Financial system

Prepared by:

Kholoud Saad Moustafa

 Financia
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Financia
Financia
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Institutio
Markets
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 (1) Financial Markets

- Financial markets are markets for financial instruments, also called financial
claims or securities.

- In financial markets, people buy and sell financial instruments such as stocks,
bonds, and futures contracts rather than pots and pans.
 (2) Financial Institutions

- They are firms such as commercial banks and life insurance

companies.

- Facilitate flows of funds from savers to borrowers.

- Financial institutions are also called "financial intermediaries“.

There are many Financial Institutions
in the economy including:

_Banks and Thrifts

_Life and Property & Casualty Insurers
_Pension and Retirement Funds
_Mutual Funds
_Investment Banks
_Brokerage Firms
 A. Commercial Banks
- Largest single class of financial institution.

- Issue wide variety of deposit products - checking, savings, time deposits.

- Carry widely diversified portfolios of loans, leases, government securities.

- May offer trust or underwriting services.

 B. Thrift Institutions

- Closely resemble commercial banks.

- Focus more on real estate loans, savings deposits, and time deposits .

- They use the funds to make mortgage loans to consumers.

 C. . Life Insurance Companies

- Life Insurance Companies insure against lost income at death.

- Policyholders pay premiums, which are pooled and invested in stocks, bonds,
and mortgages.

- Investment earnings cover the costs and reward the risks of the insurance
company.

- Investments are liquidated to pay benefits.

 D. Pension Funds

- Pension Funds help workers plan for retirement.

- Workers and/or employers make contributions, which are pooled and

invested in stocks, bonds, and mortgages.
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