Question

1-how do finance companies differ from commercial banks?

Answer 1

Difference between finance companies and commercial banks:
1. Finance companies takes raise capital form other banks, financial institutions ,capital markets, etc. The don\t provide the facility of savings account (demand and term deposit) whereas commercial banks accept demand deposits and term deposits. This amount can be used to give loans.
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2. The interest rates for financial institution are usually higher than commercial banks since their cost of funds are higher.

3. Insurance companies, Mutual funds, hedge funds, etc. are examples of financial institution. Citi Bank, Standard Chartered, HSBC bank, etc. are examples of commercial banks.

4. Financial institutions are controlled by SEC (Securities and Exchange commission whereas commercial banks are regulated by Federal reserve and FDIC(Financial Deposit insurance corporation)

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