The Major Risks of Financial Intermediaries Essay

Introduction to the Financial System Financial Instruments Financial instruments can be: • Equity This is usually through the selling of common shares and/or common stock. It gives the buyer some ownership of the firm and thus, voting power when it comes to electing the board of directors. Debt This is money that is borrowed from someone else. Debt must be repaid at set intervals. Debt can be divided into short and long-term debt. This should follow the matching principle where short-term assets should be funded with short-term debt.

There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).

Security of information is crucial in any organization regardless of the activities it undertakes. As such, in the event you are developing a project, key interest has to be taken concerning the threats or risks likely to take place. It is imperative to handle either tangible or intangible issues associated to security. For GFI to regain its reputation, it is important to comprehend the security issues that should be handled. The report will describe various security efforts aimed at making GFI more secure.

Financial intermediaries are financial institutions such as bank, insurance company, credit union, stock exchange, and so on who works as a middleman

Banks take deposits from savers and pay interest on these accounts. They receive interest on loans when they pass these funds on to borrowers. The spread between the rate they pay for funds and the rate they receive from borrowers is where their profits are derived from. This practice of combining deposits from many sources which can be lent to many borrowers forms a interchange of funds

The investment banks, and subsequent stock brokerage firms, was regulated by the Security and Exchange Commission. The banking entities, in this portion of the financial sector, were used to dealing in high risk business that were structured on the business’ equity and debt capital, instead of the commercial banks’ deposits of customers. The activities in this sector of the financial system were underwriting stocks and bonds, insurance markets, the investments in subprime debt markets and mortgages.

In this essay I am going to discuss the effects of shadow banking on the recent financial crisis of 2007-8. Shadow banking was one of the major causes of the financial crisis since it was the subprime mortgages which was the first trigger of the collapse in the banking system. Through this essay I am to achieve a detailed analysis of why the shadow banking was one of the causes in the financial crisis and why was it not prevented by any regulation enforced. The basis of shadow banking system is that it occurs when financial intermediaries conduct transformation of maturity, credit and liquidity without having access to the central bank liquidity guarantees or even public sector credit. Maturity transformation: obtaining short-term funds to

In this essay I will be addressing the “Too Big To Fail” (TBTF) problem in the current banking system. I will be discussing the risks associated with this policy, and the real problems behind it. I will then examine some solutions that have been proposed to solve the “too big to fail” problem. The policy ‘too big to fail’ refers to the idea that a bank has become so large that its failure could cause a disastrous effect to the rest of the economy, and so the government will provide assistance, in the form of perhaps a bailout/oversee a merger, to prevent this from happening. This is to protect the creditors and allow the bank to continue operating. If a bank does fail then this could cause a domino effect throughout

Financial Management is a critical aspect of any business in order to achieve a sustainable and efficient cash flow. It is essential in maintaining the link between a business’s future financial goals (profit maximization) and the resources that it has in order to achieve its objectives. Businesses demand certain common goals that increase a bussiness's all around achievement, Some of which involve; growth amongst assests, An increase in efficiency in all areas of the business whether it be management or not. And the ability to meet short term and long term debts. Finacial management undertakes the responsibility to implement and acheive these goals for the business using a range of strategies shaped to meet the needs of the business and

A: Most investments in the economy would fail to take place if there were no financial institutions because many independent investors do not like to take large amounts of risk. By utilizing financial intermediaries, which are “organizations that receive funds from savers and channel them to investors,” people are given peace of mind in knowing that their source of money/investing is more stable and accounted for. Those who apply this principle also value the liquidity, or convertibility, that financial institutions provide in the case of emergency or cold feet.

During the volatile and instable period, the risk was obviously brought to a new level. Morgan’s Private Bank kept their eyes open all the time. I concluded two main aspects.

Within the novel, The Confessions of an Economic Hit Man, the author provides many strengths that can be depicted very strongly throughout it. The first one to which comes to appear almost in every chapter is the exposure of financial institutions that include the World Bank, International Monetary Fund (IMF) and General Agreement of Tariffs and Trade (GATT) (Hamann, 12). These are the major financial institutions that have a great impact still to this day of how loans and currency exchanges are dealt

List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in

Financial intermediaries provide a number of functions. The first of which is known as size transformation. A financial intermediary is able to borrow to an economic agent with a deficit of funds the amount they require without the need to find a lender that is willing to invest the exact amount required by the borrower. Without financial intermediaries, it would be extremely difficult for a borrower to raise capital as lenders would have to pool their funds together in order to lend the borrower the amount they require. Another function of financial intermediaries is maturity transformation. Economic agents with surplus funds usually prefer investing their money in short-term projects, whereas borrowers require more long-term financing. Financial intermediaries offer an optimal solution, without which borrowers and lenders would be in disagreement over the terms of the transfer of funds. Financial intermediaries also provide risk transformation. Economic agents with surplus funds are usually very risk conscious when it comes to investment, but borrowers however may require the finance for a more risky project, that may be more profitable. Financial intermediaries are willing to take risks that borrowers usually would not. However, there is usually a compensation agreement so as to avoid

The project requires the student to carry out a research, analysis and discussion on how a Singapore listed company can access to the country’s financial system and how it benefits the company in achieving its business objective. The research will cover the various types of financial services offered by financial intermediaries whom the corporation can access to.