Chapter 7: Financial Institutions in the Financial System

A financial institution is an organization which makes the smooth operation of the financial system possible. Whether it be an individual, an enterprise, or the government, the majority of financial services are provided by financial institutions. In a modern economy, financial institutions have become ever more complex. This chapter will introduce the most basic financial institutions in the financial system and their corresponding functions, primarily: commercial banks, policy banks, insurance agencies, capital market institutions, regulatory institutions, and other such financial institutions.