FINANCIAL INSTITUTION

An institution that collects funds from the public to place in financial assets such as stocks, bonds, money market instruments, bank deposits, or loans. Depository institutions (banks, savings and loans, savings banks, and credit unions) pay interest on deposits and invest the money mostly in loans. Non-depository institutions (insurance companies and pension plans) collect money by selling insurance policies or receiving employer contributions and pay it out for legitimate claims or for retirement benefits. Increasingly, many institutions perform both depository and non-depository functions. For instance, brokerage firms now place customer's money in certificates of deposit and money market funds and sell insurance.