What type of financial institution can receive deposits from another financial institution?

The correct answer is that a depository financial institution can receive deposits from another financial institution. Depository financial institutions include commercial banks, credit unions, and savings and loan associations, which are specifically designed to accept deposits.

Depository institutions are key components of the banking system because they serve as intermediaries that facilitate the flow of funds in the economy. They accept deposits from individuals and other financial institutions, maintaining reserves while lending a portion of those deposits to borrowers, thereby adding liquidity to the financial system.

In contrast, while commercial banks and credit unions can accept deposits, they primarily cater to individual and business customers rather than serving as a hub for transactions between other financial institutions. Investment banks, on the other hand, do not typically accept deposits; instead, they primarily provide services such as underwriting and facilitating mergers and acquisitions, focusing on capital markets and investment activities rather than traditional deposit-taking functions. Thus, the term "depository financial institution" encompasses the broad category that specifically includes the ability to accept deposits from other financial entities.