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FINANCIAL
INSTITUTION
Banking and Financial
Institutions
• 1. Financial Claims – These comprise the money and the rights to receive money
under specific circumstances. These are evidenced by financial instruments which
specify the terms of the claims.
3. FINANCIAL MARKETS serves as a means of bringing the forces of demand and supply
of financial claims.
Financial Market is a market in which people trade financial securities and derivatives such as futures
and options at low transaction costs. Securities include stocks and bonds, and precious metals.
Stocks and bonds are certificates that are sold to raise money for starting a new company or for
expanding an existing company.
1.) Stocks, or shares of stock, represent an ownership interest in a corporation.
- Stocks pay dividends to the owners, but only if the corporation declares a dividend.
2.) Bonds are a form of long-term debt in which the issuing corporation promises to pay the principal
amount at a specific date.
• 4. Government Agencies– The monetary board is the policy-making body (the
Bangko Sentral ng Pilipinas ). Laws on Money, Credit and banking are legislated
by the Congress.
• The role of government agencies has a tremendous impact goal of the Bangko
Sentral is to attain internal and external stability of our peso.
• Stability of Peso means to balance the price and the sustainable growth and the cobertability
of peso.
• 5. Laws and Policies – Law of land. The National government regulates and
supervises the behaviour of the whole economy. Hence, it’s control of the
financial system is a vital condition for the whole economic behaviour. It is
formulated to ensure the desired individuals in the transfer of funds: risk ,
inconvenience and cost of transfer and the desire to avoid illiquidity.
Financial institution perform certain specific functions such
as:
• Investigation and Credit Analysis. – An individuals who lends his money
through a financial institutions is assured of a minimum risk.
• To ensure that funds will be used efficiently by the borrower to protect the interest
of both lender and financial institution.
• Matching the Supply and Demand for Funds. – Financial institutions perform
a brokerage function. They bring the lenders and borrowers together.
• Some financial institutions specialize matching the supply of savings with the
demand for funds.
• Provision for Liquidity- it is a need of cash prior to due date of payment. The
brokerage functions which provides and organized market.
• Liquidity is the amount of money that is readily available for investment and
spending.