The term "financial services" became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge.
Companies usually have two distinct approaches to this new type of business. One approach would be a bank which simply buys an insurance company or an investment bank, keeps the original brands of the acquired firm, and adds the acquisition to its holding company simply to diversify its earnings. Outside the U.S. (e.g. Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent, and has its own customers, etc. In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.
Commercial banking services
A commercial bank is what is commonly referred to as simply a bank. The term "commercial" is used to distinguish it from an investment bank, a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form of bonds (debt) or stock (equity).
The primary operations of commercial banks include:
Keeping money safe while also allowing withdrawals when needed
Issuance of chequebooks so that bills can be paid and other kinds of payments can be delivered by the post
New York City and London are the largest centers of investment banking services. NYC is dominated by U.S. domestic business, while in London international business and commerce make up a significant portion of investment banking activity.
Foreign exchange services
Foreign exchange services are provided by many banks and specialist foreign exchange brokers around the world. Foreign exchange services include:
Wire transfer - where clients can send funds to international banks abroad.
Remittance - where clients that are migrant workers send money back to their home country.
London handled 36.7% of global currency transactions in 2009[update] - an average daily turnover of US$1.85 trillion - with more US dollars traded in London than New York, and more Euros traded than in every other city in Europe combined.
Custody services - the safe-keeping and processing of the world's securities trades and servicing the associated portfolios. Assets under custody in the world are approximately US$100 trillion.
New York City is the largest center of investment services, followed by London.
Insurance brokerage - Insurance brokers shop for insurance (generally corporate property and casualty insurance) on behalf of customers. Recently a number of websites have been created to give consumers basic price comparisons for services such as insurance, causing controversy within the industry.
Finance & Insurance - a service still offered primarily at asset dealerships. The F&I manager encompasses the financing and insuring of the asset which is sold by the dealer. F&I is often called "the second gross" in dealerships who have adopted the model
Reinsurance - Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic losses.
The United States, followed by Japan and the United Kingdom are the largest insurance markets in the world.
Credit card machine services and networks - Companies which provide credit card machine and payment networks call themselves "merchant card providers".
Intermediation or advisory services - These services involve stock brokers (private client services) and discount brokers. Stock brokers assist investors in buying or selling shares. Primarily internet-based companies are often referred to as discount brokerages, although many now have branch offices to assist clients. These brokerages primarily target individual investors. Full service and private client firms primarily assist and execute trades for clients with large amounts of capital to invest, such as large companies, wealthy individuals, and investment management funds.
Private equity - Private equity funds are typically closed-end funds, which usually take controlling equity stakes in businesses that are either private, or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets.
Venture capital is a type of private equity capital typically provided by professional, outside investors to new, high-growth-potential companies in the interest of taking the company to an IPO or trade sale of the business.
Angel investment - An angel investor or angel (known as a business angel or informal investor in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share resources and pool their investment capital.
Conglomerates - A financial services company, such as a universal bank, that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, retail banking, wholesale banking, investment banking, etc. A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses are aggregated. As a consequence, economic capital for a conglomerate is usually substantially less than economic capital is for the sum of its parts.
Debt resolution is a consumer service that assists individuals that have too much debt to pay off as requested, but do not want to file bankruptcy and wish to pay off their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards or in some cases merchant accounts.
A financial export is a financial service provided by a domestic firm (regardless of ownership) to a foreign firm or individual. While financial services such as banking, insurance and investment management are often seen as a domestic service, an increasing proportion of financial services are now being handled abroad, in other financial centres, for a variety of reasons. Some smaller financial centres, such as Bermuda, Luxembourg, and the Cayman Islands, lack sufficient size for a domestic financial services sector and have developed a role providing services to non-residents as offshore financial centres. The increasing competitiveness of financial services has meant that some countries, such as Japan, which were self-sufficient have increasingly imported financial services.
The leading financial exporter, in terms of exports less imports, is the United Kingdom, which had $95 billion of financial exports in 2014. The UK's position is helped by both unique institutions (such as Lloyd's of London for insurance, the Baltic Exchange for shipping etc.) and an environment that attracts foreign firms; many international corporations have global or regional headquarters in the London and are listed on the London Stock Exchange, and many banks and other financial institutions operate there or in Edinburgh.
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