Financial System – An overview
The world financial system is composed of 4 major entities –
Before we get a bird’s eye view of these 4 major entities of the financial system, let’s discuss a few basic questions –
Why at all is the financial system required?
The financial system is needed to provide the below mentioned functions –
Savings and investment functions
Liquidity functions
Payment functions
Risk mitigation and contingency functions
Financial policy functions
Who all need the financial system?
The financial system is needed by one and all namely –
Financial institutions including the FIIs or the foreign institutional investors
Corporations and companies
Individuals
Government
How does the financial system work?
The financial system facilitates the flow of funds either directly or indirectly, from the area of surplus to the area of deficit.
Now let us see the subdivisions of the 4 broad entities of the financial system.
The financial institutions could be subdivided into –
Regulatory
Intermediary (banking and non banking)
Non intermediary
Others
The financial markets could be subdivided into –
Primary markets & Secondary markets
Both the primary and the secondary markets could be of organized or unorganized nature. The organized markets could be further classified as –
Capital markets
Money markets
Derived or derivative markets
The financial products are sub-categorized into –
Debt instruments
Equity instruments
Hybrid instruments
Derived instruments
The financial services are sub-categorized into –
Market supporting systems (Trading, Broking, Clearing, Settlement)
Custodial and Depository services
Credit rating
Factoring and Forfeiting
Risk management
Wealth management
Asset management
Mutual funds services
Hedge funds services
Insurance
Consultancy
Merchant banking
Investment banking
Leasing
Hire purchase
ET AL…
In our subsequent discussions at CAFE FINANCE, we would be covering in detail, these broader aspects of the world financial system.
The world financial system is composed of 4 major entities –
- Financial institutions
- Financial markets
- Financial products
- Financial services
Before we get a bird’s eye view of these 4 major entities of the financial system, let’s discuss a few basic questions –
Why at all is the financial system required?
The financial system is needed to provide the below mentioned functions –
Savings and investment functions
Liquidity functions
Payment functions
Risk mitigation and contingency functions
Financial policy functions
Who all need the financial system?
The financial system is needed by one and all namely –
Financial institutions including the FIIs or the foreign institutional investors
Corporations and companies
Individuals
Government
How does the financial system work?
The financial system facilitates the flow of funds either directly or indirectly, from the area of surplus to the area of deficit.
Now let us see the subdivisions of the 4 broad entities of the financial system.
The financial institutions could be subdivided into –
Regulatory
Intermediary (banking and non banking)
Non intermediary
Others
The financial markets could be subdivided into –
Primary markets & Secondary markets
Both the primary and the secondary markets could be of organized or unorganized nature. The organized markets could be further classified as –
Capital markets
Money markets
Derived or derivative markets
The financial products are sub-categorized into –
Debt instruments
Equity instruments
Hybrid instruments
Derived instruments
The financial services are sub-categorized into –
Market supporting systems (Trading, Broking, Clearing, Settlement)
Custodial and Depository services
Credit rating
Factoring and Forfeiting
Risk management
Wealth management
Asset management
Mutual funds services
Hedge funds services
Insurance
Consultancy
Merchant banking
Investment banking
Leasing
Hire purchase
ET AL…
In our subsequent discussions at CAFE FINANCE, we would be covering in detail, these broader aspects of the world financial system.
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What Is Commercial Paper?-
Commercial paper is a way for companies to raise money to cover short-term liabilities without relying on the banking system. The company issues commercial paper for tenors between one to six months to cover immediate expenses, like staff salaries, buying inventories, or paying suppliers.
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