BUSINESS FINANCE/ FINANCIAL MARKETS & INSTITUTIONS

[B Sc (Hons) in Management]

SEMINAR 7

The Financial System
1. 2. Households

Main providers of finance (or “Surplus Agents”) Users of finance (or “Deficit Agents”)

Firms

PREFERENCE :
Households Risk Liquidity of funds Maturity of funds Firms

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 Organisational structure of market

The Financial System
 Financial Markets (where financial assets are traded)

Participants :

Borrowers/lenders Brokers/agents Market makers/dealers Arbitrageurs Hedgers Speculators

The Financial System
Financial Markets

Deficit Agents

Surplus Agents

Financial Intermediaries

Regulated by Government

Singapore as a Financial Centre
 Prerequisites of a Financial Centre
    

Strong domestic economy Stable currency Strategic location Presence of international institutions Active domestic banks

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
1. Central Bank (Roles & Responsibilities)

Banker/financial agent of the government Banker of last resort to financial institutions Regulates of the banking and financial industry Stimulates the financial development of Singapore as a financial centre

Liaises with international organisations Provides important monetary and financial publication

FINANCIAL MARKETS & INSTITUTIONS

Explain the main functions and role that both banks and other institutions play in the financial system of Singapore, giving examples where appropriate.

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