1.

Which tendencies in the development of financial markets have affected these

markets the most?
Profitability is a consequence of risk
Risk - possibility of losing something or winning. We can measure this possibility, predict,
know what to do if, prepare an alternative, control, so that means we can manage it
Uncertainty - all we can’t measure, predict, manage, prepare another alternative
Growth of international trade (globalization)
Natural disasters
Technological progress
Increased securitisation
Expansion of derivatives markets
Growth of international trades (globalization); natural disaster - pandemic; rapid
technological progress; increased securitisation (the increase in corporate bonds
issuance); expansion of derivatives market.
https://www.investopedia.com/articles/trading/09/what-factors-create-trends.asp
What is happening now in Financial Market
Liberalization - no limit of trade/opening banking account/buy or sell stock, bonds or
whatever between countries inside EU
Technology - you can perform everything online
Innovation - we have access to a lot of different innovation that we can use to earn extra
Globalization - everything is accessible through the globe
Desintermediation - bank is not our first choice to do with our savings
Institutions adoptions - there are much and much new competition in market
Modernisation - consequence of technology, everything take quicker
Easier acces to global markets, digitalization, e-payments (fear of using cash – pandemic)
Politics (war and rubel situation, China and USA’s bonds 2007, Poland 2006 election –
changing ministry of finance)

2. What is the difference between financial systems: market-oriented and banking-

oriented systems?
Bank Oriented Financial System (Bank-based) Market Oriented Financial System
(Marker-based)

FEATURES

• the importance of external financing, • the importance of internal financing,

• external financing based on individual bank • external financing via anonymous
loan negotiations, capital
• emphasis on long-term, active and close markets,
relations between financial institutions and • emphasis on short-term passive
companies, relations
• banks' share in the capital of companies, between financial institutions and
• universal banks control over enterprises. enterprises,
• no bank share in the company's
capital,
• control over enterprises through
capital
markets

INSTITUTIONS

• low degree of specialization, • high specialization,

 • universal banks oriented towards long term lending • short-term loans
activity, • high abilities to create financial
• lower abilities to financial innovation innovations.

LAW FINANCE APPROACH

CIVIL CODE COMMON LAW

• lower degree of protection of the private sector • historically oriented to a greater
• firm ownership more concentrated protection of the holders of property
• governance conflicts: majority rights towards the government
shareholder/minority shareholder • public companies and widespread
• a bigger cost for the firms to obtain funding directly shareholding
on the financial market, because of the high risk • governance conflicts:
premium on the invested capital demanded by shareholder/manager
minority shareholder • very liquid financial markets are, in
effects, the main protection for
shareholders

FINANCIAL SYSTEM

Financial intermediates Financial markets

• banks, mutual bonds, pension funds, insurance • governments and corporations raise
companies funds by issuing financial instruments
• FIs buy and sell financial contracts (loan, deposit, (securities):
insurance) • debt instruments (bonds)
• these contracts are not marketable • equity instruments (shares or stocks)
• derivatives
A security traded, risk
Market-oriented is more innovative than banking-oriented
In banking-oriented systems financial institutions are predominant sources of financing. Banks are
responsible for channelling funds from savers to borrowers, They perform intermediation role in
process that could not be conducted by any of the sides.

Banks, mutual funds, pension funds, insurance companies (common in Europe)

smaller risk, banks play a leading role in mobilizing savings, allocating capital, overseeing the
investment decisions of corporate managers

In market-oriented systems finances are raised through securities markets. Companies are more
inclined to issue securities (shares, bonds etc.) They are bought directly through distribution
networks or banks, which eliminates any financial intermediary.

Bond and stock markets, (common in US), issue securities, no financial intermediary, funding is
mostly gathered from securities,
Bank-oriented: financial institutions are predominant source of financing; developed in
Europe; long term relations with the consumers;
Market-oriented: funds come primarily from the capital market (stock exchange); developed
in the USA; short term relations with the customers; more open and more into the innovation
so it is more risky so profits are higher compared to the banking oriented system;
Market based:
Pros: least cost production methods and efficiency, promotes innovation and technology
advances, economic freedom
Cons: creates distortion of investments, can be unstable, promotes social and economic
inequalities

Bank-based
Pros: improves capital allocation and corporate governance, makes investment more efficient,
creates economies of scale, promote growth in developing countries
Cons: can prevent innovation, possibility of collusion, weak in economies where markets are
well developed and possess strong shareholder rights
A market based financial system is preferred over bank based financial system because, bank
based has focused on only mobilization of funds from investors, capital allocation ,
investment decisions of managers and provides for risk management whereas in market based
financial system it focused on exerting control over corporate structures, society fund savings,
easily risk management etc. when compared as to which showed better results, market based
showed better results as it showed effective financial delivery and focuses on how to manage
risks rather than how to manage risks after the happening of the event and how to effectively
invest savings whereas bank based focused on mobilizing funds and allocation of capital.
Invest in index.

3. Some economists assume that well-organized and developed financial markets are
the key reason for the development of countries. Do you agree with it?
It promotes economic growth through capital accumulation and technological progress by
increasing the savings rate, mobilizing and pooling savings, producing information about
investment, facilitating and encouraging the inflows of foreign capital, as well as optimizing
the allocation of capital.
Countries with better-developed financial systems tend to grow faster over long periods of
time, and a large body of evidence suggests that this effect is causal: financial development
is not simply an outcome of economic growth; it contributes to this growth.
Additionally, it reduces poverty and inequality by broadening access to finance to the poor
and vulnerable groups, facilitating risk management by reducing their vulnerability to shocks,
and increasing investment and productivity that result in higher income generation.
https://www.worldbank.org/en/publication/gfdr/gfdr-2016/background/financial-development
Agree.
GDP per capita, everything goes around finances
Depends on kind of development
Impact of financial market and development of the country is in both ways, they influence
each other
The more developed the country the flow goes from development to financial market
If country is underdeveloped the financial market can push it, teach them how to use it, invest
Economy and finance influence each other, Finance pushes economy (how to survive) and economy
pushes finance (how to earn)
Financial markets help to efficiently direct the flow of savings and investment in the economy in ways
that facilitate the accumulation of capital and the production of goods and services
Yes, economy and finance influence each other. Finance pushes the economy (how to
survive) and economy pushes finance (how to earn). Financial markets help to efficiently
direct the flow of savings and investments in the economy in ways that facilitate the
accumulation of capital and the production of goods and services.
Developed financial system is safer (EU) regulations. Inflation and interest rates are a
threat.

4. Which way will the financial markets develop in future? What can we expect?

Stock market, cryptocurrency market, globalization

 Obeying regulations (taxes)

5. Do you know any examples of financial innovations? How do they change clients’
situations?
Cryptocurrency, online banking, payment system, eurozone ← currency, cashback
https://www.getsmarter.com/blog/market-trends/four-financial-innovation-examples-you-can
Paypal
Crypto
Eurozone
Paypal - paying through the internet - alternative financial system(?); cryptocurrency;
eurozone currency
Financial innovation has improved access to credit, reduced costs, and increased choice.
https://www.journals.uchicago.edu/doi/full/10.1086/663153

6. What is an asymmetry of information?

• "Asymmetric information" is a term that refers to when one party in a transaction is in
possession of more information than the other.
• In certain transactions, sellers can take advantage of buyers because asymmetric
information exists whereby the seller has more knowledge of the goods being sold than the
buyer.
Asymmetric information, also known as "information failure," occurs when one party to an
economic transaction possesses greater material knowledge than the other party. This
typically manifests when the seller of a good or service possesses greater knowledge than
the buyer; however, the reverse dynamic is also possible. Almost all economic transactions
involve information asymmetries.
https://www.investopedia.com/terms/a/asymmetricinformation.asp

Eg. in banking: taking credit (who takes have more info)

when we buy the product from the bank (the bank has more info)
To prevent it is not possible but we can make the difference lower if we learn, ask a lot of
question
Asymmetry of information occurs when one side has greater knowledge than the other. It is a
powerful tool that can be used by sellers or financial institutions to help them with selling the
product. That could lead to problems in the future when customer does not fully understand the
terms on which the product was bought.
One part has greater knowledge than the other party (normally sellers possess
knowledge of the service or god).
Bank: credits. Customers may have better knowledge about their salary(?) also known as
“information failure”.