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Guilherme Mazui

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What is the Difference Between Bank and Financial Institution?

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The main difference between a bank and a financial institution lies in the services they provide and their legal definitions.

A bank is a financial institution that is licensed to provide loan products and receive deposits. Banks can be divided into retail banks and investment banks, and they emphasize business and consumer accounts, as well as trust services. Some key features of banks include:

  • Accepting deposits from the public
  • Offering loans to borrowers from those deposits and the interest gathered from them
  • Providing a range of services such as checking and savings accounts, consumer loans, credit cards, mortgages, and foreign currencies

On the other hand, financial institutions encompass a broader range of entities that engage in financial and monetary transactions. They can be divided into banking financial institutions and non-banking financial institutions. Some key features of financial institutions include:

  • Providing services such as insurance, payment facilitation, wealth management, and retirement planning
  • Including entities like retirement and investment companies, mortgage brokers, and banks
  • Non-banking financial institutions do not have a banking license and cannot provide loan products and receive deposits like banks

Examples of financial institutions that are not banks include investment banks, insurance companies, finance firms, leasing companies, and mortgage loan companies. These institutions may provide loans and investment services but do not engage in traditional banking services.

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  • What is the Difference Between Bank and Financial Institution?
  • Comparative Table: Bank vs Financial Institution

    • Comparative Table: Bank vs Financial Institution

    Here is a table highlighting the differences between banks and financial institutions:

    Feature Banks Financial Institutions
    Definition Banks are financial institutions that provide a wide range of services, including accepting deposits, providing loans, and offering investment products. Financial institutions encompass a broader range of organizations that provide financial services, including banks, credit unions, insurance companies, and investment banks.
    Ownership Banks are usually corporations owned by shareholders. Financial institutions can be owned by shareholders, members, or even governments, depending on the type of institution.
    Services Banks offer a wide variety of services, such as checking and savings accounts, loans, and investment products. Financial institutions provide a diverse range of services, such as insurance, investment banking, and mortgage lending, in addition to traditional banking services.
    Customers Banks typically serve a broader range of customers, including individuals, businesses, and governments. Financial institutions may focus on specific customer segments or offer specialized services.
    Regulation Banks are more heavily regulated and supervised by central banks and financial regulatory agencies. Financial institutions may be subject to different levels of regulation and supervision, depending on their size, type, and location.

    In summary, banks are a type of financial institution that provides a wide range of financial services, while financial institutions encompass a broader range of organizations that offer various financial services. Banks are usually corporations owned by shareholders and are more heavily regulated than other financial institutions.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.