financial entity

A financial entity is an institution that makes financial intermediary operations (granting of credits and loans, commercial effects, capital investments, insurance, etc.). The main financial figures are intermediation banksinvestment bankssaving banks, insurance companies, etc. These entities are also known as financial institutions.

Intermediation services offered by financial entities are based mainly on fundraising (liability transactions) and its later placement (asset transactions), earning a profit from its spread or margin (difference between rate interest from lends and loans). With today´s financial crisismargins from interbank services have considerably risen (credit risk), which has limited the use of these operations to practically overnight operations. On the other hand, financial entities also earn profits by collecting commissions from other services (neutral operations).

The main commissions tax the medium of payments offered by financial entities (cards, cheques, transfers, etc.). The main types of financial entities are the following:

- Banks: is a big size private financial entity which generally trades on public markets.

- Saving banks: it is also private entity but it is managed by public organisms, therefore it is obliged to use a part of its dividends for social aims.

- Credit union: is a financial entity whose social goal is to serve co-operative members´ needs. Such members are the credit union´s owners.

- Specialized credit union: this type of financial entity is dedicated to concede personal loans and mortgages.

- Insurance company: financial entity that is in charge of taking the risks that a person is submitted to. There are many financial instruments used by financial entities:

a) Loan: giving a client an amount of money which must be returned with the corresponding accrued interests, after a certain period of time.

b) Credit: giving funds to a client up to a limit and certain deadline, perceiving periodical interests upon disposed quantities.

c) Discount: pay the amount of a receivable which is not yet payable (normally bills of exchange) after discounting commissions and interests derived from the time between the money advance and the credit deadline.

d) Guarantee or refinancing: helping smes access credit by lending endorsement guarantees and refinancing.

e) Mortgage: concede a client a loan where the guarantee of a piece property in case of failure exists.

f) Leasing: rent out a fixed or non-fixed asset with a purchase option. Nowadays, European and American financial entities are finding themselves obliged to restructure themselves. The increase in defaults (credit risk), the reduction of the value in the trading portfolio (market risk), along with others, has made a financial entities´ recapitalization obligatory.


Deadline Approaches for European Banks Recapitalizations

Deadline Approaches for European Banks Recapitalizations

Because of the latest liquidity crunch, the possibility of a wave of defaults in China

Because of the latest liquidity crunch, the possibility of a wave of defaults in China