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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