Individual Reflection Paper



Financial Institution and Markets

In finance, financial institutions are institution that offersfinancial services to its customers and the members. On the otherhand, financial markets are markets where financial assets orsecurities are purchased and sold (Rezaee &amp Rezaee, 2011). Infinancial markets, there is facilitation of transfers of funds amongpeople or businesses without any investment opportunities (lender orsurplus units to individuals having the borrower or deficit units).Financial institution provides financial services where they act asfinancial intermediaries and most of the financial institutions areregulated by the government (Rezaee &amp Rezaee, 2011).

Generally, financial intermediaries offer members the followingservices:

  • They offer clients with liquidity services

  • They assist in repackaging of risks where they have a will to create and sell assets that have less risk to the one of the party and buy assets that possess greater risks from the other party. This is a crucial process well referred to as asset transformation (Rezaee &amp Rezaee, 2011).

Commercial banks are type of financial institutions with riles ofaccepting deposits and offering security and convenience services tothe customers. Initial roles of the banks were mainly to provide thecustomers with a better way and safer way for money (Rezaee &ampRezaee, 2011). With the commercial banks, customers no longer need tomaintain large amounts of money on hand, since there are easier waysof handling transactions such as through checks, credit cards or evendebit cards.

As well, commercial banks have roles of providing loans applicable toindividuals and business when it comes to purchases of goods orexpanding the operations. As well, commercial banks have roles ofbeing payment agents in a country or between countries. Commercialbanks do not only issue customers with debit cards, they as well havearrangements of wire transfers with other financial institutions(Rezaee &amp Rezaee, 2011). Commercial banks have the capacity tounderwrite financial transactions by ensuring that they lend the bankreputation and the credibility of the transactions. Hence, commercialtransactions within banks are more convenient.

Commercial banks have roles of creating money. By this, it means thatthe bank demand deposit mainly the payments via the transfermechanisms. Commercial banks have the capacity to demand depositsthat led to posses with function of implementation on monetarypolicies. However, the central bank has a role of reducing orincreasing money supply to create an effect of ability of commercialbanks in creating demand deposits (Rezaee &amp Rezaee, 2011).

In addition, commercial banks offer smooth support paymentsmechanism. As well, other functions taken by the commercial banks arecrucial towards support of fluency payment mechanisms. This is quitepossible since the services that are offered by the banks are relatedto payment mechanisms. Some of these services are connected withclearing, credit, payment services among others (Rezaee &amp Rezaee,2011).

Commercial bank is concerned with community saving and deposit funds.The funds consist of demand deposits, savings, certificates ofdeposit and other forms that are equivalent. The commercial bank hasthe ability of raising funds which is much greater than any otherfinancial institutions. The deposit funds that are collected bycommercial banks are later distributed to all parties that need themmainly through credit (Rezaee &amp Rezaee, 2011).

Finally, commercial banks are useful when it comes to facilitation ofinternational transactions mainly goods and services transaction andcapital transactions. Transactions between countries are difficultdue to geography, distance, culture and differentiated monetarypolicies. Commercial banks operate within international scale tofacilitate settlement of transactions.


Rezaee, Z., &amp Rezaee, Z. (2011). Financial services firms:Governance, regulations, valuations, mergers, and acquisitions.Hoboken, N.J: Wiley.