Why Banks Will Survive a Financial Crisis?
Financial industry is a very broad term encompassing things about the science, development, and management of financial resources and investments. It is also a branch of accounting or the study of financial information for purposes of managing and protecting funds. Financial markets include markets for securities, derivatives, futures, options, and currencies. There are also sub-branches within the broader field of financial services like investment banking, investment management, global economics, mortgage banking, asset management, international finance, insurance and venture capital.
The term “financial services” itself can cover a lot of things. For instance savings accounts, checking accounts, investing, credit cards, loans, mortgages, and the financial services related to them. In broad terms, all financial services are services that help people to save, make investments, manage their money, or protect it. Some of the financial services that are commonly offered include bank teller services, insurance underwriting, investment banking, mortgage banking, asset management, estate planning, and financial planning. All these are related but important aspects of the entire financial services system.
Some of the other important financial services are wealth management and wealth creation. Wealth management is the act or process of creating a plan to accumulate money for future use. For instance, wealthy investors create investment plans to provide secure financial gains for their heirs. Wealth creation is doing things to create additional money so that you can use it to support your lifestyle. By definition, wealth creation doesn’t necessarily refer to making money. It could mean providing yourself with good health, great wealth creation opportunities, or building retirement assets like homes.
Another branch of finance is investment banking. It is related to banking but it also deals with the financing of different kinds of ventures. Its core responsibilities are the purchase of assets for capital market transactions and the repositioning of these assets for sale. It also involves the merging of investments to make more profits and minimizing risks on financial instruments. These include interest rate hedging, forward rate locking, interest rate banding, and other financial products and strategies designed to reduce the risks in capital markets and generate higher returns.
Savings accounts are used by most people as checking and savings accounts are generally insured. Savings accounts are considered as financial assets because they can earn interests as well as dividends. These allow you to have a little extra cash in your hand and you can also make some tax-deferred profit from them. Most banks offer some savings accounts that come with minimum balance requirements.
The financial services sector is expected to perform strongly during the period of a financial crisis. In fact, it is one sector that most economists and business analysts are predicting to be resilient during recession because it usually leads to small-scale bankruptcies and business closures. Businesses may still survive, even if they have smaller stock holders. Smaller banks may still offer loans to these businesses through the commercial lending market. Even if the overall economic picture does not look good, banking analysts believe that banks will survive, albeit reduced operations.