1 Financial System
1 Financial System
1 Financial System
CHAPTER 1
Introduction to Financial
Management
Financial System
Learning Objective
• To present an overview of the financial system
and discuss the different functions of the
financial intermediaries
Financial System
To have an OVERVIEW OF THE FINANCIAL
SYSTEM, let us study this chart.
Financial Intermediary: Banks
What FUNCTION(S) do BANKS as a
financial intermediary perform in the
financial system?
Banks provide mechanism where savers can put their
excess funds through deposits, which will earn interests as
incentives. To cover for the interests, banks lend the money
to borrowers after performing a credit investigation. Some
of the deposits can also be invested in some financial
instruments like government securities and corporate
bonds.
Banks can also serve as conduits of investors in buying
and selling both government securities and corporate
bonds.
Financial Intermediary:
Insurance Companies
WHAT FUNCTION(S) do INSURANCE
COMPANIES as a financial intermediary
perform in the financial system?