What Are The Major Functions Of Financial Institutions?

Financial institutions, which are immensely important to the smooth functioning of a society have certain functions of their own, which accentuates their role in the society, consolidating their significance to an extensive extent.

The first function of financial institutions is the transformation of assets, which are acquired through markets, into a wider and more preferable form, which becomes their liability – this function is performed mainly by financial intermediaries, which is undeniably the most important category of financial institutions.

Also financial institutions are involved in exchanging of assets on behalf of their customers.  Other than that, exchanging of assets for their own personal accounts is also part of their job.  Furthermore, financial institutions create financial assets for their customers and sell those assets to other market participants for a definite emolument.  In addition to all these functions, financial institutions are also involved in providing investment advice to market participants and managing the portfolios of market participants.