By a financial system one understands the way, how in a national economy the demand is regulated and mediated after and the offer by available capital. This switching function is taken over by the financial sector, i.e. the whole of institutions of a national economy, with whose assistance the desires for investments of a subject are brought together with the savings of another subject.

The function of the capital switching can be regulated in different way. The two most important institutions of a financial system are

• the capital market and
• the financialintermediate.

A functioning financial system is of crucial importance for the development and the growth of a national economy. Disputed is however the ideal organization form of a financial system. The financial systems of the industrial nations differ partially substantially in their arrangement. While anglo-saxon countries exhibit a greater importance of the capital market (capital market-based financial systems), support themselves Germany and Japan to a larger part by financialintermediate (bank-based financial systems).

As advantages of bank-based systems the good monitoring possibilities are called, which confine relationship between applicants for the credit and house banks from that relatively develop. Corporate Governance problems, which are based on asymmetrical information, can be solved by these more effectively, than with many creditors. The moreover one a house bank relationship closes better possibilities also of supporting an applicant for the credit over bad times. On the other hand exists into bank-based system the danger of the misuse of power of the house banks, which are not subject to power control, for example, as a Kollusion between applicants for the credit and banks takes place to Ungunsten of the shareholders and/or the public.

In course the international integration be with a approximation of financial market and base system count.

One calls the whole between the national financial systems and its interaction also the global financial system. As additional component here the foreign exchange market is added. In addition here nations appear also as international creditors and debtors. In order to establish an arranging and mediating Kraft in the global financial system, the IWF (International Monetary Fund) was furnished.

Articles in category "Financial system"

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