Financial services
Economic services tied to finance provided by financial institutions.
Financial services are the economic activities related to finance that financial institutions carry out. This field covers many service-sector tasks, especially those involving financial management and consumer finance. When people talk about the finance industry or financial services industry, they usually mean commercial banks. These banks provide market liquidity, risk instruments, and brokerage services for large public companies and multinational corporations. Their work happens on a macroeconomic scale that can influence domestic politics and foreign relations. The finance industry’s power and scale, which exist outside direct government control, remain a subject of ongoing debate in many industrialized Western economies. The American Occupy Wall Street protests of 2011 are one example of this controversy.
Different types of financial institutions include credit unions, banks, savings and loan associations, trust companies, building societies, brokerage firms, payment processors, many kinds of brokers, and some government-sponsored enterprises. Financial services cover accountancy, investment banking, investment management, and personal asset management. Financial products include insurance, credit cards, mortgage loans, and pension funds.
The term “financial services” became more common in the United States partly because of the Gramm–Leach–Bliley Act in the late 1990s. This law allowed different types of companies in the U.S. financial services industry to merge. Companies usually take one of two approaches to this new business model. In the first, a bank buys an insurance company or investment bank, keeps the acquired firm’s original brand, and adds it to a holding company simply to diversify earnings. Outside the U.S., such as in Japan, non-financial services companies are allowed within the holding company. In this case, each company still looks independent and keeps its own customers. In the second approach, a bank creates its own insurance or brokerage division and tries to sell those products to its existing customers, offering incentives for combining everything with one company.
The financial sector is traditionally one of the industries that receives government support during widespread economic crises. However, these bailouts tend to have less public support than those for other industries.
A commercial bank is what people usually call
- field
- Financial services
- known_for
- Providing market liquidity, risk instruments, and brokerage; controversy over extragovernmental power
- largest_centers
- New York City (investment banking and investment services), London (foreign exchange and investment banking)
- key_legislation
- Gramm–Leach–Bliley Act (late 1990s, United States)
- major_protest
- American Occupy Wall Street civil protest movement of 2011
Lore & Background
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. Companies usually have two distinct approaches to this new type of business: a bank buying an insurance company or investment bank and keeping the original brands, or a bank creating its own insurance or brokerage division to sell to existing customers.
Reader's Guide
Financial services are significant because they underpin modern economies by providing credit, liquidity, risk management, and investment channels. The industry's scale and extragovernmental power remain an ongoing controversy in many industrialized Western economies, as seen in the American Occupy Wall Street civil protest movement of 2011. The financial sector is traditionally among those to receive government support in times of widespread economic crisis, though such bailouts enjoy less public support than those for other industries. The United States is the largest commercial banking services location, while New York City and London are the largest centers of investment banking services. London handled 36.7% of global currency transactions in 2009. The industry includes a wide variety of institutions—credit unions, banks, savings and loan associations, trust companies, building societies, brokerage firms, payment processors, and government-sponsored enterprises—and offers services such as accountancy, investment banking, investment management, and personal asset management, as well as products like insurance, credit cards, mortgage loans, and pension funds.
Did You Know?
- The term 'financial services' became more prevalent in the United States partly due to the Gramm–Leach–Bliley Act of the late 1990s.
- London handled 36.7% of global currency transactions in 2009, with an average daily turnover of US$1.85 trillion.
- The American Occupy Wall Street civil protest movement of 2011 highlighted the extragovernmental power and scale of the finance industry.
- Assets under custody in the world are approximately US$100 trillion.
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