Which is a non-deposit-taking financial institution?

Which is a non-deposit-taking financial institution?

• A. Finance Companies
• B. Commercial Banks
• C. Credit Unions
• D. Saving Institutions

Answer: (A)

Non-deposit-taking financial institutions are funded without taking customer deposits; they rely on other funding sources to finance their lending and credit activities. Finance companies fit this pattern because they raise funds by issuing debt, commercial paper, or borrowing from banks and through securitization, rather than attracting deposits from the public. They primarily provide loans and leases and do not offer traditional deposit accounts like checking or savings to customers. In contrast, the other options are deposit-taking institutions: commercial banks accept deposits and use those funds to make loans; credit unions take deposits from their members; saving institutions (thrifts) specialize in savings deposits and mortgage lending. Since they rely on customer deposits as a primary funding source, they are considered deposit-taking.

Non-deposit-taking financial institutions are funded without taking customer deposits; they rely on other funding sources to finance their lending and credit activities. Finance companies fit this pattern because they raise funds by issuing debt, commercial paper, or borrowing from banks and through securitization, rather than attracting deposits from the public. They primarily provide loans and leases and do not offer traditional deposit accounts like checking or savings to customers.

In contrast, the other options are deposit-taking institutions: commercial banks accept deposits and use those funds to make loans; credit unions take deposits from their members; saving institutions (thrifts) specialize in savings deposits and mortgage lending. Since they rely on customer deposits as a primary funding source, they are considered deposit-taking.