly variable.
Lloyd’s of London will endure aganst any contngency at a price.
D) MUTUAL FUNDS (Investment Funds)
A Mutual fund pools the funds of many people; the managers of the fund invest the money in a
diversified portfolio of securities and try to achieve some stated objective; like long-term growth of
capital or high current income or perhaps only modest current income but minimum risk.
Open-end mutula funds: typical kind sell redeemable shares in the fund to the general public.
Closed-end Investment Companies: are completely unlike those just described. Issue only a
limited number of shares and do not redeem their own shares on demand, like open end funds.
FINANCE COMPANIES
Consumer Finance Companies: make consumer loans.
Commercial Finance Companies: make a commercial loans usually on a secured(
collateralized) basis.
Loans made by finance companies are usually riskier than loans made by commercial.
Lending is short-term.
Some finance companies referred to as CAPTIVE INSURANCE COMPANIES.
SECURITIES BROKERS,DEALERS AND INVESTMENT BANKS
All important in the distribution and trading of huge amounts of securities, including corporate
bonds, state and local government securities and US securities.
VENTURE CAPITAL FUNDS AND MEZZANINE DEBT FUNDS
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are too small to be recorded seperately in our tables on intermediary assets.
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Not registered with SEC.
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Many are sponsored with brokage firms and banks
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Risky assets
Venture Captalists provide funds to these firms in return for a substantal equity stake in the firm.
Mezzanine Debt Funds provide debt funds to small and mid-sze companies with claims in
assets that lie soewhere between the “upper level” of financing and the lower level of financing
(equitiy).
BANKS VS NONDEPOSITORY INSTITUTIONS
Banks compete with finance companies over loans.
Today most of the large finance coanes are owned by banks.
Universal Banking
In this regulatory model , commercial banks can engage in corporate securites underwriting.