Essential Standard 4.00 Understand the role of finance in business

Objective 4.02 Understand the banking system.

Topics Classification of financial institutions Common payment services Federal Reserve System

Classification of financial institutions

Classification of Financial Institutions Depository –Earns money to finance their business by accepting deposits from customers –Types include: Commercial banks, which offer many different services, including savings, loans, and checking accounts. Savings and loan associations (S&Ls), which traditionally specialize in savings and home loans, but now are very similar to commercial banks. Mutual savings banks, which are owned by the depositors and specialize in savings and home loans. Credit unions, which are not-for profit, serve their members only, and are owned by their depositors.

Classification of Financial Institutions continued Non-depository –Earns money to finance their business by selling specific services such as policies, investments, and loans –Types include: Life insurance companies Investment companies Consumer finance companies Mortgage companies Check-cashing outlets Pawnshops

Classification of Financial Institutions continued Which characteristics of financial institutions are used for comparing them? –Services offered –Safety –Convenience –Fees and charges –Restrictions What kinds of questions may be asked about each characteristic?