Financial system

A financial system is a system that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels.^[1] Financial institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and borrowers.^[2]

In other words, financial systems can be known wherever there exists the exchange of a financial medium (money) while there is a reallocation of funds into needy areas (financial markets, business firms, banks) to utilize the potential of ideal money and place it in use to get benefits out of it. This whole mechanism is known as a financial system.

Money, credit, and finance are used as media of exchange in financial systems. They serve as a medium of known value for which goods and services can be exchanged as an alternative to bartering.^[3] A modern financial system may include banks (public sector or private sector), financial markets, financial instruments, and financial services. Financial systems allow funds to be allocated, invested, or moved between economic sectors, and they enable individuals and companies to share the associated risks.^[4]^[5]

^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 551. ISBN 0-13-063085-3.{{cite book}}: CS1 maint: location (link)
^ Gurusamy, S. (2008). Financial Services and Systems 2nd edition, p. 3. Tata McGraw-Hill Education. ISBN 0-07-015335-3
^ "Back to Basics: What Is Money? - Finance & Development, September 2012". www.imf.org. Retrieved 2016-01-10.
^ Allen, Franklin; Gale, Douglas (2000-01-01). Comparing Financial Systems. MIT Press. ISBN 9780262011778.
^ "Financial Systems" (PDF).

[1] O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 551. ISBN 0-13-063085-3.{{cite book}}: CS1 maint: location (link)

[2] Gurusamy, S. (2008). Financial Services and Systems 2nd edition, p. 3. Tata McGraw-Hill Education. ISBN 0-07-015335-3

[3] "Back to Basics: What Is Money? - Finance & Development, September 2012". www.imf.org. Retrieved 2016-01-10.

[4] Allen, Franklin; Gale, Douglas (2000-01-01). Comparing Financial Systems. MIT Press. ISBN 9780262011778.

[5] "Financial Systems" (PDF).

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