Services Provided by Financial System
A financial system includes a network of financial institutions, markets, financial instruments and services to facilitate transfer of funds. The system also contains savers, intermediaries, instruments and the ultimate user of funds.
Listed below are the services provided by the financial system.
• Risk sharing – Financial system enables risk sharing by allowing savers to hold many assets. The system also create instruments to transfer risk from savers to borrowers who do not wish for uncertainty in returns or payments to savers or investors who are willing for risk.
• Liquidity – Liquidity is the second service that financial system provides for savers and followers. It is the ease with which an asset can be exchanged for money to purchase other assets or also exchanges for goods and services.
• Information – The collection and communication of information is the third service of the financial system. The system gathers information regarding prospective borrowers and their utilization of the borrowed funds. The financial system also communicates the information by incorporating information into stock prices, bonds and other financial assets.
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