Non-banking financial company
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Non-bank financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. Operations are, regardless of this, still exercised under bank regulation. However this depends on the jurisdiction, as in some jurisdictions, such as New Zealand, any company can do the business of banking, and there are no banking licenses issued.
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[edit] Services Provided
Non-bank institutions frequently acts as
- suppliers of loans and credit facilities,
- supporting investments in property,
- Trading money market instruments
- funding private education,
- wealth management such as Managing portfolios of stocks and shares and
- Underwrite stock and shares, TFCs and other obligations
- retirement planning
- Advise companies in merger and acquisition
- Prepare feasibility, market or industry studies for companies
- Discounting services e.g., discounting of instruments
However they are typically not allowed to take deposits from the general public and have to find other means of funding their operations such as issuing debt instruments.
[edit] Regulation
For European NBFCs the Payment Services Directive (PSD) is a regulatory initiative from the European Commission to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA). The PSD describes which type of organisations can provide payment services in Europe (credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), Electronic Money Institutions (EMI), and also creates the new category of Payment Institutions). Organisations that are not credit institutions or EMI, can apply for an authorisation as Payment Institution in any EU country of their choice (where they are established) and then passport their payment services into other Member States across the EU.
[edit] Classification
Depending upon their nature of activities, non- banking finance companies can be classified into the following categories:
- Development finance institutions
- Leasing companies
- Investment companies
- Modaraba companies
- House finance companies
- Venture capital companies
- Discount & guarantee houses
