If you are not clear on the concept of financial intermediary and what are its functions, in this post We are going to help you understand it a little better so that you can choose the financial institution or intermediary that best suits your needs.
Índice
Definition of financial intermediaries
He financial intermediary is that person, entity or institution that offers financial services playing an economic role among savers and businesses that require financing.
It is considered as a intermediation between an investor and an issuer financial instrument so that the investor does not have to deal directly with said issuer.
By performing this function, the Financial intermediaries receive a benefit derived from net interest income, which is derived from the difference between the interest rate offered to savers and the one requested from borrowers.
In addition, it is necessary to know that to be a financial intermediary and offer their services, specialization is required, so it is necessary to be authorized by the CNMV and Bank of Spain and register in their records, complying at all times with the criteria and requirements that they stipulate.
Two exists types of financial intermediaries:
- Bank financial intermediaries (money creators): They are those formed by the private banks and the savings banks. Its services are the collection of deposits and the offer of loans and credits.
- Non-bank financial intermediaries (they do not have the ability to create money directly): Among the non-banking financial entities we find some very varied ones that issue assets other than money and carry out activities beyond banking.
The Financial intermediaries They may be:
- Insurance companies: They emit a specific financial asset what are the insurance policies, which allows them to offer certain compensation in the event that the insured event occurs.
- Official Credit Institute (ICO): It's a self-financing public bank which is dedicated to financing Spanish companies (mostly self-employed and SMEs) with interest.
- Private pension funds: They serve to complement or replace the pensions that Social Security pays out after retirement.
- Mortgage credit companies: grant mortgage credits, for which they obtain resources through term deposits or the issuance of mortgage securities guaranteed by their loan portfolio or by a specific loan.
- Investment companies and mutual funds: They are groups of investors that associate to better access to the Stock Market.
- Leasing companies: They are companies that rent a tangible asset through a price with an option to buy at the end of the lease.
- factoring companies: Service oriented to SMEs. Consists in Selling the applicant's company's future payment rights to the factoring company in exchange for interest. In this case, the applicant's company may have the money it needs at that time.
- Consulting professionals.
Functions of financial intermediaries
Although the functions performed by the Financial intermediaries, the main and most important function is the mediation, since they carry out very important commercial tasks that put those savers who are looking for financial products from the offerers in contact with the purpose of activating the market.
Other of the functions who perform the Financial intermediaries are:
- They direct and channel savings towards investment.
- Facilitate the exchange of goods and services.
- They offer personalized services proposing investment alternatives that are more appropriate to the profile of each investor.
- Facilitate trading, diversification and risk management.
- They follow up with the client.
- They try to reduce the risk of the savers' investment portfolio.
- They move funds from savers who want to invest to those who need financing; The purpose is to capture resources in the short term to transfer them in the long term.
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