Financial system
Financial system is the system that allows the exchange of funds between lenders, investors, and borrowers.
A modern financial system may include
 |
- Financial institutions
- Financial market
- Financial instrument
- Financial services
Functions of a financial system
- Pooling of funds
- Capital formation
- Facilitates payment
- Short and long term need
- Risk function
- Better decisions
- Finance government need
- Economic development
What is financial inter-mediation ?
Financial inter-mediation is conducted by third party who take deposits from savers and give it to borrowers.It can be identify as a middleman between two parties in a financial transaction. (Commercial banks, investment banks, mutual funds)
The banking business thrives on the financial intermediation abilities of financial institutions that allow them to lend out money at relatively high rates of interest while receiving money on deposit at relatively low rates of interest.
Excess funds ➦ Deficit funds
(who have money) (who need money)
What is financial inter-mediation ?
Financial inter-mediation is conducted by third party who take deposits from savers and give it to borrowers.It can be identify as a middleman between two parties in a financial transaction. (Commercial banks, investment banks, mutual funds)
The banking business thrives on the financial intermediation abilities of financial institutions that allow them to lend out money at relatively high rates of interest while receiving money on deposit at relatively low rates of interest.
In banking their main role is financial intermediation from excess money to deficit money. Main product of a bank is loans.
👉For long time- loans
👉For short time- overdrafts
In banking their main role is financial intermediation from excess money to deficit money. Main product of a bank is loans.
👉For long time- loans
👉For short time- overdrafts
Financial intermediaries offer a number of benefits to the consumers those are safety,liquidity,economies of scale in long run,lower search cost, spreading risk, assets management, investment banking.
Let's see more about what we have discussed.
Financial intermediaries offer a number of benefits to the consumers those are safety,liquidity,economies of scale in long run,lower search cost, spreading risk, assets management, investment banking.
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