Financial service sector

• Financial Services Sector


  Provides link between organizations needing capital and those with capital available for investment
• Core functions of the financial services sector

  • Investment chain
  • Managing Risk
  • Payment Systems
• Investment chain


  Provides the link between organisations needing capital and those with capital available for investment
• Managing Risk


  Allows risks to be managed effectively and efficiently through the use of insurance, and increasingly through the use of sophisticated derivatives
• Payment Systems


  Mechanisms for money to be managed, transmitted and received quickly and reliably
• Payment system example


  • SWIFT (Society for Worldwide Interbank Financial Telecommunication)
• Wholesale Financial Markets


  • Equity markets
  • Bond markets
  • Foreign exchange
  • Derivatives
  • Insurance markets
• Equity markets


  The trading of quoted shares
• Bond markets


  The trading of government, supranational or corporate debt
• Foreign exchange


  The trading of currencies
• Derivatives


  The trading of options, swaps, futures and forwards
• Insurance markets


  Major corporate insurance (including professional indemnity), reinsurance, captive insurance and risk-sharing insurance
• Other wholesale sector activities

  • Fund management
  • Investment banking
  • Custodian banking
• Fund management


  Managing the investment portfolios of collective investment schemes (CISs), pension funds and insurance funds
• Investment banking


  Banking services tailored to organisations, such as undertaking mergers and acquisitions (M&A), equity trading, fixed-income trading and private equity
• Custodian banking


  Provision of services to asset managers involving the safekeeping of assets, the administration of the underlying investments, settlement, corporate actions and other specialised activities
• Retail Financial Services


  • Retail banking
  • Insurance
  • Pensions
  • Investment services
  • Financial planning and financial advice
• Retail banking


  The traditional range of current accounts, deposit accounts, lending and credit cards
• Insurance


  The provision of a range of life assurance and protection solutions for areas such as medical insurance, critical illness cover, motor insurance, property insurance, income protection and mortgage protection
• Pensions


  The provision of investment accounts specifically designed to capture savings during a person's working life and provide benefits on retirement
• Investment services


  A range of investment products and vehicles ranging from execution-only stockbroking to full wealth management services and private banking
• Financial planning and financial advice

  Helping individuals to understand and plan for their financial future
• Equity markets


  Stock markets where the ordinary and preference shares of companies are traded
• Market capitalization


  The total value of all a company's shares of stock, calculated by multiplying the price of a stock by its total number of outstanding shares
• Multilateral Trading Facilities (MTFs)


  Systems that bring together multiple parties that are interested in buying and selling financial instruments including shares, bonds and derivatives, operated by an investment firm or another market operator
• Bond markets


  Allow governments and companies to raise loans or debt finance directly from investors and then facilitate the subsequent secondary trading of the debt securities created
• Foreign exchange (FX) markets

  The global marketplace that determine the exchange rates for currencies around the world, and where one currency is traded for another
• Over-The-Counter (OTC)


  The trading of securities between two counterparties executed outside of formal exchanges and without the supervision of an exchange regulator
• Derivatives market


  A financial market where investors trade in financial instruments whose value is derived from an underlying asset, such as stocks, indices, currencies, or commodities
• Insurance market


  The buying and selling of insurance and the entities involved in these transactions
• Investment banks


  Their functions include corporate finance and advisory work, banking, treasury dealing, investment management, and securities-trading
• Custodians


  Banks that specialise in safe custody and asset services, including holding assets in safekeeping, arranging settlement, asset servicing, managing cash transactions, providing reporting, and reconciliations
• Retail and commercial banks

  Financial conglomerates providing a range of financial services
• Savings institutions


  Also known as Cajas, Credit Unions, Building Societies, Mutual Societies or Mutual Savings Banks
• Demutualization


  The process by which a private, member-owned company legally changes its structure to become a public-traded company owned by shareholders
• Peer-to-Peer (P2P) Lending


  Cutting out banks so that borrowers often receive slightly lower rates, while savers get far improved headline rates, with the P2P firms themselves profiting via a fee
• Crowdfunding


  The practice of funding a project or venture by raising small amounts of money from a large number of people, which can take the form of donations, debt, or equity
• Insurance companies


  Collect premiums in exchange for coverage, invest the premium income in equities and bonds, and hold cash to satisfy claims
• Pension funds


  Institutional investors that manage the retirement savings of individuals
• Crowdfunding


  Using the internet to access many potential funders, instead of asking a bank or a few people for large sums of money