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LSDefine
Simple English definitions for legal terms
depository institution
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A quick definition of depository institution:
A depository institution is a type of organization that is allowed by law to receive deposits from people and businesses. These institutions are closely watched by the government to make sure that people's money is safe. They can also have other powers, like managing trusts. However, not all types of banks are depository institutions. For example, insurance companies and some other banks are not considered depository institutions unless they have federal insurance for their deposits.
A more thorough explanation:
A depository institution is an organization that is authorized by state or federal law to receive deposits from individuals and businesses. These institutions are supervised and examined by government agencies to protect depositors.
Examples of depository institutions include:
- Banks
- Credit unions
- Savings and loan associations
- Trust companies
These institutions are authorized to exercise fiduciary powers, which means they can act as a trustee or manage assets on behalf of their clients.
It's important to note that not all financial institutions are depository institutions. For example, insurance companies and industrial loan companies are not considered depository institutions unless their deposits are insured by a federal agency.
Overall, depository institutions play a crucial role in the economy by providing a safe place for individuals and businesses to deposit their money and access financial services.