FOB 2/sem 2018
Table of content
Components of financial system
Central bank role in managing Sri Lankan financial system
International and domestic developments affecting financial stability
Financial issues and challenges
Financial sector development Stability
A Financial system is exchange of the funds between lenders, investors and borrowers. Financial system can be defined at an international, regional and organizational level. The financial system consists of the financial institutions, financial markets, financial instruments, financial services and money. It is a set of implemented procedures that path financial activities. The basic role of financial system is essentially channeling of funds within the different units of economy from surplus units to difficult units’ productive purpose.
Components of Sri Lankan financial system
When consider about Sri Lankan financial system can be identified five factors. Those are,
Financial institutions are simply mean is a bank provides investment and depository services to customers. It is Middleman between consumers and the capital as well as it depts. Markets and provide banking and investment services. Its responsible is supply of money to the market to the transfer of funds from investors to the companies in the form of loans, deposits and investment. There are so many financial institutions in Sri Lanka. There are many types of financial institutions include the commercial banks, investment banks, brokerage firms, insurance companies, and assets management funds in addition to include credit unions and finance firms.
The central banks regulators the financial institution to control the supply of money in the market and protect consumers.
The market means the aggregate of possible buyers and sellers certain good and services transaction between them.
Financial market is arrangement for facilitating buying and selling of financial claims. In other words, a financial market is a financial institutions or agreement that facilitates the exchange of financial instruments like shares, debentures, commercial papers,
Financial Market main role is creating or transferring financial assets. Mostly financial markets facilitating the sale by newly issued financial assets. The examples of financial markets capital markets, Commodity markets, Money markets, derivatives markets, insurance markets, Foreign exchange markets etc.
Funds are transferring directly from ultimate severs from to ultimate barrowers is known as direct financing and a financial intermediary transform financial claims with one set of characterized known as indirect financing.
Financial markets can be categorized multiple way. One of the most common method adopted is on the basics methods maturity and trading. According to the maturity structure can be classified capital market and money market.
The lenders and borrowers to satisfied their short term financial needs it is called money market. Money is synonym of liquidity. Simply means of money market money or its equivalent can be traded.