The financial system is that set of institutions, markets and media in a given country whose main objective and purpose is to channel the savings generated by lenders to borrowers..
Then, the aforementioned intermediation work that we mention is carried out by those institutions that make up the financial system and is considered as elementary to be able to carry out the transformation of financial assets issued by investors into indirect financial assets. The financial system will be understood by financial assets as well as institutions, intermediaries and financial markets.
The exclusive mission to be fulfilled by the financial system of a market economy will be capture that surplus from savers and channel it to borrowers, whether public or private.
Vital influence on the domestic market
Among those institutions that make up the aforementioned system, the Banks, those of a private nature and also the public ones, whose administration and management is in charge of the national state stand out. It is precisely the banks that offer citizens various investment tools, such is the case of the famous fixed terms, which report an income to clients and of course also become benefits for the banks that work with that money. and they apply it to other operations from which of course they obtain revenues.
The financial system plays a fundamental role in the economy of any country and its good or bad functioning has a direct impact on the domestic market. In this sense, it is sometimes considered to be responsible for some economic complications and they enjoy a certain demonization by those who have a critical view of capitalism.
In market economies, financial systems are of vital importance since they are in charge of capturing people's savings and diverting them towards specific investments, as we have already indicated, which will tend to have a positive impact on the real economy of the country in question.
What are financial assets and markets?
They are called as financial assets to those titles or accounting entries issued by the economic units of expenses and that in a certain way constitute the means to maintain wealth for those who possess it and a liability for those who generate it. These do not add to the general wealth of a country since they are not contained in the gross domestic product, but they do move the real resources of the economy contributing to the real growth of wealth. The characteristics of these assets are the liquidity, risk and profitability.
On the other hand, Financial markets are those organizations in which the exchange of financial assets takes place and their prices will also be determined. Meanwhile, the contact between the different agents that operate in this type of market does not necessarily have to be done in a physical space, but can be done through various modalities such as the telephone, telematics, Internet auctions, among others.
Forecasting and regulation
So, this system offers savers many savings and investment opportunities, however, it is important that we mention that it is important to be warned in this regard that many options that they offer us carry some risks that in many cases are beyond what the client average knows about the movement of the market, for example, good advice is always recommended, with someone you trust, who can offer all the alternatives and also warn us about the best and worst scenarios of the various operations.
In order to exercise the function of controller within the financial system, there are those called regulatory bodies of the financial system who will be in charge of supervising compliance with the laws promulgated by parliament as well as those issued by the regulators of the system itself.
