01 04

Price determination Capital information

Performs the function of price discovery Provide the channel through which the
of the different financial instruments new savings of the investors flow in the
country which aid in the capital
formation of the country

02 05
Easy access Liquidity
Act as a platform provides the potential Investors can sell their securities readily
buyer and seller easily and convert them into cash

FUNCTION
03 06
Funds mobilization of Financial Risk sharing
The required return out of the funds
Market Risk is transferred from the person who
invested by the investor is also determined undertakes the investments to those
by participants in the financial market persons who provide the funds for
making those investments
 Safety
hey help in lowering the risk of an individual
Financial cost with surplus cash by spreading the risk via
Financial intermediaries transfer funds from
lending to several people.
one party to another. This results in making
the cost of business cheaper, because
business owners can quickly and easily access
the resources they need

Function of
Financial
Intermediaries

Price determination
The firm or business can make an investment
Line of credit by applying for loan to have the capital for
Creditors provide a line of credit to qualified operation of the business .
clients and collect the premiums of debt
instruments such as loans for financing
homes, education, auto, credit cards, small
businesses, and personal needs, and others.
 issuance of new securities issuance of second-hand securities

supply funds does not supply fund

underwriters brokers and dealers

PRIMARY SECONDARY
less liquid
MARKET & MARKET
more than 1 year

BOND
BOND
CAPITAL MARKET
MARKET
MARKET

EQUITY
SECURITY
EQUITY
DEBT STRUCTURE MARKET
SECURITY
SECURITY OF
MARKET FINANCIAL
MARKET DEBT
SECURITY

MONEY
MARKET

high liquidity
&
PRIMARY SECONDARY
less than 1 year
MARKET MARKET

1 7
BANKERS ACCEPTANCE
A draft issued by bank that will
be accepted for a payment,
effectively the same as
cashier’s check.
2 NEGOTIABLE INSTRUMENTS OF DEPOSITS
A financial instrument offered
by banks for depositing a
particular amount at a
predetermined interest rate for
a set period of time.
3 REPURCHASE AGREEMENTS
The bank sells its approved money
market instruments to investors,
with the intention to return
them at an agreed price
(interest rate) on a future date.
4 COMMERCIAL PAPER
A corporation issues a short-term
debt instrument with a maturity
of less than one year, used for
financing accounts receivable,
inventories, and meeting short-
term liabilities.
F.MARKET
INSTRUMENTS
5 COMMON STOCK
An analysis of the strengths, weaknesses,
opportunities, and threats facing your
marketing efforts.Common stock is a
security representing ownership in a
corporation, with voting rights, but
without priority of payment and fixed
dividends.
6 PREFERRED STOCK
The policy offers priority of
payment, no voting rights, and
a fixed dividend.
CONVERTIBLE BONDS
Debt instruments that can be
converted into stock if the
company achieves success.
8 JUNKS BONDS
A type of corporate bonds that
will possess both high yield and
high risk.
9 MORTGAGES
Loans are provided to households
or firms to purchase houses, land,
and other real structures, with
the structure or land serving as
collateral.
10 TREASURY BONDS
Treasury bonds are fixed-rate
government debt securities with a
maturity range of 10-30 years,
offering risk-free government-
issued securities.

TYPES
Contractual savings institutions
Investment intermediaries
Depositary institutions
DEPOSITORY INS.
Accept deposits from
individuals and
institutions, making loans,
such as commercial
banks, mutual savings
banks, and credit unions.
WHAT
Financial intermediaries, such as banks and finance companies,
facilitate indirect finance by borrowing funds from lenders
and using them to make loans to borrowers.
TERMEDIARIES
.IN
FUNCTIONS (FINANCIAL
F INSTITUTIONS)
Saving function
Policy function
INVESTMENT INS Wealth function
Investment Liquidity function
institutions, such as CONTRACTUAL
finance companies,
SAVINGS INS
mutual funds, and
Acquire fundsl ike insurance companies and
money market mutual
pension funds, invest their funds in long-term
funds, provide loans to securities like corporate bonds, stocks, and
individuals and mortgages at periodic intervals.
corporations.
 Islamic bank un der the Islamic Banking Ac
t 1983,
in 1983
Banking system
tablished
Islamic banks, es inciple and serve both
erate in strict accorda nce with the Syariah Pr
op
customers.
Muslim and non-Muslim
Commercial bank n-owned entities, are
rising 27 local and foreig
Comm ercial ba nks, comp
the banking system, co
llecting deposits Offshore bank Financial Centre,
the large st fund pro vid ers in
titutions. s, like Labu an International Offshore
ing loa ns to ind ividu als, businesses, and ins Offshore ba nk
ies and accept deposits an
d credit facilities,
and provid eig n currenc

MALAYSIA
operate in for
Investment bank nking services, except Malaysian Ringg
it, since October 1990.
ed inves tm en t bank offers wholesale ba
A locally-own complex banking
enting the role of commercial banks to meet
complem

FINANCIAL
needs.

SYSTEM Non-bank Financial Interme d ia r ies

Insurance Companies
e Institutions
Development Financura lopment,
Offer financial coverag
e to policyholders in ca
nce, which compensates
se of death or property
policyholders for

Structure of Malaysia
l, and commercial deve
l, agricult loss, such as life insura
Offer capital for industria d medium-sized
ing funding for small an tragedy or disability.
with SME Banks provid l sector development.
and Ag roban ks supporting agricultura

Financial System
s,
Savings Institutions
indus trie
among individuals
n Fund te and mobilize savings
Provident and Pensdiopro gs Institutions promo
Savin
er income group.
vide future
mbers an especially from the low
Safeguard saving for me
death, disabilities
benefits for retirement,

Financial Market
Derivatives Market ing securities e.g
ture/Option instrume nts derive from underly
Fu
ure
Money Market KLIBOR future, KLCI fut
paper
e.g. T-Bills, Commercial
Short-term instruments
Offshore Market contract
y e.g. Sport and Forward
Capital Market Trade in foreign currenc
e.g. Stocks, Bonds
Long-term instruments