Scribd
Upload
11 views19 pages

Lecture 1 Financial Institutions and Markets

This is very nice lecture on financial institutions and markets. Also focuses on the stock markets as well.

Uploaded by

ziafmcs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
11 views19 pages

Lecture 1 Financial Institutions and Markets

This is very nice lecture on financial institutions and markets. Also focuses on the stock markets as well.

Uploaded by

ziafmcs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 19

Financial System

Learning Objectives

• Financial System
• Participants in the Financial System
• Functions of Financial System
• Importance of Financial System
• Features of Financial system
• Components Of Financial System
Financial System
• Financial system is the system that allows the transfer of funds between the
lender( saver) and borrower( Investors)
• Financial System is network of financial instruments, financial markets and
financial institutions to facilitate the transfer of funds
Financial System
• The purpose of the financial system is to bring together individuals, businesses,
and government entities (economic units) that generate and spend funds
 Surplus economic units have funds left over after spending all they wish to
spend.
 Deficit economic units need to acquire additional funds to sustain their
operations.
Financial System
• Lenders are the ultimate providers of savings (can be referred to as investors in
that they expend cash on the acquisition of financial assets such as bonds and
shares and real or tangible assets such as land, buildings, gold, and paintings)
• Borrowers are the ultimate users of those savings
• Both are non-financial entities and are referred to as surplus and deficit
economic units respectively
Participants in the Financial System
• Household (individuals or Group of Individuals; Householders become
consumer of goods and Services produce by the business sectors)
• Business or corporate (all non-financial firms or companies producing and
distributing goods and services)
• Government (central and provincial governments as well as local authorities)
• Financial Organizations (Commercial banks, Investment banks, insurance
companies, brokerage)
Functions of Financial System
• Financial system works as an effective allocation of financial recourses an
economy
• It helps in establishing a link between the savers and investors
• Financial System allows asset-liabilities transformation, banks create the
liabilities against themselves when they accept the deposits from customers but
also create the assets when they provide the loans to customers
• Economic recourses(funds) are transferred from one party to another through
financial system
Functions of Financial System

• Financial system helps in risk transformation by diversification


• Financial system enhance liquidity of financial claims
• Financial system help to reduce the cost of transactions
Classification of Financial system
Formal Financial System Informal Financial System

Financial Institution Money Lenders

Financial Markets Indigenous Bankers

Financial Instruments Landlords

Financial Services Traders


Direct Financing and Indirect Financing
Components of Financial System

• Financial Instruments

• Financial Markets

• Financial Institutions

• Financial Services
Financial Instruments
• Financial Instrument is a contract that give rise to Financial Assets to one
entity and Financial Liability or equity instrument of an other entity.
• Financial Instruments are the Financial securities that are traded in the
financial Markets financial instruments can be characterized as marketable
or non-marketable
Types of Financial Instruments

• Treasure bill
• Bill of Exchange
• Treasure Note
• Commercial Paper
• FED Funds
• REPO (Repurchase Agreement)
Types of Financial Instruments

• Call loan

• Share ( Preferred Shares)

• Debentures

• Corporate Bond

• Mortgage Bonds

• Federal Investment Bonds

• Money Market Mutual Funds


Financial Markets
• Financial Market is a market in which securities/Instruments and derivatives
are traded at low transaction cost
• Some of Securitas include stocks, Bonds, Debentures Commodities and
precious Stock
Types of Financial Markets

Money Market Market

Capital Market

Primary Market

Secondary Market

Derivative Market

Forex Market
Financial Institutions
• Financial institutions are the Financial intermediates that transfer the flow of
funds from lenders to borrowers
• Financial Institutions facilitate the transfer of funds from the surplus unit and
transfer it to the deficit unit
• Financial institutions serve as intermediate between the lender and borrower
Types of Financial Institutions

• Banking Institutions
• Non Banking Institution ( NBFC and Development Financial instutions)
• Mutual Funds
• Insurance Companies
• Housing Finance Companies
• Regulatory Institutions
Financial Services
• Financial services ensure the smooth flow of financial activates in the country
• Banking service
• Insurance service
• Stock Broking Services
Financial services catered the need of Financial institutions,
financial markets, and financial instruments

You might also like