1. Fintech Chapter 4: Financial Institutions

2. “We need banking…but not banks!”
-Bill Gates

3. Figure 4.1 Large Commercial Banks

5. Role of Financial Intermediaries
Information Asymmetries
Moral Hazard
Adverse Selection

6. Importance of Financial Institutions
Intermediation
Diversification
Information and Contracting Efficiencies
Payments
Security.
Cost Savings

7. Financial Institutions
Commercial Banks
Investment Banks
Credit Unions
Central Banks
Insurance Companies, Finance Companies, Hedge Funds, Mutual Funds, ETFs
Shadow Banking: Other Financial Intermediaries

8. Commercial Bank Services-Retail
Checking and savings accounts
Certificates of deposit
Mortgages on residential and investment properties
Home equity and other lines of credit
Credit card lending
Student loans
New and used car, motorcycle and boat loans
Foreign exchange and remittance transfers
Stock brokerage
Wealth management
Private banking
Insurance

9. Commercial Bank Services-Institutional
Loans to financial and non-financial companies and governments
Cash management and other corporate treasury services
Leasing
Commercial real estate
Trade finance – letters of credit, bill collection, and factoring.
Human resources services

10. Commercial Bank Services-Risks
Credit risk
Interest rate risk
Trading risk
Operational risk

11. Investment Banks
Investment Banks

12. Investment Bank Services
Public offering of securities
Trading
Private Placements
Securitizations
Mergers and Acquisitions
Merchant Banking
Restructuring Advice
Securities Finance
Prime Brokerage
Clearing and Custody Services
Origination and Trading of Derivatives
Asset Management

13. Figure 4.2: Investment Bank Revenue Sources

14. Figure 4.3: Investment Bank Revenue in Equity Markets

15. Figure 4.4: Investment Bank Revenue in Bond Markets

16. Figure 4.5 Global Investment Banking Revenue and Market Share (01Jan – 03Jul 2017)

17. Investment Bank Activities
Trading
Research
Asset Securitization
M & A
Prime Brokerage

18. Credit Unions
Credit Unions

19. Central Banks
Central Banks

20. US Fed: Roles Regulating and overseeing financial institutions;
Providing financial services to the banking system;
Executing monetary policy in support of macroeconomic goals;
Acting as lender of last resort
Providing banking services to the U.S. government
Issuing currency

21. US Fed: Policy Tools Open market operations The Discount rate
Reserve requirements
Unconventional tools: Quantitative Easing

22. Historical Innovation in Big Financial Institutions

23. Shadow Banking: Other Financial Intermediaries
Investment banks
Mortgage lenders
Money market funds
Insurance companies
Hedge funds
Private equity funds
Payday lenders

24. Fintech Applications Fintech Applications Challenger banks
Atom Bank, Monzo Bank, Starling Bank, and Tandem
Zopa
Klarna
“World’s Best Digital Bank”: DBS