Financial Sectors
The financial sectors include those that trade in loans (such as banks and building societies), accounts receivable and industrial production. The main activity of these businesses is to lend money, secure it with assets (such as bank deposits) and ensure the repayment of debts through payments channels. While the formal sector structures all its activities on a set order, the informal sector relies on improvisation and on constant change.
There are many financial sectors in the UK financial market and these are classified according to the way in which they lend money, secured or unsecured. These financial markets are: the retail financial markets, the wholesale financial markets, investment banks, the central banks and the government. The activities of the banks therefore depend on the activities of other players in the market. For instance, the role of banks is to lend money that enables companies and households to buy new products or services, create new jobs and expand their operations.
Some of the financial sectors have evolved on the basis of the need of the individual or the business to raise finance . One of the financial markets that emerged during the twentieth century was the retail financial sector, which provided the financial solutions for the working class without the involvement of large banks or other financial institutions. Retail financial sectors now provide credit cards and personal loans, as well as many other services such as cash advance facilities.
Some of the financial sectors also indirectly contribute to the overall health of the UK financial system. The credit markets ensure that the lending is done according to the current needs of the consumer. The role of the banks therefore is not to lend money but to make sure that consumers get the credit they need. This ensures that the overall health of the financial system is maintained. The main reason why financial regulations protect the interests of the creditors is that the government protects the banks from being bankrupted.
Financial regulation also provides support to the financial systems. For example, the FSA and other bodies to work together to maintain standards across the board. By working with financial institutions, the FSA ensures that the rules and regulations are followed. Financial regulation also works to maintain financial stability by making sure that there are no sudden changes in the interest rates. In fact, if you look at the history of financial systems, you will see that major changes in interest rates usually have a negative effect on the whole economy.
Insurance Companies The main function of insurance companies is to provide financial services. It is therefore not surprising that insurance companies also form a large part of the financial sectors. Most insurance companies employ hundreds of people and run workshops and seminars so that they can inform people about the different products that they offer. Many insurance companies also operate subsidiaries that specialize in particular areas of financial services. The financial services that these insurers provide include life insurance, annuities, and health insurance.
Savings Banks operate the same way as other banks; however, they focus more on earning interest than lending money. Savings banks earn interest through the checking of customer's deposits, through giving loans, and through insurance products. In order to be a member of this sector, banks need to meet certain requirements including being registered with the Financial Services Authority.
The four major financial sectors are classified according to how they provide financial services. These sectors can be further classified into four main subsets: the formal sector institutions, which include banks, building societies, financial institutions and the privatised. The informal sector consists of informal groups such as charities, mutual organisations and volunteer organisations. Finally there are the formal sector institutions such as the government, central and local government, non-profit organisations, and even public sector bodies such as schools and colleges. Some major informal sectors include the social sector, which includes welfare, employment and child benefit programmes.