Market vs Bank based systems Flashcards
1
Q
What are the advantages of Market-Based Systems?
A
Encourages innovation & investment, greater transparency, diversifies risk.
2
Q
What are the disadvantages of Market-Based Systems?
A
Higher volatility, susceptibility to bubbles, may marginalize smaller companies.
3
Q
What are the advantages of Bank-Based Systems?
A
Stability in downturns, banking expertise, suitable for less developed economies.
4
Q
What are the disadvantages of Bank-Based Systems?
A
Systemic risk during crises, limited direct access to capital markets.
5
Q
Define a bank-based system.
A
A financial system where banks are the primary vehicle for capital allocation and investment.
