Investing financial intermediaries

Credit unions

Finance houses

Other deposit-taking intermediaries

These are hybrid financial intermediaries, many of them having evolved from hire purchase (HP) companies. HP companies financed themselves by raising share capital, taking deposits from the general public and borrowing from banks. These funds were used to buy assets, which were paid for by compa­nies and people borrowing on TIP': after the last payment was made (usually It was £ 1 more than the others), the ownership of the machine or car passed to the company or individual concerned. Most HP companies later broadened (heir activities into the products mentioned in the next paragraph and be­came known as finance houses.

Today, most finance houses do not accept deposits from the public, although some are owned by retail banks which offer deposits with their finance house subsidiaries as a ‘home' for larger sums of money. Moreover, they have moved into other activities, so that their lending activities comprise:

- Traditional HP business;

- Factoring of book debts;

- Leasing - 'small-ticket' business on machinery and equipment of up to say, £50,000 per item;

- Second mortgage finance for double glazing, conservatories, kitchens, bathrooms and the like.

These are, in general, very small scale savings and lending societies. Members are usually linked by neighbourhood, religion or employment, with members saving regular amounts each week: interest is paid gross of tax. The other main activity is lending, with a statuary maximum interest rate of 1% per month. Members may borrow up to £5,000 plus another £5,000 providing that they have £5.000 in savings with the union. The membership of a credit union may not exceed 5,000.

Credit unions are supervised by the Registrar of Friendly Societies, under the Credit Union Act 1979. They are fairly important in Northern Ireland, but die of very limited significance in Great Britain. However, they are more im­portant in Ireland, Canada. USA and Australia. (They are mentioned here only for the sake of completeness.)

In earlier parts of this unit we concentrated on deposit-taking financial intermediaries which, in general, take deposits and onlend them, rather than buy­ing and selling assets. However, there are exceptions:

- Banks and building societies buy and sell gilts and Treasury bills:

- Banks buy and sell the debts of third world countries (the so-called 'Brady' bonds);

- Investment banks buy and sell assets in the financial markets, rather than take deposits.

In the final part of this unit, we focus on intermediaries which buy and sell for them lending and deposit-taking are minor activities. Unfortunately, the market term for them is 'the institutions' and, as was stressed in section 1, they are more than just brokers and agents. Also, they are more than providers of advice.

The investing intermediaries are dealt with in order of size.

Дата добавления: 2014-12-29