What Are the Different Types of Financial Institution Security?

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  • Written By: Geri Terzo
  • Edited By: PJP Schroeder
  • Last Modified Date: 08 November 2019
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A financial institution is deeply involved in the flow of money into and out of the capital markets. Whether facilitating deals on behalf of clients or using its own resources to accomplish transactions in the markets, a financial institution firm seeks to protect its own security, that of clients, and potentially the regional economy. Risk management measures are used to provide some protection to the sensitivity of data and the way that financial resources are directed. Also, financial institution security surrounding the use of technology systems is used to protect sensitive information from competitors and against any other breaches.

Financial institution security for an organization's balance sheet, where assets and liabilities are listed, is a type of protection used among banks. This type of security can be approached by determining when it is reasonable to use a financial institution's own resources to create or buy securities in the markets, which exposes the firm to risk factors. For instance, an investment bank's proprietary trading desk uses the firm's own resources to buy and sell financial securities in an attempt to increase revenues for that entity. Risk management could lead to the determination that it is not prudent for a bank to use its own balance sheet to form, issue, or buy securities in the markets, in which case the proprietary desk might not participate.


Network protection is another type of financial institution security for technology systems throughout an organization. Financial institutions are privy to personal information surrounding clients, and the release of this data could be highly damaging to all parties involved. Subsequently, it is necessary for firms to install proper network security software programs that are designed to recognize any unscrupulous behavior. This financial institution security could involve protection against a potential breach of information, an Internet virus that may be threatening a system, or even from unwanted communication resulting from online spam.

Crimes against financial institutions can be white collar in nature and may be an attack on the finances of a corporation. There are third-party financial institution security firms that perform vetting actions, such as criminal background checks, on potential partners leading up to any formal business arrangement. These security firms may solicit the manpower of former criminal investigators to use the abilities and procedures inherent in recognizing red flags throughout criminal defense in a way that will similarly benefit a financial institution from investing or partnering with a market participant with potentially fraudulent intentions.


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