Chapter 1 Flashcards
It refers to the whole gamut of market dealings with financial assets
Financial system
It is where the lenders and borrowers of funds need to finance their needs and satisfy their objectives
Financial system
Lenders and borrowers can be
Individuals businesses institutions and even the government
This can be individuals businesses institutions and even the government
Lenders and borrowers
They have available capital through savings and accumulated wealth and are willing to lend their capital for a fee
Lenders
They are willing to pay a fee for the use of capital to support their financing means
Borrowers
It brings together the borrowers and lenders of funds
Intermediation process
It is the most common form of financial intermediation in the financial system
Banking system
Lenders and borrowers in the financial system can be
Households firms government non-residents
These are also part of the services provided by the financial intermediaries
Risk management liquidity and information dissemination
Components of banking institutions
Universal banks
commercial banks
thrift banks
rural banks
specialized government banks
Components of non bank financial intermediaries
Investment houses
financing companies
securities dealers or brokers
investment companies
insurance companies
lending investors
pawnshops
government non-bank financial institutions
Components of non bank thrift institutions
Mutual building and loan associations
non-stock savings and loan
It is responsible for implementing the monetary policy and regulation of the banking system
Bangko sentral ng pilipinas
It supervises the operations of the insurance companies
Insurance commission
It works with the bsp and ic in supervising and regulating the activities of the financial institutions in the country
Securities and exchange commission
They are expanded commercial banks capitalized at 5 million or more
Universal banks
They are banks with a minimum capitalization of 2.8 billion
Commercial banks
They are banks with a minimum capitalization of 325 million for those whose head office is within metro manila and 25 million otherwise
thrift or savings bank
They are normally operating and the sector with minimum capitalization of 3.2 million for those in the fifth and sixth class municipality is but those in metro manila need a minimum capitalization of 32 million
Rural banks
These are government owned and controlled corporations engage and specialized lending program for economic development
Specialized government banks
They are involved in underwriting of securities financial consultancy among others and have a minimum capital requirement of 300 million
Investment houses
they lend to business firms and individuals using equity capital and long-term borrowed funds with minimum capital ranging from 2.5 million to 10 million depending on domicile
Financing companies
They sell its own securities to the public and invest the proceeds in stocks and bonds
Investment companies
They are engage in property liability life insurance and or multiple line products
Insurance companies
They are involved in the buying and selling of securities and have a minimum capital of 30 million
Securities dealers or brokers
Cater to the financial requirements of smaller firms or individuals
Lending investors
They provide immediate cash relief to the individual customers but charge higher rates than most banks and they are capitalized the minimum of 100,000
Pawnshops
These are companies catering to a niche market
Mutual building and loan associations and non-stock and loans associations
The four major markets of the financial system
Money market capital market foreign exchange market derivatives market
It is a segment of the financial market with dealings and short-term maturities of financial contracts
Money market
Financial instruments with maturities of less than one year are included in this market
Money market
Examples of money market
Treasury bills and short-term commercial papers
This market are fixed income debt instruments
Money market
Is a segment of the financial market with dealings in maturities beyond one year
Capital market
Examples of capital market
Government bonds long-term commercial papers corporate bonds of private companies
Types of capital market
Primary market secondary market
The form of financial instruments that can be traded in the capital market
Debt versus equity
It refers to the issuance of new securities representing an actual transfer of funds from the investor to the issuing entity commonly called the initial public offering
Primary markets
It refers to the trading of securities providing a liquidity mechanism and the market for investors
Secondary market
The secondary market can be an
Organized market or over-the-counter market
It is a financial obligation that has to be repaid with interest
debt
It is a form of ownership in an enterprise and does not have to be repaid
Equity
These are debts of private corporations which carry interest repayments
Commercial papers
It refers to the market dealing in a foreign currencies like yen us dollar and other major currencies
Foreign exchange market
In our country most of the trading in foreign currencies is done using the
Philippine dealing system
It is an organized secondary market where the buying and selling clients of the bankers association of the philippines meet and where transactions or map or recorded
Philippine dealing system
It includes all financial contracts deriving its value form any other underlying assets
Derivatives
Example of underlying assets
Security prices commodity prices interest rates and foreign exchange rates
The basic classes of derivatives
Futures options swaps and forward rate contracts
This provide a risk management tool in the financial system
