Non-bank financial company

A non-bank financial company (NBFC) is a financial institution that provides banking services, but does not have a full banking license or is not part of the deposit-taking system. NBFCs are typically subject to less regulation than banks, and may have different business models, such as providing loans to individuals or businesses, or offering specialized financial services. Examples of NBFCs include credit card companies, microfinance institutions, and mortgage companies.

Examples of non-bank financial companies

Examples of non-bank financial companies (NBFCs) include:

• Credit card companies, such as American Express and Capital One
• Microfinance institutions, such as Grameen Bank and Opportunity International
• Mortgage companies, such as Quicken Loans and Guild Mortgage
• Peer-to-peer lending platforms, such as Lending Club and Prosper
• Auto finance companies, such as Santander Consumer USA and Capital One Auto Finance
• Payday loan providers, such as Cash America and Advance America
• Equipment leasing companies, such as CIT Group and First National Leasing
• Investment companies, such as Blackstone and The Carlyle Group

NBFCs play an important role in providing financial services to individuals and businesses, particularly those who may not have access to traditional banking services.

Differences between bank and non-bank financial company

Banks and non-bank financial companies (NBFCs) are both financial institutions that provide a range of financial services, but there are some key differences between the two:

• Licensing: Banks are typically licensed and regulated by government agencies such as the Federal Reserve or the Office of the Comptroller of the Currency, while NBFCs may not have a full banking license and may be subject to less regulation.
• Deposit-taking: Banks are part of the deposit-taking system, which means they accept deposits from customers and are insured by the Federal Deposit Insurance Corporation (FDIC). NBFCs, on the other hand, do not take deposits from customers and are not FDIC-insured.
• Business models: Banks typically offer a wide range of services, including checking and savings accounts, loans, credit cards, and investment services. NBFCs may have a more specialized business model, such as providing loans to individuals or businesses, or offering specialized financial services such as auto financing or equipment leasing.
• Capital requirement: Banks generally have higher capital requirement than NBFCs. Banks are required to hold enough capital to withstand financial stress, while NBFCs are not held to the same standard.
• Risk management: Banks are closely regulated, and their risk management practices are closely scrutinized by regulatory bodies. NBFCs may have less oversight and may not be held to the same standards.
• Liquidity : Banks are required to maintain a certain level of liquidity, which means they have to hold enough assets that can be easily converted to cash. NBFCs may not have the same liquidity requirements.

Overall, Banks are more closely regulated and have more stringent requirements than NBFCs, but both play an important role in providing financial services to individuals and businesses.

References

• Carmichael, J., & Pomerleano, M. (2002). The development and regulation of non-bank financial institutions. World Bank Publications.
• Cheng, X., & Degryse, H. (2010). The impact of bank and non-bank financial institutions on local economic growth in China. Journal of Financial Services Research, 37(2), 179-199.
• Hassan, M. R. (2013). Issues and challenges of non-bank financial institutions in Bangladesh. Asian Business Review, 2(1), 61-64.