Chapter Two

Introduction to Financial Institutions


The past decade has witnessed significant changes in the structure, characteristics, and types of products and services provided by the financial services industry. The most significant changes were in four areas: consolidation, convergence, competition, and regulations. These changes, which are expected to continue to occur at a higher speed in the future, have been motivated and caused by a number of factors and forces, including the global financial crisis, globalization of business, geographic expansion, highly valued stock prices, product line expansion, technological advances, relatively low interest rates, and the worldwide economic downturn. Consolidation, convergence, competition, and regulations have transformed the financial services industry from traditional organizations such as banks, brokers, insurance companies, mutual funds, and securities providers to asset management companies such as bank holding companies (BHCs) and financial holding companies (FHCs).

Landscape of the Financial Services Industry

The structure and characteristics of banks and banking organizations are changing from traditional brick-and-mortar branches to universal banking, personal computer banking, and Internet banking. Customers can now do one-stop shopping for all of their financial services. The range of options is not limited by geographic restrictions and/or product limitations. The majority of households and businesses ...

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