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Global Financial System

The document defines a financial system and global financial system, identifies key institutions and components of the global financial system, and defines the concept of financialization and its key features. A financial system allows the transfer of money between savers and borrowers, and the global financial system encompasses all financial institutions within the global economy.

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87 views16 pages

Global Financial System

The document defines a financial system and global financial system, identifies key institutions and components of the global financial system, and defines the concept of financialization and its key features. A financial system allows the transfer of money between savers and borrowers, and the global financial system encompasses all financial institutions within the global economy.

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by Scribd
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GLOBAL

FINANCIAL SYSTEM
CONTEMPORARY WORLD

JASON JULIAN IDLISAN | [email protected]


OBJECTIVES
01 RECAP
04 DEFINE GLOBAL FINANCIAL SYSTEM

02 DEFINE FINANCIAL SYSTEM


05
IDENTIFY INSTITUTIONS OF GLOBAL
FINANCIAL SYSTEM

03 IDENTIFY REASONS OF BORROWING


AND SAVING 06
DEFINE FINANCIALIZATION AND
IDENTIFY ITS KEY FEATURES
FINANCIAL SYSTEM
A financial system is a set of institutions, such as banks, insurance
companies, and stock exchanges, that permit the exchange of funds.

System that allows the transfer of money between savers and


borrowers.

Financial systems exist on firm, regional, and global levels.


WHY DO 1. 2. 3.
PEOPLE
BORROW?
WHY DO
PEOPLE 1. 2. 3.
SAVE?
Retirement
Combat Inflation
Education
For future use
Start a business
COMPONENTS OF
FINANCIAL SYSTEM

1 2 3 4 5
FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL INSTRUMENTS FINANCIAL SERVICES CURRENCY (MONEY)

Financial institutions act as These are places where the Tradable or financial instruments Financial services provide investors a way A currency is a form of payment to
intermediaries between the lender exchange of assets occurs with enable individuals to trade within of managing assets and offer protection exchange products, services, and
and the borrower when providing borrowers and lenders, such as the financial markets. These can against systemic risk. Banks, insurance investments and holds value to
financial services. stocks, bonds, derivatives, and include cash, shares of stock companies, and investment services would society.
commodities. (representing ownership), bonds, be considered financial services.
options, and futures.
GLOBAL
FINANCIAL SYSTEM
The Global Financial System refers to those financial institutions and regulations that act
on the international level, as opposed to those that act on a national or regional level.

The global financial system is basically a broader regional system that encompasses all
financial institutions, borrowers, and lenders within the global economy. In a global view,
financial systems include the International Monetary Fund, central banks, government
treasuries and monetary authorities, the World Bank, and major private international
banks.
TWO MAIN
FUNCTIONAL COMPONENTS
GLOBAL CAPITAL MARKET FOREIGNE EXCHANGE MARKET

Financial market that brings buyers and A global marketplace where currencies
sellers together to trade stocks, bonds, are traded and determines the exchange
currencies, and other financial rates of currencies to another.
instruments.
INSTITUTIONS OF GLOBAL
FINANCIAL SYSTEM

REGIONAL
INSTITUTIONS

GOVERNMENT
INSTITUTIONS

INTERNATIONAL
INSTITUTIONS
PRIVATE
PARTICIPANTS
INSTITUTIONS IN GLOBAL
FINANCIAL SYSTEM
INTERNATIONAL INSTITUTIONS

IMF - Keeps account of international balance of payment of members states, also acts as a lender of last resort
World Bank - Provide funding, take up credit risk and offer financial favorable terms to development projects in developing countries
WTO - Negotiates international trade agreements, settles trade disputes

GOVERNMENT INSTITUTIONS
Financial ministries, tax authorities, central banks, securities and exchange commissions, etc.

PRIVATE PARTICIPANTS
Commercial banks, pension funds, hedge funds, etc.

REGIONAL INSTITUTIONS
NAFTA, ASEAN, etc.
FINANCIAL MARKETS FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS
WHO? WHAT?

WHERE? Financial Intermediaries a. Cash


a. Banks b. Bnd
b. Brokers c. Forex
c. Forex dealers d. Securities
d. Insurance companies
ERA OF
FINANCIALIZATION
Developed countries’ financial systems exploded relative to other
parts of the economy, particularly the role of banks
Climate of greater general indebtedness and increased gearing
(debt to equity ratios)
Financial assets and debts become a larger proportion of GDP
Banks strategically became focused upon commissions business
and speculative operation
KEY FEATURES OF
FINANCIALIZATION
Liberalization of capital account.
Capital flows increasingly taking the form of FDI and portfolio
investment.
Inflation targeting priority over growth, jobs, health, or other
social outcomes to protect the value of investment capital.
REFERENCES
https://www.investopedia.com/terms/f/financial-
system.asp#:~:text=What%20Is%20a%20Financial%20System,%2C%20regional%2C%20and
%20global%20levels.
https://www.wallstreetmojo.com/financial-system/
https://www.investopedia.com/terms/f/financialization.asp
THANK YOU FOR
LISTENING!

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