Professional Documents
Culture Documents
SEMINAR 7
The Financial System
1. Households
Main providers of finance (or “Surplus Agents”)
2. Firms
Users of finance (or “Deficit Agents”)
PREFERENCE :
Households Firms
Risk
Liquidity of funds
Maturity of funds
5. Governments
Regulate the financial markets
Influence financing and investment decisions by taxing the
financing choices differently
The Financial System
Financial Intermediaries
Role : transfer funds from Surplus Agents to Deficit Agents
Basis :
– Economies of Scale
– Diversification
Functions :
– Provision of payment mechanism
• Cheques
• Cards
• Wire transfers
The Financial System
Financial Intermediaries
Functions :
– Portfolio transformation
• Maturity/Liquidity
• Risk
• Asset/Volume
– Reduction of cost
• Search
• Contract
• Information
The Financial System
Financial Markets (where financial assets are traded)
Role :
– Pricing of assets
– Financial discipline
Classification :
– Types of claims/assets
– Date of issuance
– Maturity
– Means of settlement
Participants :
– Borrowers/lenders
– Brokers/agents
– Market makers/dealers
– Arbitrageurs
– Hedgers
– Speculators
The Financial System
Financial Markets
Financial
Intermediaries
Regulated by Government
Singapore as a Financial Centre
2. Banking Structure
Full banks
Wholesale banks
Offshore banks
Representation Offices
Singapore as a Financial Centre
1. Bank Business
Interest Income
– Deposit
– Loans
Fee-based Income
– Financial planning
– Corporate finance
– Bancasurrance
– Custodian
– Payment mechanism
– International trade
Trading Income
Singapore as a Financial Centre
financial centre