Some Concepts of Financial industry And Financial Institution(II)

Concept of Financial Institution

Financial institutions refer to financial intermediaries engaged in financial industry, which are part of the financial system.

 

Financial institutions include banks,Steel Pipe Suppliers securities companies, insurance companies, trust investment companies and fund management companies.

 

At the same time, it also refers to the institutions that lend loans to companies whose customers turn over financially, and whose interest is relatively higher than that of banks, but it is more convenient for customers to borrow because they do not need complicated documents to prove it.

Market risks

Market risk refers to the risk that investors can not obtain expected returns due to market fluctuations, including adverse fluctuations of prices or interest rates and exchange rates due to economic reasons. In addition to the adverse effects of fluctuations in stocks, interest rates, exchange rates and commodity prices, market risks also include securities trading cost risk, dividend risk and related risks.

 

Credit risks

Credit risk refers to the possibility that a party to a contract fails to perform its obligations, including the risk of loss caused by default of loans, swaps, options and counter-parties in the settlement process. When financial institutions sign loan agreements, over-the-counter contracts and grant credit, they will face credit risks. Credit risk can be minimized through risk management control and procedures such as requiring opponents to maintain adequate collateral, pay margins and stipulate net settlement terms in contracts.

 

Operational risks

Operational risk refers to the risk of loss caused by improper operation of transaction or management system, including the risk caused by out of control within the company.

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