How is a financial institution defined?

A financial institution is defined as an entity primarily involved in financial activities such as accepting deposits, offering loans, providing investment services, and facilitating transactions. This broad definition encompasses various types of organizations, such as banks, credit unions, and investment firms, while explicitly excluding certain entities that are not engaged in core financial operations like insurance companies or government agencies.

The focus of the definition on financial activities ensures clarity regarding the types of organizations covered under this category. For example, while a corporation that offers only insurance products might partake in financial dealings, it does not qualify as a financial institution in the same way that a bank or credit union would. Similarly, a government agency that oversees financial regulations is not classified as a financial institution itself, even though it plays a crucial role in regulating those that are. This distinction is important for regulatory purposes and in understanding the roles and responsibilities of different entities within the financial system.