INTRODUCTION TO

FINANCIAL SYSYTEMS
TABERNILLA, JASPER P.
 financial systems
A financial system is the set of
global, regional, or firm-specific
institutions and practices used to
facilitate the exchange of funds.
Financial systems can be
organized using market
principles, central planning, or a
hybrid of both.
Institutions within a financial
system include everything from
banks to stock exchanges and
government treasuries.
COMPONENTS AND
ASPECTS
 FINANCIAL INSTITUTIONS
Financial systems typically include banks, credit
unions, insurance companies, and other financial
intermediaries. These institutions provide various
financial services, including accepting deposits,
making loans, facilitating payments, and managing
investments.
 FINANCIAL MARKETS
Financial markets are platforms where individuals,
businesses, and governments can buy and sell
financial assets such as stocks, bonds, commodities,
and currencies. There are primary markets (where
new securities are issued) and secondary markets
(where existing securities are traded).
 REGULATORY BODIES
Governments and regulatory authorities oversee
financial systems to ensure they operate
smoothly, are fair, and do not pose systemic risks.
These regulatory bodies set rules, standards, and
policies to safeguard investors and maintain
market integrity.
 CLEARING AND SETTLEMENT
SYSTEMS
These systems ensure the proper and timely transfer
of assets and funds between buyers and sellers in
financial markets. They reduce counterparty risk and
ensure the integrity of financial transactions.
 PAYMENT SYSTEMS
Payment systems enable the transfer of funds
between individuals and businesses. This includes
electronic funds transfers, credit card payments, and
digital wallets. Central banks often oversee and
regulate payment systems.
 FINANCIAL INSTRUMENTS
Financial systems involve a wide range of financial
instruments, including stocks, bonds, derivatives,
certificates of deposit, and more. These
instruments are used for various purposes, such as
raising capital, managing risk, and investing.
 CREDIT AND LENDING
Banks and other financial institutions play a crucial
role in providing credit and lending services. They
extend loans to individuals and businesses, which can
stimulate economic activity.
 INVESTMENT SERVICES
Financial systems offer investment services, including
asset management, wealth management, and financial
advisory services. These services help individuals and
institutions manage and grow their wealth.
 RISK MANAGEMENT
Financial institutions and markets offer various tools and products to
manage financial risk. This includes insurance, hedging through derivatives,
and diversification of portfolios.
 FINANCIAL TECHNOLOGY
The integration of technology into financial services
has transformed the industry. Fintech companies
provide digital banking, online payment solutions,
robo-advisors, and other innovative financial
products and services.
 GLOBALIZATION
Financial systems are interconnected globally. Cross-
border investments, trade, and capital flows are
essential components of modern financial systems,
but they can also lead to financial contagion and
crises that spread across borders.
 FINANCIAL STABILITY
Ensuring the stability of financial systems is a
paramount concern. The 2008 financial crisis
highlighted the importance of monitoring and
safeguarding against systemic risks that can
disrupt the entire economy.
THANK YOU