Chapter 21: Learning Objectives Other Financial Institutions: What Are They? Insurance Industry:...

Chapter 21:Learning Objectives

Other Financial Institutions: What Are They?

Insurance Industry: General Characteristics

Mutual Funds & Pension Funds: General Overview

Government Programs & Incentives

Other Financial InstitutionsOther Financial Institutions

Financial and Leasing Corporations Investment Dealers Government Financial Institutions Insurance Companies Mutual Funds Pension Funds

Investment DealersInvestment Dealers

Underwrite securities Also act as primary market dealers Since the early 1990s have been largely bought

out by Chartered banks Serious regulatory issues have affected the

industry in the 1990s

Government Financial InstitutionsGovernment Financial Institutions

In theory, fill in gaps left behind by the private market either because of risk or low profitability

Examples include: CMHC, FBDB, EDC, FCC

Insurance CompaniesInsurance Companies

Most are federally regulated Separate Acts regulate domestic vs. foreign based companies There are 2 types of cos.: Joint-stock (shareholder owned) &

mutual cos (policy holder owned). Assets must be sufficient to cover liabilities segregated fund component acts like an intermediary by offering

RRIFs They have their own “protection” fund that acts like deposit

insurance Demutualization is the dominant current trend

Investment Funds & CosInvestment Funds & Cos

Mutual FundsClosed-end (fixed no. of shares)Open-end (no share limit)usually specialize (e.g., bonds, mortgages, etc.)

Pension fundsWho operates them? Public vs. PrivateHow are finds built up? Contributory vs. compulsoryWho manages them? TrusteeshipHow are benefits paid? Defined (size & fund return) vs flat benefit (tenure)

SummarySummary

There exist a large variety of public and private institutions which function as intermediaries but are not necessarily deposit-taking institutions

Public institutions attempt to fill a perceived void left by the private market either because risks are too high or anticipated profits too low

Other financial institutions include leasing cos., investment dealers, insurance companies, government financial institutions, mutual and pension funds