Financial services or Financial sector is one of the service sector. It includes all services from the financial industry, provided by financial institutions. Their principal activity is the management of financial resources. The financial sector is used by all organizations or individuals who need to either apply its surplus financial resources or vice versa need foreign financial resources for its operation or business. In both cases, they turn to a financial institution. Financial sector uses various financial instruments.
According to NACE classification, financial sector is called Financial and insurance activities, and is broken down into the following sectors:
- Financial service activities, except insurance and pension funding
Insurance, reinsurance and pension funding, except compulsory social security
- Life insurance
- Non-life insurance
- Pension funding
Activities auxiliary to financial services and insurance activities
Activities auxiliary to financial services, except insurance and pension funding
- Administration of financial markets
- Security and commodity contracts brokerage
- Other activities auxiliary to financial services, except insurance and pension funding
Activities auxiliary to insurance and pension funding
- Risk and damage evaluation
- Activities of insurance agents and brokers
- Other activities auxiliary to insurance and pension funding
- Fund management activities
The financial sector connects all other sectors of the economy and any instability in this sector leads to instability of the whole economy. Given the globalization of financial markets, the effects are global and lead to global financial (economic) crisis. The main aim is to avoid these crises and this, to some extent, ensures regulation.
The financial sector is subject to regulation and supervision both at national and international level in order to ensure greater stability, transparency and credibility of the entire financial market. Trust and confidence in the market is an important element of the entire financial sector. Trust for all organizations and all customers who use its services, is very important. With the confidence and stability of the financial market is related an independent assessment of the financial institutions or their financial products (rating).
Financial market regulatory authorities exist both at the international and national level. At the national level, they are often the institutes of state power (see public administration). However, some fundamental limitations result from this. Among the largest is the limitation on the powers of the national territory. Another disadvantage may be the fragmented regulators on individual financial fields. Since the merger of all regulatory authorities in one global is not possible because of the diversity of the world, at least there is an attempt to achieve as uniform as possible procedures. In the UK oversees the financial services sector FSA (Financial Services Authority).
In banking, as a key part of the financial sector, was in 1974 founded the Basel Committee on Banking Supervision. Standards issued by the latter are referred to as Basel (Basel II, Basel III). The insurance and investment sector also have their relevant international regulatory authorities, these are mainly The World Bank, IFC (International Finance Corporation) as a member of the World Bank, which provides financial services for projects in developing countries, ICSID (International Centre for Settlement of Investment Disputes), MIGA (Multilateral Investment Guarantee Agency) and WFE (World Federation of Exchanges), and others.