financial institution (2024)

A financial Institution is defined in 18 U.S. Code § 20 as an entity, national or international, that deals primarily in business related to financial or/and monetary transactions, namely loans, deposits, investments, currency exchange, or any other transaction of similar nature. Financial institutions therefore encompass banks, trust or insurance companies, credit unions, finance companies, securities firms, leasing companies, etc. In that sense, financial institutions constitute a major component of the financial services sector.

Financial institutions can be of different natures, private or public, national or international. A dual classification of financial institutions is oftentimes used, putting on one side financial banking institutions and on the other side financial non-banking institutions. Banking financial institutions include commercial banks, whose most important role is to deal with loans and deposits, and more broadly everyday banking transactions. Non-banking financial institutions include investment banks, insurance and leasing companies, whose roles are more specialized and technical. For instance, investment banks’ main role is to advise businesses and governmental entities on how to meet their financial challenges and provide them with a broader expertise on concrete operations.

International financial institutions (IFI) are important on the international stage because they establish a framework for the development of financial and monetary rules and allow financial actors to benefit from major sources of financial and technical support for matters related to economic development. The main participants in IFI are generally national governments or other international institutions, or other organizations. Bilateral financial institutions also exist.

The main and most renowned IFI were instituted with the creation of the Bretton Woods system, namely the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the International Centre for Settlement of Investment Disputes (ICSID). Other very famous IFI can be quoted and categorized as multilateral development banks, such as the World Bank, the European Investment Bank or the Islamic Development Bank. Oftentimes IFIs are regional, in that sense can be quoted as the following: the Asian Development Bank, the CAF – Development Bank of Latin America, the African Development Bank, etc.

For state laws on financial institutions, click here.

[Last updated in March of 2022 by the Wex Definitions Team]

financial institution (2024)


What does it mean when they ask for financial institution? ›

The definition of a financial institution typically describes an establishment that completes and facilitates monetary transactions, such as loans, mortgages, and deposits. Financial institutions are a place where consumers can effectively manage earnings and develop financial footing.

What does it mean when it says your financial institution? ›

A financial Institution is defined in 18 U.S. Code § 20 as an entity, national or international, that deals primarily in business related to financial or/and monetary transactions, namely loans, deposits, investments, currency exchange, or any other transaction of similar nature.

Why put your money in a financial institution banzai? ›

In other words, it's completely safe to keep your money in a financial institution where it's insured and protected. Protected accounts include checking and savings accounts, money market deposit accounts, CDs, share certificates, IRAs, and more.

What does name of financial institution mean on a check? ›

This indicates the financial institution that issued your checks and where the money in question will be withdrawn from.

How do I know my financial institution? ›

How do I find my institution and/or transit number?
  1. Option 1: Look at your checkbook. ...
  2. Option 2: Log into your internet banking. ...
  3. Option 3: Find the Institution number in the list below. ...
  4. Option 4: Routing Number. ...
  5. Use Wise, Save Money.

What is financial institution examples? ›

Types of financial institutions include: Banks. Credit unions. Community development financial institutions.

Is your bank a financial institution? ›

"Bank" is a term people use broadly to refer to many different types of financial institutions. What you think of as your "bank" may be a bank and trust company, a savings bank, a savings and loan association or other depository institution.

Why do I need to use a financial institution? ›

Your money is safe.

you at risk of theft, fire, flood, loss, or damage. Opening an account at an FDIC-insured bank anywhere across the nation ensures that your money is protected in the event of disaster.

What is the difference between a bank and a financial institution? ›

Banks manage customers' deposits and facilitate transactions, while finance broadly encompasses the management of funds, whether for individuals, corporations, or governments. Credit and Loans: Both sectors provide loans and credit services.

What do financial institutions do with your money? ›

It doesn't remain locked away in the bank vault – instead, the money you deposit into a savings account is used by the bank to make loans to other people and businesses in your community so that they have the money to pay for big expenses like houses and cars, or even to operate a business.

How Japanese handle their money? ›

Spend well, save well, live well. Money should facilitate a meaningful life, not control it. Kakeibo is a budgeting technique to help people be mindful of where, how, and why they spend their money.

What do financial institutions do with people's money? ›

Although banks do many things, their primary role is to take in funds—called deposits—from those with money, pool them, and lend them to those who need funds. Banks are intermediaries between depositors (who lend money to the bank) and borrowers (to whom the bank lends money).

What do I put for financial institution on direct deposit form? ›

In the spaces available, fill in your bank or credit union's name, your bank account number, and your routing number. If you're unsure about your account number or routing number, you can find them on one of your checks from your bank. Your routing number will be a 9-digit number on the bottom left corner of the check.

What do I write for financial institution on mobile deposit? ›

You can make deposits in a snap with your iPhone® or Android™ device. Due to a new banking regulation, all checks deposited via a mobile service must include: “For Mobile Deposit Only” handwritten below your signature in the endorsem*nt area on the back of the check or the deposit may be rejected.

How do I write $900 on a check? ›

Dollar Amount of Check in Numerals

To the right of the "pay to the order of" line is a box (preceded by a dollar sign) for indicating the dollar amount of the check. For instance, you might write the numerals 900 in the box to reflect that you're paying $900 to USA Apartment Co. Inc.

Is there a difference between a bank and a financial institution? ›

Banks are financial institutions that are licensed to provide loan products and receive deposits; non-banking institutions cannot do this. Financial services include insurance, the facilitation of payments, wealth management, and retirement planning.

Is cash App a financial institution? ›

Cash App is a financial services platform, not a bank. Banking services are provided by Cash App's bank partner(s). Prepaid debit cards issued by Sutton Bank. Brokerage services by Cash App Investing LLC, member FINRA/SIPC, subsidiary of Block, Inc.

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