What are financial institutions primarily established to do?

Financial institutions are primarily established to accept deposits and provide loans. This core function allows individuals, businesses, and governments to manage their finances effectively. By accepting deposits, financial institutions provide a safe place for individuals to store their money, earn interest, and maintain liquidity. On the other hand, by providing loans, these institutions enable borrowers to finance their needs, whether it’s for personal use, business expansion, or purchasing property. This process promotes economic growth by facilitating access to capital, which is essential for both personal and business development.

While issuing stock options, managing corporate tax strategies, and facilitating mergers and acquisitions are important financial activities, they do not represent the primary purpose of financial institutions. Those activities are typically more specific functions carried out by investment banks, financial advisory firms, or corporate finance departments rather than banks and credit unions, which primarily focus on the management of deposits and loans. This fundamental role of financial institutions helps to build trust, stabilize the economy, and create a robust financial system that supports various economic activities.