Financial field is a broad term for various things about the science, development, and management of funds and securities. It includes banking, insurance, investment banking, corporate financing, mortgage banking, structured settlements, cash management, insurance, and financial planning. Financial science refers to a lot of physical sciences dealing with funds, the supply and use of money, how money affects society, the consequences of monetary decisions, and what actions people can take to manage their financial affairs. Financial markets are the place where money is traded between financial institutions in a bid to create enough demand for particular assets. One example of a financial market is stock market.
The financial services sector involves all banks, credit unions, mortgage companies, and other forms of financial institutions that help people manage and plan their finance and monetary affairs. Some examples of financial services include bank tellers, bank accounts, various types of financial planning and management, and insurance underwriting. A number of government agencies also fall under the financial sector like department stores, labor unions, public utilities, independent electricians, universities, hospitals, colleges and even independent contractors. The scope of the financial sector is very vast, but some sectors are more common than others.
Some common categories under the financial sector include assets and liabilities, fixed income securities, financial instruments, and derivatives. Assets and liabilities refer to both tangible and liquid assets. Fixed income securities refer to such financial instruments as bonds, stocks, mutual funds, and other securities guaranteed by the governments. Financial instruments include financial derivatives such as swaps, forward contracts, swaps, derivatives, interest rate contracts, foreign exchange, commodity contracts, and credit default swaps.
The banking sector provides various financial services. Banking refers to the process of borrowing money from a bank or other financial services companies. Commercial banks, savings and loans, and other kinds of banks are involved in banking. The role of the banks is often played by private banks that follow a private lending business model. The main activities of banks include:
Apart from banks, there are also several other financial services companies. Examples of these are investment banking, insurance companies, global trade associations, mortgage and refinancing companies, and money markets. All these entities together make up the gross domestic product (GDP). The GDP is an economic term used to measure the value of all products in a country that is not controlled by a government. Some major countries that have a significant role in the GDP includes the United States of America, Japan, China, India, and many other countries.
Financial institutions are important players in the economy. However, they form only a small percentage of the overall gross domestic product. The role of banks in our lives is therefore relatively small, but their importance cannot be ruled out given the role they play in our economy. The next time you read the main article on this topic, you will know why all such articles are important.