Financial system

hệ thống tài chính

© 2012 Pearson Prentice Hall. All rights reserved. 2-1 © 2012 Pearson Prentice Hall. All rights reserved. 2-1 CHAPTER 1 FINANCIAL SYSTEM © 2012 Pearson Prentice Hall. All rights reserved. 2-2 © 2012 Pearson Prentice Hall. All rights reserved. 2-2 Contents Topics include: ─ Function and Structure of Financial Markets ─ Internationalization of Financial Markets ─ Types and Functions of Financial Intermediaries ─ Main Regulation of the Financial System © 2012 Pearson Prentice Hall. All rights reserved. 2-3 © 2012 Pearson Prentice Hall. All rights reserved. 2-3 T h e F i n a n c i a l S y s t e m The financial system is the process by which money flows from savers to users. © 2012 Pearson Prentice Hall. All rights reserved. 2-4 © 2012 Pearson Prentice Hall. All rights reserved. 2-4 F i n a n c i a l S y s t e m  Financial System  Savers  Users  Financial Institutions  Financial Markets  Savings is a function of many variables.  Funds can be transferred between users and savers directly or indirectly. © 2012 Pearson Prentice Hall. All rights reserved. 2-5 © 2012 Pearson Prentice Hall. All rights reserved. 2-5 Function of Financial Markets  Channels funds from person or business without investment opportunities (i.e., “Lender - Savers”) to one who has them (i.e., “Borrower - Spenders”).  Funds can be transferred between users and savers directly or indirectly.  Improves economic efficiency © 2012 Pearson Prentice Hall. All rights reserved. 2-6 © 2012 Pearson Prentice Hall. All rights reserved. 2-6 Financial Markets Funds Transferees © 2012 Pearson Prentice Hall. All rights reserved. 2-7 © 2012 Pearson Prentice Hall. All rights reserved. 2-7 Segments of Financial Markets 1. Direct Finance • Borrowers borrow directly from lenders in financial markets by selling financial instruments which are claims on the borrower’s future income or assets 2. Indirect Finance • Borrowers borrow indirectly from lenders via financial intermediaries (established to source both loanable funds and loan opportunities) by issuing financial instruments which are claims on the borrower’s future income or assets © 2012 Pearson Prentice Hall. All rights reserved. 2-8 © 2012 Pearson Prentice Hall. All rights reserved. 2-8 Function of Financial Markets © 2012 Pearson Prentice Hall. All rights reserved. 2-9 © 2012 Pearson Prentice Hall. All rights reserved. 2-9 Importance of Financial Markets  Financial markets are critical for producing an efficient allocation of capital, allowing funds to move from people who lack productive investment opportunities to people who have them.  Financial markets also improve the well-being of consumers, allowing them to time their purchases better. © 2012 Pearson Prentice Hall. All rights reserved. 2-10 © 2012 Pearson Prentice Hall. All rights reserved. 2-10 Structure of Financial Markets 1. Debt Markets ─ Short-Term (maturity < 1 year) ─ Long-Term (maturity > 10 year) ─ Intermediate term (maturity in-between) 2. Equity Markets ─ Pay dividends ─ Represents an ownership claim in the firm [...]... rights reserved 2-32 Types of Financial Intermediaries © 2012 Pearson Prentice Hall All rights reserved 2-33 Regulation of Financial Markets  Main Reasons for Regulation 1 Increase Information to Investors • • Decreases adverse selection and moral hazard problems SEC forces corporations to disclose information 2 Ensuring the Soundness of Financial Intermediaries • • Prevents financial panics Chartering,... Function of Financial Intermediaries: Indirect Finance  This process, called financial intermediation, is actually the primary means of moving funds from lenders to borrowers  More important source of finance than securities markets (such as stocks)  Needed because of transactions costs, risk sharing, and asymmetric information © 2012 Pearson Prentice Hall All rights reserved 2-21 Function of Financial. .. Financial Intermediaries: Indirect Finance  Transactions Costs 1 Financial intermediaries make profits by reducing transactions costs 2 Reduce transactions costs by developing expertise and taking advantage of economies of scale © 2012 Pearson Prentice Hall All rights reserved 2-22 Function of Financial Intermediaries: Indirect Finance  A financial intermediary’s low transaction costs mean that it can... other developed nations usually obtain funds from financial intermediaries, not directly from capital markets  In Germany and Japan, financing from financial intermediaries exceeds capital market financing 10-fold  However, the relative use of bonds versus equity does differ by country © 2012 Pearson Prentice Hall All rights reserved 2-24 Function of Financial Intermediaries: Indirect Finance  FI’s... 4 Financial crisis in 2008… © 2012 Pearson Prentice Hall All rights reserved 2-18 Function of Financial Intermediaries: Indirect Finance © 2012 Pearson Prentice Hall All rights reserved 2-19 Function of Financial Intermediaries: Indirect Finance Instead of savers lending/investing directly with borrowers, a financial intermediary (such as a bank) plays as the middleman:  the intermediary obtains funds... All rights reserved 2-34 Regulation Reason: Increase Investor Information  Asymmetric information in financial markets means that investors may be subject to adverse selection and moral hazard problems that may hinder the efficient operation of financial markets and may also keep investors away from financial markets  The Securities and Exchange Commission (SEC) requires corporations issuing securities...Structure of Financial Markets 1 Primary Market ─ New security issues sold to initial buyers ─ Who does the issuer sell to in the Primary Market? 2 Secondary Market ─ Securities previously issued are bought and sold ─ Examples include the NYSE and Nasdaq ─ Who trades? © 2012 Pearson Prentice Hall All rights reserved 2-11 Structure of Financial Markets Even though firms don’t... referred to as asset transformation, because in a sense risky assets are turned into safer assets for investors © 2012 Pearson Prentice Hall All rights reserved 2-25 Function of Financial Intermediaries: Indirect Finance  Financial intermediaries also help by providing the means for individuals and businesses to diversify their asset holdings  Low transaction costs allow them to buy a range of assets,... rights reserved 2-26 Asymmetric Information: Quiz  Define Asymmetric Information  List and explain the two major types of Asymmetric Information that affect financial markets © 2012 Pearson Prentice Hall All rights reserved 2-27 Function of Financial Intermediaries: Indirect Finance  Another reason FIs exist is to reduce the impact of asymmetric information  One party lacks crucial information about... Hazard  Financial intermediaries reduce adverse selection and moral hazard problems, enabling them to make profits How they do this is the covered in many of the chapters to come  Because of their expertise in screening and monitoring, they minimize their losses, earning a higher return on lending and paying higher yields to savers © 2012 Pearson Prentice Hall All rights reserved 2-31 Types of Financial . Structure of Financial Markets ─ Internationalization of Financial Markets ─ Types and Functions of Financial Intermediaries ─ Main Regulation of the Financial. reserved. 2-4 F i n a n c i a l S y s t e m  Financial System  Savers  Users  Financial Institutions  Financial Markets  Savings is a function of