The financial services sector makes money available for people and companies to use, enabling them to maximize their earning power and enhancing the prosperity of the economy. This industry includes commercial banks, credit unions, insurance companies, stock brokerages, and asset managers.
There are different types of financial services, including corporate financing, loans and leasing, mergers and acquisitions, and private equity. Many of these sectors are also subject to regulations, and regulators must ensure that they uphold consumer protection laws and transparency.
Banking and other financial services are a key part of the economic system, helping channel cash from savers to borrowers and redistribute risk among a large pool of participants. For example, banks accept deposits and pay depositors who then lend or invest the money they receive.
Insurance policies are a common type of financial service, helping to protect people against loss from unexpected events like accidents or disease. For instance, life insurance pays out a predetermined sum in the event of a death.
Regulatory agencies and supervisors are responsible for protecting the financial services industry from failures. They regulate the activities of banks and other financial institutions, and can take over them in the case of a problem or fraud.
Financial services are an essential part of the economy, and a strong sector is important for boosting the confidence of consumers and helping the economy grow. However, recent growth in this industry has strained the resources of regulatory bodies. Increasingly complex financial instruments, such as new types of securities and derivatives, can make it more difficult to regulate. Moreover, recent natural disasters and cyberattacks have demonstrated the risks that remain for financial service providers.