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• Consolidation mergers and acquisitions have created financial giants out of numerous smaller financialservice providers.. 4 7[r]
(1)(2)Chapter 4
The Future of the Financial System and the Money and
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McGrawHill/Irwin
Money and Capital Markets, 9/e © 2006 The McGrawHill Companies, Inc., All Rights Reserved.
Learning Objectives
• To explore the economic, demographic, social, and
technological forces reshaping the financial system today
• To learn about recent trends in the financial system and how
they may affect us in the future
• To understand how the problems the financial system faces
(4)• Powerful forces are reshaping financial institutions and
financial services today
• These forces for change include powerful new trends within
the financial sector itself, major changes in the structure and functioning of the economy, and new social and demographic trends that are altering the public’s need for new financial
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McGrawHill/Irwin
Money and Capital Markets, 9/e © 2006 The McGrawHill Companies, Inc., All Rights Reserved.
Financial Forces
Reshaping the Money and Capital Markets Today
• Financial innovation the development of many new financial
services and instruments
• Service proliferation the expansion of the menu of financial services offered
• Competition the intense struggle for the customer’s business
(6)Reshaping the Money and Capital Markets Today
• Deregulation the lightening or elimination of government
rules brought about by a strategy of privatization of the financial sector
• Convergence the blurring of the traditional distinctions
among different types of financialservice institutions
• Homogenization the growing similarity in the service menus
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McGrawHill/Irwin
Money and Capital Markets, 9/e © 2006 The McGrawHill Companies, Inc., All Rights Reserved.
Financial Forces
Reshaping the Money and Capital Markets Today
• Globalization the global expansion of operations and the
falling of geographical barriers
• Market broadening the expansion of traditionally local
markets to become regional, national, or even international in scope
• Securitization the pooling of loans and the issuance of
(8)Reshaping the Financial System
• Aging population there is a greater need for retirement, tax
and estate planning
• Changing basic family unit the rise in the proportion of singleparent households, parents and children living apart, immigrants, and welleducated working women will increase the demand for new forms of housing, daycare facilities,
(9)4ư9 McGrawưHill/Irwin MoneyandCapitalMarkets,9/e â2006TheMcGrawưHillCompanies,Inc.,AllRightsReserved. Social,Economic,&DemographicForces ReshapingtheFinancialSystem ã Displacement of manufacturing industries by service industries in more developed economies
• Technological innovation the dissemination and storage of information today is broader, cheaper, faster, and more
accurate
• Internationalization of markets such as the emergence of the
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