Briefly discuss the purpose and role that each type of financial institution (depositary, contractual, and investment) play in the U.S.|My homework helper

Posted: March 8th, 2023

Briefly discuss the purpose and role that each type of financial institution (depositary, contractual, and investment) play in the U.S. economy. How do each of these institutions intersect with the various types of markets, i.e., capital, money, spot (cash), derivatives, Forex and Interbank, primary, and secondary (inclusive of OTC)?

SOLUTION

Financial institutions play a crucial role in the US economy by facilitating the flow of funds between savers and borrowers. There are three types of financial institutions: depositary, contractual, and investment. Depositary institutions, such as banks and credit unions, accept deposits from savers and use the funds to make loans to borrowers. They also offer a range of financial services, such as checking and savings accounts, loans, and credit cards. Depositary institutions are closely connected to the money market, where short-term loans are made between banks and other financial institutions.