Non-banking financial company
Encyclopedia
Non-bank financial companies (NBFCs) are financial institution
s that provide banking services without meeting the legal definition of a bank
, i.e. one that does not hold a banking license
. These institutions are not allowed to take deposits from the public. Nonetheless, all operations of these institutions are still exercised under bank regulation
. However this depends on the jurisdiction, as in some jurisdictions, such as New Zealand, any company can do the business of banking, and there are no banking licenses issued.
sorts of banking services, such as loans and credit facilities, private education funding, retirement planning, trading in money market
s, underwriting
stocks and shares, TFCs and other obligations. These institutions also provide wealth management such as managing portfolios of stocks and shares, discounting services e.g. discounting of instruments and advice on merger and acquisition activities. The number of non-banking financial companies has expanded greatly in the last several years as venture capital companies, retail and industrial companies have entered the lending business.
Non-bank institutions also frequently support investments in property and prepare feasibility, market or industry studies for companies.
However they are typically not allowed to take deposits
from the general public and have to find other means of funding their operations such as issuing debt
instruments.
(PSD) is a regulatory initiative from the European Commission to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA). The PSD describes which type of organisations can provide payment services in Europe (credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), Electronic Money Institutions (EMI), and also creates the new category of Payment Institutions). Organisations that are not credit institutions or EMI, can apply for an authorisation as Payment Institution in any EU country of their URL choice (where they are established) and then passport their payment services into other Member States across the EU.nbfc is basically for those people who want better service in short period of time .
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s that provide banking services without meeting the legal definition of a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
, i.e. one that does not hold a banking license
Banking license
Under most jurisdictions, a banking license is a prerequisite for a financial institution that wants to provide banking services, such as taking deposits from the general public....
. These institutions are not allowed to take deposits from the public. Nonetheless, all operations of these institutions are still exercised under bank regulation
Bank regulation
Bank regulations are a form of government regulation which subject banks to certain requirements, restrictions and guidelines. This regulatory structure creates transparency between banking institutions and the individuals and corporations with whom they conduct business, among other things...
. However this depends on the jurisdiction, as in some jurisdictions, such as New Zealand, any company can do the business of banking, and there are no banking licenses issued.
Services provided
NBFCs offer mostsorts of banking services, such as loans and credit facilities, private education funding, retirement planning, trading in money market
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
s, underwriting
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
stocks and shares, TFCs and other obligations. These institutions also provide wealth management such as managing portfolios of stocks and shares, discounting services e.g. discounting of instruments and advice on merger and acquisition activities. The number of non-banking financial companies has expanded greatly in the last several years as venture capital companies, retail and industrial companies have entered the lending business.
Non-bank institutions also frequently support investments in property and prepare feasibility, market or industry studies for companies.
However they are typically not allowed to take deposits
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
from the general public and have to find other means of funding their operations such as issuing debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
instruments.
Regulation
For European NCs the Payment Services DirectivePayment Services Directive
The Payment Services Directive is a regulatory initiative from the European Commission which will regulate payment services and payment service providers throughout the European Union and European Economic Area .The purpose is to increase pan-European competition and participation in the...
(PSD) is a regulatory initiative from the European Commission to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA). The PSD describes which type of organisations can provide payment services in Europe (credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), Electronic Money Institutions (EMI), and also creates the new category of Payment Institutions). Organisations that are not credit institutions or EMI, can apply for an authorisation as Payment Institution in any EU country of their URL choice (where they are established) and then passport their payment services into other Member States across the EU.nbfc is basically for those people who want better service in short period of time .
Classification
Depending upon their nature of activities, non- banking finance companies can be classified into the following categories:- Development finance institutions
- Leasing companies
- Investment companies
- Modaraba companies
- House finance companies
- Venture capital companies
- Discount & guarantee houses
- Corporate development companies
See also
- Alternative financial servicesAlternative financial servicesAlternative financial services are financial services provided outside traditional banking institutions, on which many low-income individuals depend. In developing countries, these services often take the form of microfinance...
- Non-bank financial institutionNon-bank financial institutionA non-bank financial institution is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFIs facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market...
- Shadow banking systemShadow banking systemThe shadow banking system is the infrastructure and practices which support financial transactions that occur beyond the reach of existing state sanctioned monitoring and regulation. It includes entities such as hedge funds, money market funds and Structured investment vehicles...