Topic 2 - Non-Banking Institutions

Summary

This video explains the role of non-banking financial institutions, which include investment banks, brokerage firms, insurance companies, and mortgage companies. It outlines their functions, such as advising on mergers, managing transactions, and offering various types of insurance. The video also delves into how mortgage companies assess borrowers through factors like credit score, down payments, and debt-to-income ratios. It highlights different types of lenders, including retail, direct, and hard money lenders. The video concludes by offering a Quizlet link for further learning and encouraging viewer interaction.

Takeaways

• 😀 Non-banking institutions are financial entities that don't offer services like issuing checks or demand drafts, unlike banking institutions.
• 😀 There are four types of non-banking institutions: investment banks, brokerage firms, insurance companies, and mortgage companies.
• 😀 Investment banks help manage complex financial transactions for corporate clients, offering services such as financial advising, mergers, and research.
• 😀 Investment banks assist companies in going public through IPOs (Initial Public Offerings) and offer advice on raising capital in other ways.
• 😀 Brokerage firms act as intermediaries between buyers and sellers of financial assets, charging fees for facilitating transactions.
• 😀 Three types of brokerage firms are: full-service, discount brokerage, and robo-advisors, each offering different levels of service and fee structures.
• 😀 Insurance companies provide protection against risks, offering different types of insurance such as health, car, home, and life insurance.
• 😀 Mortgage companies issue loans for buying residential or commercial properties, with factors like credit score and down payment affecting loan eligibility.
• 😀 Four main factors in mortgage eligibility are: credit score, size of down payment, liquid assets, and debt-to-income ratio.
• 😀 Seven types of lenders in the mortgage market include retail lenders, direct lenders, portfolio lenders, correspondent lenders, warehouse lenders, hard money lenders, and wholesale lenders.

Q & A

What are non-banking institutions?

Non-banking institutions are financial institutions that do not have the authority to issue checks or demand drafts, unlike banking institutions. These institutions deal with financial transactions but are not involved in traditional banking services like savings accounts or checking accounts.

What are the four main types of non-banking institutions?

The four main types of non-banking institutions are investment banks, brokerage firms, insurance companies, and mortgage companies.

How do investment banks assist corporate clients?

Investment banks provide strategic advice, help companies with initial public offerings (IPOs), advise on alternative ways to raise capital, assist in mergers by estimating the value and negotiating fair prices, and conduct research on companies to guide investors on buying, selling, or holding shares.

What are the three main functions of investment banks?

The three main functions of investment banks are: 1) Providing financial advice to institutional investors, 2) Helping with mergers and acquisitions, and 3) Conducting research and issuing reports on financial opportunities.

What types of services do brokerage firms provide?

Brokerage firms act as intermediaries between buyers and sellers for investment transactions. They can operate through online platforms or physical offices, and offer full-service, discount brokerage, and robo-advisor services.

What are the different types of brokerage firms?

The three types of brokerage firms are: 1) Full-service brokerage firms, which offer financial advice and ongoing support, 2) Discount brokerage firms, which offer self-directed online platforms with lower fees, and 3) Robo-advisors, which provide automated investment services with minimal human intervention.

How do insurance companies work?

Insurance companies protect their clients against various risks by collecting premiums. These premiums are invested, and the insurance companies pay out claims when insured events occur, such as accidents, health issues, or property damage.

What are the most common types of insurance?

The most common types of insurance are car insurance, home insurance, life insurance, health insurance, liability insurance, and pet insurance.

What factors influence whether you qualify for a mortgage?

The four main factors that affect mortgage eligibility are: 1) Credit score, 2) Size of down payment, 3) Liquid assets, and 4) Debt-to-income ratio.

What are the seven types of lenders in the mortgage industry?

The seven types of mortgage lenders are: 1) Retail lenders, 2) Direct lenders, 3) Portfolio lenders, 4) Correspondent lenders, 5) Warehouse lenders, 6) Hard money lenders, and 7) Wholesale lenders.