The Financial Sector sits between Savers and Investors Also described as Lenders & Borrowsers
Financial Institutions that operate inside the Financial Sector, within a specific Financial Market includes;
- Banks
- Buildings Socieities
- Finance Companies
- Merchant Banks
- Credit Unions These people “mediaite”, coming between people with surplus funds and those who want to borrow funds.
Markets of the Financial Sector
Types of Financial Markets
- Loan Markets
- Business Firms borrow money to purchase; assets, & capital equipment.
- Households borrow to fund; their mortage, buy consumer durables, and pay for holidays.
- Banks, Finance Companies, and Credit unions are also apart of the loan market.
- Bond Markets
- Firms and governments sell Bonds to raise finance.
- Share Markets
- Firms obtain finance by issuing new shares to the stock market.
80% The Financial Sector is critical to economic health.
- Provides essential financial services to both households & firms.
- Money & Credit facilitates transactions between buyers and sellers.
- Enables savings to be converted into Investment.
Investment is key to promoting economic growth, and increasing living standards over time.
Role of Money in an Advanced Economy;
- A means of Exchange
- Money is used for purchasing goods & services
- A Unit of measurement
- Money measures & compares prices, incomes, asset values etc.
- A Store of value
- Money can be saved for use in future transactions. A stable financial system allows us to ensure sustainable economic growth. A failure of financial instituitions can lead to economic recession. For example the Global Financial Crisis of 2008-9
Other Financial Regulators: