Objectives of Financial Institutions

Financial institutions have been around almost as long as civilization itself. The Babylonian Empire's Code of Hammurabi, written as far back as the 18th century BC, specifically recognized and enumerated laws for banking functions. In modern times, financial institutions fulfill a wide variety of objectives, from storing money to increasing wealth and lending.

Retail Banking

Retail banking is the most common objective that most people are aware of. Retail banks perform functions such as taking deposits, maintaining checking accounts, and offering the use of debit cards for customers to withdraw money on demand.

Lending

One of the oldest functions of financial institutions included the making of loans to merchants. The objective was to provide funding for potentially profitable sellers and makers of goods for trade between citizens and other nations. Today lending companies exist to serve every day citizens as well as corporations. Examples of lending companies include credit card companies and commercial banks.

Asset Protection

Insurance companies are financial institutions whose objective is to provide protection against the loss of assets due to specified adverse events called perils. They provide, in exchange for paid premiums, protection against death, loss of homes or business assets, and even against liabilities. Examples of asset protection include auto insurance and life insurance.

Currency Management

Financial institutions called Central Banks, also known as Reserve Banks, serve to manage the fiat currency, or money supply, of entire nations. Their objective is to control interest rates and manage inflation. Governments also call upon central banks to support the general financial system, including stricken banks, in times of nationwide financial crisis.

Hybrid Companies

Many modern financial institutions cover all of the above. Banks now handle not only the keeping of money, but also loans, currency exchanges, the trading of securities, as well as various forms of insurance.