nondepository financial institution
Noun: A nondepository financial institution is a type of financial institution that does not accept or hold traditional customer deposits (like checking or savings accounts). Instead, it funds its investment and lending activities primarily through other means, such as issuing and selling securities (like stocks and bonds) or insurance policies.
This term is used in finance, economics, and regulatory contexts to categorize and distinguish financial firms from traditional deposit-taking banks and credit unions. * The regulatory framework for a nondepository financial institution differs from that of a commercial bank. * Investment banks and insurance companies are classic examples of a nondepository financial institution.
- Unlike a bank, a nondepository financial institution cannot offer FDIC-insured savings accounts to the public.
- The company operated as a nondepository financial institution, raising capital by issuing corporate bonds to investors.
- Analysts studied the stability of the nondepository financial institution sector during the market downturn.
The term is often used in legal and regulatory documents to define the scope of financial oversight. * The act specifically exempted certain nondepository financial institutions from the new reserve requirement rules.
- Non-depository institution: A common hyphenated variant of the term.
- Depository financial institution: The direct antonym; a financial institution that holds customer deposits (e.g., banks, savings and loans, credit unions).
- Financial intermediary: A broader term that includes both depository and nondepository institutions that channel funds between savers and borrowers.
- Nonbank financial institution
- Nonbank financial company (NBFC)
- Securities: Financial instruments (stocks, bonds) that nondepository institutions often sell to raise funds.
- Underwriting: A core activity for many such institutions, involving the risk-bearing and sale of new securities or insurance policies.
- Capital markets: The markets where nondepository financial institutions typically operate to raise and invest funds.
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a financial institution that funds their investment activities from the sale of securities or insurance
