Eco. 324 (Online Discussion/ Quiz 1 (14-01-2022)–Understanding the Financial System)

NAME:NEBOH CHIZITEREM MARGERETROSE
REG NO:2018/242341

1) No, I disagree. Financial systems have numerous characteristics/features.
I)It plays a vital role in the economic development of the country as it encourages both savings and investment
Ii)It helps in mobilising and allocating one’s savings
III) It facilitates the expansion of financial institutions and markets
iv) Plays a key role in capital formation
v) It helps form a link between the investor and the one saving
vi) It is also concerned with the Provision of funds

2)In my school of thought,Well-functioning financial systems are characterized by financial instruments that help people solve financial problems, liquid markets with low trading costs (operationally efficient), timely financial disclosures resulting in market prices that reflect available information (informationally efficient), and therefore prices that move primarily with changes in fundamental value instead of liquidity demands. Well-functioning markets ultimately lead to efficient allocations, which use resources where they are most valuable.

NAME: Joseph chinonso Lucky
Reg no: 2018/241859
Dept: Economics

1 The idea came from the Rio+20 Summit in 2012 – the largest summit in UN history. Columbia and Guatemala proposed goals to follow on from the Millennium Development Goals, set up in 2000 to halve poverty by 2015. Poverty, as measured by living on less than $1.25 a day, has halved. Setting goals works – in a complex world, organizations and countries can align their agendas and prioritize funding.

The new goals are the result of a three-year process involving 83 national surveys engaging over 7 million people, making it the biggest consultation in UN history.
Nations finally agreed on a list of 17 goals. Some critics argue that 17 are too many. The goals will not be legally binding, part of a new trend in international policy to prevent endless legal obstructions.
SDGsSource: Jakob Trollbäck

The 35-page United Nations text outlining the post-2015 development agenda is available here. “This agenda is a plan of action for people, planet and prosperity,” it says.

From governance experts to climate researchers, the academic community largely supports the goals. The International Council for Science’s independent assessment of the goals gave them a cautious thumbs up.
Not everyone agrees.

The Lancet described the goals as “fairy tales, dressed in the bureaucratese of intergovernmental narcissism, adorned with the robes of multilateral paralysis, and poisoned by the acid of nation-state failure”

This may be true, but it ignores the fact that the goals have been heavily negotiated, so will never be perfect. Instead, they are about values. However, they have broad legitimacy among all parties – which is a big deal.

The concern now is how to make people care about the SDGs. If no one notices them, they won’t attract the attention they need to build momentum. This is a very real issue because the media has largely ignored them to date. British film-maker Richard Curtis aims to bring the goals to 7 billion people. Part one of the plan has been to work with the Swedish designer Jakob Trollbäck to rebrand them as the Global Goals and create an army of #goalkeepers.

While the Millennium Development Goals were aimed at poorer countries (more or less), the new goals are designed to be universal. This is a monumental shift in thinking about sustainable development from a worldview where rich nations support poorer nations to develop, towards a view where the actions of all, particularly those in wealthy nations, risk destabilizing important parts of Earth’s life-support system – most obviously the climate, the oceans, biodiversity and the forests.

So which country is most likely to complete the goals first? Sweden, according to one report. Norway, Denmark, Finland and Switzerland are close behind.

Name: Adigwe ifeoma Favour
Reg no: 2018/241871
Department: Economics department
Courses code Eco 324

Question
Clearly discuss the school of thought you have aligned with in your understanding of the financial system.
Answer

A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds.
Financial systems can be organized using market principles, central planning, or a hybrid of both.
Institutions within a financial system include everything from banks to stock exchanges and government treasuries.

** A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds.

** Financial systems can be organized using market principles, central planning, or a hybrid of both.
Institutions within a financial system include everything from banks to stock exchanges and government treasuries.
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. … Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets.

Name: IBENYENWA JUSTICE JUNIOR Reg no : 2018/245647
Economics 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.
From my own view point I don’t agree with the Revell view. 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.
Financial system functions as an intermediary and facilitates the flow of funds from the areas surplus to the areas of deficits. It’s the composition of various institutions, markets, managers, analysts, transactions and claims and liabilities. A financial system consists of institutional units and markets that interact, typically in a complex manner, for the purpose of mobilizing funds for investment, and providing facilities, including payment systems, for the financing of commercial activity. So with the definitions above we can see that financial system is a web that incorporates all other means of channeling finances.

Eze Naomi Onyinyechi
2018/241870
Eco 324 online quiz

A financial system is a super structure erected on the basis of the wealth of an economic system. Goldsmith (1969) refers to this as the relationship between the super structure (a set of financial institutions, intermediaries and instruments) and financial infrastructure (real wealth or national income).
it is not possible to have a well developed financial system in a less developed economy. Generally, a financial system cannot develop more than the economy in which it serves. In other to appreciate the significance of the various elements in the financial structure – the financial inter-relationships between
economic units, the types of financial claims, the
markets in which the claims are traded and the
financial institutions.

Name: Oguegbu Chiamaka Maureen Reg no : 2018/242309 From my own perspective I don’t align with the Revell view. Financial system functions as an intermediary and facilitates the flow of funds from the areas surplus to the areas of deficits. It’s the composition of various institutions, markets, managers, analysts, transactions and claims and liabilities. A financial system consists of institutional units and markets that interact, typically in a complex manner, for the purpose of mobilizing funds for investment, and providing facilities, including payment systems, for the financing of commercial activity. So with the definitions above we can see that financial system functions like a web that incorporates all other means of channeling finances. 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.

Name: Ezeaku Anderson Esomchukwu
Reg no: 2018/242413
Dept: Economics
Course code: Eco 324

The Economist Jack revell acquired an international reputation for his emphasis on the importance of understanding how financial institutions and markets work in practice in order to improve both policy formulation and economic theory development. This was a lonely path to tread during an era when mathematical and statistical model increasingly dominated in modern economics. Revell did not dispute the need for these developments or their capacity for increasing the rigour of the subject. His contribution was to remind the economics profession of the necessity of ensuring that the institutions, markets and respective data being modelled in a
theoretical setting did in fact reflect the real world that economist seek to explore, explain and ultimately to improve.
Revell held socialist views throughout his life. The reputation that he developed in banking and financial system research was no abrogation of his beliefs in fair play and equal opportunity for all, together with a firm understanding that the free market unaided cannot deliver all of these benefits
Revell also identified the need for effective banking supervision by regulators and the special economic role of capital adequacy the amount of capital that banks should be required to hold in relation to the risks assumed in their business.
Jack revell’s research dealt with a world less elegant and precise than that often inhabited by modern economic theory but his informed commentaries were read by a wide audience. “Everything should be made as simple as possible,but not simpler”. Einstein’s statement captures the contribution that revell made to our understanding of modern banking and financial systems.

NAME:CHINWUBA IFEANYI INNOCENT
CLASS:300LEVEL
DEPARTMENT:ECONOMICS
ASSIGNMENT:
A financial market is a market in which people trade financial securities and derivatives atlow transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets as commodities.
The term “market” is sometim8es used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (such as the New York Stock Exchange (NYSE), London Stock Exchange (LSE), JSE Limited (JSE), Bombay Stock Exchange (BSE) or an electronic system such as NASDAQ. Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell the stock from the one to the other without using an exchange.
Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, to stock exchanges. There are also global initiatives such as the United Nations Sustainable Development Goal 10 which has a target to improve regulation and monitoring of global financial markets.
TYPES OF FINANCIAL MARKETS
• Capital markets which consist of:
o Stock markets, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
o Bond markets, which provide financing through the issuance of bonds, and enable the subsequent trading thereof.
• Commodity markets, The commodity market is a market that trades in the primary economic sector rather than manufactured products, Soft commodities is a term generally referred as to commodities that are grown, rather than mined such as crops (corn, wheat, soybean, fruit and vegetable), livestock, cocoa, coffee and sugar and Hard commodities is a term generally referred as to commodities that are mined such as gold, gemstones and other metals and generally drilled such as oil and gas.
• Money markets, which provide short term debt financing and investment.
• Derivatives markets, which provide instruments for the management of financial risk.[2]
• Futures markets, which provide standardized forward contracts for trading products at some future date; see also forward market.
• Foreign exchange markets, which facilitate the trading of foreign exchange.
• Cryptocurrency market which facilitate the trading of digital assets and financial technologies.
• Spot market
• Interbank lending market
The capital markets may also be divided into primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets, such as during initial public offerings. Secondary markets allow investors to buy and sell existing securities. The transactions in primary markets exist between issuers and investors, while secondary market transactions exist among investors.
Liquidity is a crucial aspect of securities that are traded in secondary markets. Liquidity refers to the ease with which a security can be sold without a loss of value. Securities with an active secondary market mean that there are many buyers and sellers at a given point in time. Investors benefit from liquid securities because they can sell their assets whenever they want; an illiquid security may force the seller to get rid of their asset at a large discount.

Name: Ezeorah Mariagoretti Ukamaka
Registration Number: 2018/244494
Department: Social Science Education

In my view, the three prevailing schools of thought on Financial System are as follows, with many economists sharing one or more features of the three

1. Make the banks that engage in higher risks — mainly investment banks — smaller. A smaller investment banking sector is the most reliable path to smaller risk, this school says. Do this by restoring some or all of the 1933 Glass Steagall Act, which put firmer separation between investment banking use of commercial and community bank depositors’ money. It also restricted selling of public shares (in other words, speculation or bets with other people’s savings) by investment banks which were predominantly partnerships and whose own incomes rose or fell with the fortunes of their clients. An additional argument in favor of the “make them smaller” school: maybe this will lessen their bargaining power over national industrial and infrastructure policy through their extremely powerful lobbies.

People’s World
Three schools of thought on financial reform
January 15, 2010 5:48 PM CST BY JOHN CASE
Share

Email
In my view, the three prevailing schools of thought on financial reform are as follows, with many economists sharing one or more features of the three:

1. Make the banks that engage in higher risks — mainly investment banks — smaller. A smaller investment banking sector is the most reliable path to smaller risk, this school says. Do this by restoring some or all of the 1933 Glass Steagall Act, which put firmer separation between investment banking use of commercial and community bank depositors’ money. It also restricted selling of public shares (in other words, speculation or bets with other people’s savings) by investment banks which were predominantly partnerships and whose own incomes rose or fell with the fortunes of their clients. An additional argument in favor of the “make them smaller” school: maybe this will lessen their bargaining power over national industrial and infrastructure policy through their extremely powerful lobbies.

2. Don’t focus on making banking smaller. There may be big political consequences if financing of national debt moves more and more offshore due to scaling down U.S. finance, this school warns. Plus some argue that there is no sure path to risk reduction through breaking up Goldman, JPMorgan, Bank of America, or AIG. This group favors national tax, insurance and regulatory policy to control the amount of leverage in the system. This group seems to me to underestimate the essential “fox guarding the chicken coop” behavior and bias (resulting from the flow of professionals in finance between public and private sectors) of the bureaucratic institutions designed to supervise giant, private financial institutions.

3. The unintended side effects of any government intervention are just too awful to contemplate. Do nothing and in the “long run” (when, as John Maynard Keynes says, “we are all dead!”), markets will reach a “new equilibrium.” Only the alleged “invisible hand” of the marketplace knows what wages or living or social conditions such “new equilibrium” may bring – perhaps the Pinochet solution! So what! So says the third group, mainly Republicans and those heavily tainted with policies that encouraged the Wall Street bubble mania in mortgage-backed securities.

Name: Ugwu Chikaodinaka Augustina
Reg no: 2018/246451
Course: eco 324
Dept: Economics

FINANCIAL SYSTEM
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
Financial systems are of crucial significance to capital formation. The adequate capital formation is indispensable to a speedy economic development is universally recognized in academic literature. The main function of financial system is the collection of saving and their distribution for industrial investment, thereby stimulating the capital formation and, to that extent, accelerating the process of economic growth. The process of capital formation involves three distinct, although inter-related activities:
-Savings: The ability by which claims to resources are set aside and become available for other purposes.

-Finance: The activity by which claims to resources are either assembled from those released by domestic savings, obtained from abroad, or specially created usually as bank deposits or notes and then placed in the hands of the investors.

-Investments: The activity by which resources are actually committed to production.The volume of capital formation depends upon the intensity and efficiency with which these activities are carried on. The effective mobilization of savings, the efficiency of the financial organization/system and the channelization of these savings into the most desirable and productive forms of investment are all inter-connected and have a great bearing on capital formation to economic development. Their relevance to the saving- investment process is derived from what is called the transfer process.
Transfer Process: The genesis of the financial system is traceable to the divorce between savings defined as the excess of current income over current expenditure, and investment representing expenditure on durable assets. The relationship between savings and investments varies considerably among economic units. Goldsmith has designated the various economic units into three categories:
(i) Saving-surplus units, that is, those units whose savings are in excess of investments,
(ii) Saving-deficit units, that is, those units whose investment exceeds savings, and
(iii) Neutral units in whose case savings are equal to investment. If capital formation is to take place, the savings of the saving-surplus units must be transferred to the saving-deficit units. This is precisely what the financial systems do by acting as a link between the savers and the investors, thereby facilitating the flow of savings into the industrial investment. They are important in the process of capital formation, because the act of investment is usually confined to a special class of businessmen who command the requisites technical and market information and temperament to use it, while the activity of saving is largely diffused between innumerable individuals who lack the skills, capacity and personal characteristics for active investment. Hence transferred process is crucial to facilitate the economic growth. Besides, there are geographical and technical limitations that inhibit the process of investment. This gap is filled by the financial systems which promote the process of capital formation by bringing together the supply of savings and the demand for investible funds.

the three prevailing schools of thought on financial reform are as follows, with many economists sharing one or more features of the three:

1. Make the banks that engage in higher risks — mainly investment banks — smaller. A smaller investment banking sector is the most reliable path to smaller risk, this school says. Do this by restoring some or all of the 1933 Glass Steagall Act, which put firmer separation between investment banking use of commercial and community bank depositors’ money. It also restricted selling of public shares (in other words, speculation or bets with other people’s savings) by investment banks which were predominantly partnerships and whose own incomes rose or fell with the fortunes of their clients. An additional argument in favor of the “make them smaller” school: maybe this will lessen their bargaining power over national industrial and infrastructure policy through their extremely powerful lobbies.

2. Don’t focus on making banking smaller. There may be big political consequences if financing of national debt moves more and more offshore due to scaling down U.S. finance, this school warns. Plus some argue that there is no sure path to risk reduction through breaking up Goldman, JPMorgan, Bank of America, or AIG. This group favors national tax, insurance and regulatory policy to control the amount of leverage in the system. This group seems to me to underestimate the essential “fox guarding the chicken coop” behavior and bias (resulting from the flow of professionals in finance between public and private sectors) of the bureaucratic institutions designed to supervise giant, private financial institutions.

3. The unintended side effects of any government intervention are just too awful to contemplate. Do nothing and in the “long run” (when, as John Maynard Keynes says, “we are all dead!”), markets will reach a “new equilibrium.” Only the alleged “invisible hand” of the marketplace knows what wages or living or social conditions such “new equilibrium” may bring – perhaps the Pinochet solution! So what! So says the third group, mainly Republicans and those heavily tainted with policies that encouraged the Wall Street bubble mania in mortgage-backed securities.

While I tend to favor #1, and certainly oppose #3 as completely useless, there is going to be a real problem moving big numbers of ordinary people into action on any financial reform that does not a) restore their lost 401k pensions, or b) give them back their foreclosed home.

The closest thing to that was the cram-down bill by Sen. Richard Durbin, D-Ill. – that would have saved millions of homes at mostly financial sector expense – which got killed early on. That alone speaks volumes about what AFL-CIO President Richard Trumka characterized as our servitude to Wall Street in so many aspects of economic life. No reform under contemplation by Congress at this time, whether from the “make them smaller” or “let them be big but legislate some way to de-leverage them” factions, will bring back lost retirement funds and homes.

But if we think about financial reform in a more fundamental sense as a struggle to implement a collective, social reallocation of investment capital from less productive to the most productive, most strategic applications, then the fight for jobs – which is of such overriding immediate AND long-range urgency, and affects the overwhelming majority of working families (one of every two families has a member without work) – must inevitably exert the biggest pressure for a stronger national industrial (investment) policy, and thus a large public share of investment dollars, and thus a relatively smaller private financial sector.

NAME: Ani Obinwane Fortune
DEPT: ECONOMICS
REG NO: 2018/243744
COURSE TITLE: THE FINANCIAL SYSTEM
COURSE CODE: ECO 324
Level:- 300
FINANCIAL SYSTEM
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
From the definition above we can make these conclusions about the financial system:
_A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds.
_Financial systems can be organized using market principles, central planning, or a hybrid of both.
_Institutions within a financial system include everything from banks to stock exchanges and government treasuries.
Most financial systems contain elements of both give-and-take markets and top-down central planning. For example, a business firm is a centrally planned financial system with respect to its internal financial decisions; however, it typically operates within a broader market interacting with external lenders and investors to carry out its long term plans.
At the same time, all modern financial markets operate within some kind of government regulatory framework that sets limits on what types of transactions are allowed. Financial systems are often strictly regulated because they directly influence decisions over real assets, economic performance, and consumer protection.
In a centrally planned financial system (e.g., a single firm or a command economy), the financing of consumption and investment plans is not decided by counterparties in a transaction but directly by a manager or central planner. Which projects receive funds, whose projects receive funds, and who funds them is determined by the planner, whether that means a business manager or a party boss.
FINANCIAL SYSTEM COMPONENTS;
Multiple components make up the financial system at different levels. The firm’s financial system is the set of implemented procedures that track the financial activities of the company. Within a firm, the financial system encompasses all aspects of finances, including accounting measures, revenue and expense schedules, wages, and balance sheet verification.
On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds. Regional financial systems include banks and other institutions, such as securities exchanges and financial clearinghouses.
The global financial system is basically a broader regional system that encompasses all financial institutions, borrowers, and lenders within the global economy. In a global view, financial systems include the International Monetary Fund, central banks, government treasuries and monetary authorities, the World Bank, and major private international banks.
Basic 3 Components of Financial System:
_Financial Institutions
_Financial Markets
_Financial Instruments (Assets or Securities)
_FINANCIAL INSTITUTION
Financial institutions facilitate smooth working of the financial system by making investors and borrowers meet. They mobilize the savings of investors either directly or indirectly via financial markets, by making use of different financial instruments as well as in the process using the services of numerous financial services providers.
They could be categorized into Regulatory, Intermediaries, Non-intermediaries and Others. They offer services to organizations looking for advises on different problems including restructuring to diversification strategies. They offer complete array of services to the organizations who want to raise funds from the markets and take care of financial assets for example deposits, securities, loans, etc.
_FINANCIAL MARKET
A financial market is the place where financial assets are created or transferred. It can be broadly categorized into money markets and capital markets. Money market handles short-term financial assets (less than a year) whereas capital markets take care of those financial assets that have maturity period of more than a year. The key functions are:
a. Assist in creation and allocation of credit and liquidity.
b. Serve as intermediaries for mobilization of savings.
c. Help achieve balanced economic growth.
d. Offer financial convenience.
One more classification is possible: primary markets and secondary markets. Primary markets handles new issue of securities in contrast secondary markets take care of securities that are presently available in the stock market.
Financial markets catch the attention of investors and make it possible for companies to finance their operations and attain growth. Money markets make it possible for businesses to gain access to funds on a short term basis, while capital markets allow businesses to gain long-term funding to aid expansion. Without financial markets, borrowers would have problems finding lenders. Intermediaries like banks assist in this procedure. Banks take deposits from investors and lend money from this pool of deposited money to people who need loan. Banks commonly provide money in the form of loans.
_FINANCIAL INSTRUMENTS:
This is an important component of financial system. The products which are traded in a financial market are financial assets, securities or other type of financial instruments. There is a wide range of securities in the markets since the needs of investors and credit seekers are different. They indicate a claim on the settlement of principal down the road or payment of a regular amount by means of interest or dividend. Equity shares, debentures, bonds, etc are some examples.
With my understanding of how the financial system works from the writings above, I disagree with Revell (1973) on his argument that “financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system” because most of the activities going on in the financial system are been regulated directly or indirectly by the financial institutions and financial thereby making them an essential feature of the financial system and without them any financial system will fail to thrive.

Name: Eze Nnenna Anthoniatta
Department: Economics
Reg No: 2018/248095

QUESTION

However, Revell (1973), argues financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system. He further contends that ‘ the essential feature of any financial system consists of a number of financial inter-relationships between the persons and bodies that make up an economy, and the basic structure of a financial system has three features. Do you agree? Clearly discuss the school of thought you have aligned with in your understanding of the financial system.

ANSWER

Generally, financial system can be organized using markets, central planning. I do not agree that financial institutions and financial markets are not the whole of the financial system because Financial market consist of agents, brokers, institutions, and intermediaries transacting purchases and sales of securities. The many persons and institutions operating in the financial markets are linked by contracts, communications networks which form an externally visible financial structure, laws, and friendships. The financial market is divided between investors and financial institutions. While financial institution is a broad phrase referring to organizations which act as agents, brokers, and intermediaries in financial transactions. Agents and brokers contract on behalf of others; intermediaries sell for their own account. Financial intermediaries purchase securities for their own account and sell their own liabilities and common stock. For example, a stockbroker buys and sells stocks for us as our agent, but a savings and loan borrows our money (savings account) and lends it to others (mortgage loan).

Unlike Revell’s arguments, Financial institutions, like insurance companies, help to mobilize savings and investment in productive activities. In return, they provide assurance to investors against their life or some particular asset at the time of need. In other words, they transfer their customer’s risk of loss to themselves and financial markets deals with securities including stock markets and bonds, making it essential to the financial or economics system.

Name: OSIKE SOLOMON UGOCHUKWU
Reg.No: 2018/242458
Department: Economics

Question
Clearly discuss the school of thought you have aligned with in your understanding of the financial system.
Answer

A financial system is a network of financial institutions – such as insurance companies, stock exchanges, and investment banks – that work together to exchange and transfer capital from one place to another. Through the financial system, investors receive capital to fund projects and receive a return on their investments.

Financial markets involve various players, including borrowers, lenders, and investors that negotiate loans for investment purposes. The borrowers and lenders tend to trade money in exchange for a return on the investment at some future date. Derivative instruments are also traded in the financial markets as well, which are contracts that are determined based on an underlying asset’s performance.
When determining the guidelines of raising capital within a financial system, the project being funded and who funds them are decided upon by the planner, who can be a business manager. Thus, the financial system is typically organized through central planning, a market economy, or a combination of both.

A centrally planned economy is structured around a central authority, such as a government, which makes economic decisions regarding the manufacturing and distribution of products for a specific country. A market economy is when the pricing of goods and services is dictated by the aggregated decision of citizens and business owners, often resulting in the effects of supply and demand.
Financial markets operate within a government regulatory framework that filters the sort of transactions that can be conducted. Financial systems are heavily regulated due to their influence and facilitation capabilities to contribute to the growth of real assets.

Financial System Components
The financial system is composed of many components depending on the level. From a company’s perspective, its financial system includes procedures that follow its financial activities. It would include aspects such as finances, accounting, revenue, expenses, wages, and more.

From a regional standpoint, the financial system, as mentioned above, facilitates the exchange of funds between borrowers and lenders. Players on a regional level would include banks and other financial institutions such as clearinghouses.
On a global scale, the financial system includes the interactions between financial institutions, investors, central banks, government authorities, the World Bank, and more.

NAME: E-PATRICK DALOSAH
REG NUMBER: 2018/242457
DEPARTMENT:ECONOMICS
LEVEL:300
COURSE CODE: ECO 362

Defining the financial system
Every scholar on the financial markets has attempted a definition of the financial system. Ours is:
The financial system is a set of arrangements / conventions embracing the lending and borrowing of funds by
non-financial economic units and the intermediation of this function by financial intermediaries in order to
facilitate the transfer of funds, to create additional money when required, and to create markets in debt and equity instruments (and their derivatives) so that the price and allocation of funds are determined efficiently.

This definition identifies the six essential elements of a financial system:
• First: the lenders and borrowers, i.e. the non-financial economic units that undertake the lending
and borrowing process.
• Second: the financial intermediaries, which intermediate the lending and borrowing process,
meaning that they interpose themselves between the lenders and borrowers.
• Third: the financial instruments (marketable and non-marketable), which are created to satisfy
the needs of the various participants.
• Fourth: the creation of money when required, i.e. the unique money creating ability of banks.
• Fifth: the financial markets, i.e. the institutional arrangements and conventions that exist for
the issue and trading (dealing) of the financial instruments.
• Sixth: price discovery, i.e. the determination or making of the price of equity and the price of
money / debt (the rate of interest).
    The definition covers the essence of the financial system. In addition to the mentioned elements, there
are also allied participants / players / entities in the system, without which the system would not function
efficiently. They are:
• First: the brokers and dealers, i.e. the members of exchanges and/or financial intermediaries that
facilitate the trade in financial instruments (which we refer to here collectively as broker-dealers).
• Second: the fund managers (portfolio managers), i.e. the corporate entities or departments
of financial intermediaries that manage funds on behalf of principals (owners or holders of
money).
• Third: the financial exchanges that allow the broker-dealers to facilitate trading in securities,
and create the mechanism for clearing and settlement of trades in a risk-minimising manner.

    Five Basic Components of Financial System
.Financial Institutions
.Financial Markets
.Financial Instruments (Assets or Securities)
.Financial Services
.Money
  Financial Institutions
Financial institutions facilitate smooth working of the financial system by making investors and borrowers meet. They mobilize the savings of investors either directly or indirectly via financial markets, by making use of different financial instruments as well as in the process using the services of numerous financial services providers.

They could be categorized into Regulatory, Intermediaries, Non-intermediaries and Others. They offer services to organizations looking for advises on different problems including restructuring to diversification strategies. They offer complete array of services to the organizations who want to raise funds from the markets and take care of financial assets for example deposits, securities, loans, etc.

Financial Services
Financial services consist of services provided by Asset Management and Liability Management Companies. They help to get the necessary funds and also make sure that they are efficiently deployed. They assist to determine the financing combination and extend their professional services upto the stage of servicing of lenders. They help with borrowing, selling and purchasing securities, lending and investing, making and allowing payments and settlements and taking care of risk exposures in financial markets.

Money
Money is understood to be anything that is accepted for payment of products and services or for the repayment of debt. It is a medium of exchange and acts as a store of value.

NAME :OFILI BELUCHI
REG NO :2018/241862
COURSE :ECO 324

A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.

In my view, the three prevailing schools of thought on financial system are as follows, with many economists sharing one or more features of the three:

1. Make the banks that engage in higher risks — mainly investment banks — smaller. A smaller investment banking sector is the most reliable path to smaller risk, this school says. Do this by restoring some or all of the 1933 Glass Steagall Act, which put firmer separation between investment banking use of commercial and community bank depositors’ money. It also restricted selling of public shares (in other words, speculation or bets with other people’s savings) by investment banks which were predominantly partnerships and whose own incomes rose or fell with the fortunes of their clients. An additional argument in favor of the “make them smaller” school: maybe this will lessen their bargaining power over national industrial and infrastructure policy through their extremely powerful lobbies.

2. Don’t focus on making banking smaller. There may be big political consequences if financing of national debt moves more and more offshore due to scaling down U.S. finance, this school warns. Plus some argue that there is no sure path to risk reduction through breaking up Goldman, JPMorgan, Bank of America, or AIG. This group favors national tax, insurance and regulatory policy to control the amount of leverage in the system. This group seems to me to underestimate the essential “fox guarding the chicken coop” behavior and bias (resulting from the flow of professionals in finance between public and private sectors) of the bureaucratic institutions designed to supervise giant, private financial institutions.

3. The unintended side effects of any government intervention are just too awful to contemplate. Do nothing and in the “long run” (when, as John Maynard Keynes says, “we are all dead!”), markets will reach a “new equilibrium.” Only the alleged “invisible hand” of the marketplace knows what wages or living or social conditions such “new equilibrium” may bring – perhaps the Pinochet solution! So what! So says the third group, mainly Republicans and those heavily tainted with policies that encouraged the Wall Street bubble mania in mortgage-backed securities.

Name :Onuh Onyinye
Reg number :2018 /241872
Department :Economics department
Email :onuhonyinye7@gmail.com

According to Revell (1973) financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system. He further contends that ‘ the essential feature of any financial system consists of a number of financial inter-relationships between the persons and bodies that make up an economy, and the basic structure of a financial system has three features, which includes
1, The extent of these relationships
2, The forms of financial claims with which these interrelationships are expressed
3, The patterns of relationships between persons and bodies of different kinds, between independent economic units.

I agree with Revell in proposing that there is more to the financial system than the financial institutions, but I believe that financial institutions are at the core of the financial system, giving individuals the ability to save and invest whenever and wherever they want.

A financial system is an economic arrangement wherein financial institutions facilitate the transfer of funds and assets between borrowers, lenders, and investors. Its goal is to efficiently distribute economic resources to promote economic growth and generate a return on investment (ROI) for market participants.

The market participants may include investment banks, stock exchanges, insurance companies, individual investors, and other institutions. It functions at corporate, national, and international levels and is governed by various rules dictating the eligibility of participants and the use of funds for different purposes. Aside from financial institutions
, financial markets
, financial assets
, and financial services are the components of the financial system

Components of the financial system

There are several financial system components to ensure a smooth transition of funds between lenders, borrowers, and investors.
1.Financial Institutions
2.Financial Markets
3.Tradable or Financial Instruments
4.inancial Services
5.currency (Money)
#1 Financial Institutions
Financial institutions act as intermediaries between the lender and the borrower when providing financial services. These include:
Banks (Central, Retail, and Commercial Insurance Companies
Investment Companies
Brokerage Firms
#2 – Financial Markets
These are places where the exchange of assets occurs with borrowers and lenders, such as stocks, bonds, derivatives
, and commodities Financial markets help businesses to grow and expand by allowing investors to contribute capital. Investors invest in company stock with the expectation of it producing a return in the future. As the business makes a profit, it can then pass on the surplus to the investors.

#3 – Financial Instruments
Tradable or financial instruments enable individuals to trade within the financial markets. These can include cash, shares of stock (representing ownership), bonds, options, and futures.

#4 – Financial Services
Financial services provide investors a way of managing assets and offer protection against systemic risk
. These also ensure individuals have the appropriate amount of capital in the most efficient investments to promote growth. Banks, insurance companies, and investment services would be considered financial services.

#5 – Currency (Money)
A currency is a form of payment to exchange products, services, and investments and holds value to society.

Financial systems are an essential part of an economy, and without them, the flow of funds would cease to exist. It keeps evolving considering the regional or global economic situations.

NAME: UNADIKE FABIAN CHINEMEZU
REG NO: 2018/249698
DEPARTMENT: ECONOMICS
COURSE CODE: ECO 324

QUESTION:
Some financial analysts believe that a financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
However, Revell (1973), argues financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system. He further contends that ‘ the essential feature of any financial system consists of a number of financial inter-relationships between the persons and bodies that make up an economy, and the basic structure of a financial system has three features. Do you agree? Clearly discuss the school of thought you have aligned with in your understanding of the financial system.

ANSWER:
Financial System is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
With the Definition above We can say that a Financial System is a network of Financial Institutions such as Insurance companies, stock exchanges, and investment banks that work together to exchange and transfer capital from one place to another. Through the financial system, investors receive capital to fund projects and receive a return on their investments.
The financial system is composed of many components depending on the level. From a company’s perspective, its financial system includes procedures that follow its financial activities. It would include aspects such as finances, accounting, revenue, expenses, wages, and more. From a regional standpoint, the financial system, as mentioned above, facilitates the exchange of funds between borrowers and lenders. Players on a regional level would include banks and other financial institutions such as clearinghouses. On a global scale, the financial system includes the interactions between financial institutions, investors, central banks, government authorities, the World Bank, and more.
Financial markets involve various players, including borrowers, lenders, and investors that negotiate loans for investment purposes. The borrowers and lenders tend to trade money in exchange for a return on the investment at some future date. Derivative instruments are also traded in the financial markets as well, which are contracts that are determined based on an underlying asset’s performance. When determining the guidelines of raising capital within a financial system, the project being funded and who funds them are decided upon by the planner, who can be a business manager. Thus, the financial system is typically organized through central planning, a market economy, or a combination of both. A centrally planned economy is structured around a central authority, such as a government, which makes economic decisions regarding the manufacturing and distribution of products for a specific country. A market economy is when the pricing of goods and services is dictated by the aggregated decision of citizens and business owners, often resulting in the effects of supply and demand. Financial markets operate within a government regulatory framework that filters the sort of transactions that can be conducted. Financial systems are heavily regulated due to their influence and facilitation capabilities to contribute to the growth of real assets.

So with that being said.,I will say No, I do not agree to the Revell’s 1973 school of thought which says that “Financial Institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system”, because most of the activities going on in the Financial System are been regulated directly or indirectly by the Financial Institution and thereby making them an essential feature of the Financial System and without them any Financial System will fail to thrive.

NAME: OBODOAGU SOMTOCHUKWU LILIAN
DEPARTMENT: ECONOMICS
REG. NO: 2018/242452
LEVEL: 300l
COURSE: ECO 342
Assignment
Clearly discuss the school of thought you have aligned with in your understanding of the financial system.
Here we have two school of thought that try to explain what financial system is all about , they are:
* The Financial Analyst school of thought and
* The Revell (1973) school of thought
The financial analyst defined financial system in two terms such as financial institutions and financial market while
Revell view financial system in three features aspect financial system embraces more than the institutions and markets that operate in the financial sector.
I agreed with the financial analyst school of thought which defined financial system as 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. Financial institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.
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.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.

Name: Ik-Ukennaya Ezekiel
Reg no: 2018/ 249 788
Department: Economics
Email: ezekielikukennaya4@gmail.com

Eco. 324 (Online Discussion/ Quiz 1 (14-01-2022)–Understanding the Financial System)
Comment:
Financial system is a system that facilitates the flow of funds from the surplus areas to areas of deficit. Various economic units which their progress reflects economic development of a nation make up these areas. These units are broadly classified into corporate sector, government and household sector. They can be placed in a surplus/deficit/ balanced- budgetary situations while preforming their activities. Surplus area are mostly made up of households while seekers of funds which comprises the government and business firms make up the deficit area. So the financial system act as an intermediary between these areas and is composed of various institutions, money manager, analysts, transaction, claim and liabilities. The financial system is thus, complex in structure.
The word “system” in the term financial system implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims and liabilities in the economy. It is concerned about money, credit and finance. The Nigerian financial system consists of financial markets, financial instruments and financial intermediation. The financial markets also help to facilitate foreign exchange transactions and foreign trade. According to Okigbo (1981), Financial system include the “enviroment of rules and regulations governing the interaction of the different categories of the institutions among themselves and with others”
From the above, it is very obvious that financial system embraces more than the institutions and markets that operate in the financial sector.
I agree with Revell ( 1973) on his view about financial system because, the financial system is a web of organized and regulated financial interrelationship among financial institutions of various kinds and between and among the various economic units such as households, businesses, government and external bodies and persons that make up the economy.
These relationships are expressed by the form of financial claim available to the system. The financial institutions and economic units and bodies interact in different financial markets thereby creating a web of assets and liabilities, shares and debts. A financial market itself is a market in which people and entities can trade financial securities and other items of value at a low transaction costs and at prices that reflect supply and demand. It is used to match those who want capital to those who have it.
The role of financial system in an economy cannot be over emphasized. It plays the fundamental role in growth and development of an economy through facilitating productive activities as it performs vital role of financial intermediation, anchors payment services, and is the bedrock of monetary policy implementation. The development of the financial system changes in-line with the development in the economy.

Name:Aroh oluchukwu perpetua

Reg no:2018/243120

Course code:324

Department: Economics

However, Revell (1973), argues financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system. He further contends that ‘ the essential feature of any financial system consists of a number of financial inter-relationships between the persons and bodies that make up an economy, and the basic structure of a financial system has three features. Do you agree?

Answer:
No,I don’t agree with him(Revell) because financial system need all these 5 financial features instead of 3 to be able to attain a financial goal or function properly.
The 5 features include:

1)Financial institution

2)Financial Instruments (Assets or Securities)

3)Financial Services

4)Financial markets

5)Money

Financial Institutions
Financial institutions facilitate smooth working of the financial system by making investors and borrowers meet. They mobilize the savings of investors either directly or indirectly via financial markets, by making use of different financial instruments as well as in the process using the services of numerous financial services providers.

They could be categorized into Regulatory, Intermediaries, Non-intermediaries and Others. They offer services to organizations looking for advises on different problems including restructuring to diversification strategies. They offer complete array of services to the organizations who want to raise funds from the markets and take care of financial assets for example deposits, securities, loans, etc.

Financial Instruments

This is an important component of financial system. The products which are traded in a financial market are financial assets, securities or other type of financial instruments. There is a wide range of securities in the markets since the needs of investors and credit seekers are different. They indicate a claim on the settlement of principal down the road or payment of a regular amount by means of interest or dividend. Equity shares, debentures, bonds, etc are some examples.

Financial Services
Financial services consist of services provided by Asset Management and Liability Management Companies. They help to get the necessary funds and also make sure that they are efficiently deployed. They assist to determine the financing combination and extend their professional services upto the stage of servicing of lenders. They help with borrowing, selling and purchasing securities, lending and investing, making and allowing payments and settlements and taking care of risk exposures in financial markets. These range from the leasing companies, mutual fund houses, merchant bankers, portfolio managers, bill discounting and acceptance houses.

Financial Markets
A financial market is the place where financial assets are created or transferred. It can be broadly categorized into money markets and capital markets. Money market handles short-term financial assets (less than a year) whereas capital markets take care of those financial assets that have maturity period of more than a year. The key functions are:

1. Assist in creation and allocation of credit and liquidity.

2. Serve as intermediaries for mobilization of savings.

3. Help achieve balanced economic growth.
Money
It is the medium in which prices and values are expressed. It circulates from person to person and country to country, facilitating trade, and it is the principal measure of wealth.

Clearly discuss the school of thought you have
aligned with in your understanding of the financial system.
3Financial system school of thought according to my own understanding are:
a)Financial Literacy

b)Financial Wellness

C)Financial Planning

Financial Literacy
What is financial literacy? There are many definitions out there on what financial literacy is, who it is for, and what it can accomplish for those who possess it. At its core, financial literacy is a skill that encompasses a wide spectrum of topics relating to personal finance, money management/budgeting, and common financial themes and terms (at least at a conceptual level).

Financial literacy does not require that the individual be an “expert” on the subject matter, but rather they can comfortably navigate conversations around their finances. Financial illiteracy means that someone lacks skills to make better decisions around their finances. As a result, someone who lacks certain knowledge about products and services could potentially become a victim of poor spending and money management habits. These habits could lead to debt, worsening credit ratings, and even predatory lending.

important to note that they are often a thinly veiled sales presentation and should be attended with an attentive if not skeptical approach.

Financial Wellness

What is financial wellness? As with financial literacy, financial wellness is defined as a person’s relationship with their finances and money. financial wellness also involves some “light” financial planning, as financial wellness is also a bit of financial awareness. Put another way, financial wellness is about the personal feelings towards finance and also a cursory snapshot of a person’s financial situation.

The major difference in financial wellness versus financial planning is that financial wellness focuses more on behaviors and the psychology of money management as opposed to presenting a direct solution. The end goal is that financial literacy and wellness could work together and build up to the more analytical and optimization based financial planning approach. As a discipline, financial wellness seems more easily defined. However, as a product and service, there can be a wide variety of what constitutes financial wellness in comparison to financial planning.

Recently, more and more employers are offering “financial wellness” programs to their employees. Just as health solutions, paid time off, and other benefits have allowed employers to retain talent, financial wellness is beginning to be looked at as a must have benefit. As a result, some companies may offer their version of financial wellness.

On the lower end, it could be a service that surveys employees about how they feel about their finances, their work benefits, debts, retirement, etc. The employee may even be supplied with some rudimentary steps forward as well as summary statements that might highlight their total benefits or “rewards”. These programs may provide some great education, but ultimately do not go as far as they could to motivate or encourage employees to make changes and progress towards their goals.

Financial Planning

Financial planning is really a culmination of educating a client (financial literacy), assessing the psychology and health of a person’s relationship with money and their current situation (financial wellness), and then bringing it all together to present optimization and modeling (such as how to achieve retirement/get out debt/save for education) customized to the individual. While financial planning may have variations of this definition, what is more commonly described is the financial plan.

A financial plan is usually defined as a comprehensive prepared document that outlines an individual or couple’s financial goals presenting both the current snapshot as well as recommendations and projections for future success. A financial planner must take a client through a detailed process to ensure that they are providing the best advice tailored to their client. As a result, the financial plan itself may be very well the least complex feature of the planning process.

What that process looks like however can vary widely depending on who you work with, and what credentials the advisor holds. The CFP Board, for example, has defined the financial planning process in six steps:

1)Establishing and defining the relationship with a client

2)Gathering client data

3)Analyzing and evaluating the client’s financial status

4)Developing and presenting financial planning recommendations

5)Implementing the financial planning recommendations

6)Monitoring

NAME: OWOH ANAYO JONATHAN
DEPT: ECONOMICS
REG NO: 2018/250325
COURSE TITLE: THE FINANCIAL SYSTEM
COURSE CODE: ECO 324
ANSWERS:
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
From the definition above we can make these conclusions about the financial system:
– A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds.
– Financial systems can be organized using market principles, central planning, or a hybrid of both.
– Institutions within a financial system include everything from banks to stock exchanges and government treasuries.
Most financial systems contain elements of both give-and-take markets and top-down central planning. For example, a business firm is a centrally planned financial system with respect to its internal financial decisions; however, it typically operates within a broader market interacting with external lenders and investors to carry out its long term plans.
At the same time, all modern financial markets operate within some kind of government regulatory framework that sets limits on what types of transactions are allowed. Financial systems are often strictly regulated because they directly influence decisions over real assets, economic performance, and consumer protection.
In a centrally planned financial system (e.g., a single firm or a command economy), the financing of consumption and investment plans is not decided by counterparties in a transaction but directly by a manager or central planner. Which projects receive funds, whose projects receive funds, and who funds them is determined by the planner, whether that means a business manager or a party boss.
FINANCIAL SYSTEM COMPONENTS
Multiple components make up the financial system at different levels. The firm’s financial system is the set of implemented procedures that track the financial activities of the company. Within a firm, the financial system encompasses all aspects of finances, including accounting measures, revenue and expense schedules, wages, and balance sheet verification.
On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds. Regional financial systems include banks and other institutions, such as securities exchanges and financial clearinghouses.
The global financial system is basically a broader regional system that encompasses all financial institutions, borrowers, and lenders within the global economy. In a global view, financial systems include the International Monetary Fund, central banks, government treasuries and monetary authorities, the World Bank, and major private international banks.
Basic Components of Financial System:
– Financial Institutions
– Financial Markets
– Financial Instruments (Assets or Securities)
– Financial Institutions:
Financial institutions facilitate smooth working of the financial system by making investors and borrowers meet. They mobilize the savings of investors either directly or indirectly via financial markets, by making use of different financial instruments as well as in the process using the services of numerous financial services providers.
They could be categorized into Regulatory, Intermediaries, Non-intermediaries and Others. They offer services to organizations looking for advises on different problems including restructuring to diversification strategies. They offer complete array of services to the organizations who want to raise funds from the markets and take care of financial assets for example deposits, securities, loans, etc.
– Financial Markets:
A financial market is the place where financial assets are created or transferred. It can be broadly categorized into money markets and capital markets. Money market handles short-term financial assets (less than a year) whereas capital markets take care of those financial assets that have maturity period of more than a year. The key functions are:
1. Assist in creation and allocation of credit and liquidity.
2. Serve as intermediaries for mobilization of savings.
3. Help achieve balanced economic growth.
4. Offer financial convenience.
One more classification is possible: primary markets and secondary markets. Primary markets handles new issue of securities in contrast secondary markets take care of securities that are presently available in the stock market.
Financial markets catch the attention of investors and make it possible for companies to finance their operations and attain growth. Money markets make it possible for businesses to gain access to funds on a short term basis, while capital markets allow businesses to gain long-term funding to aid expansion. Without financial markets, borrowers would have problems finding lenders. Intermediaries like banks assist in this procedure. Banks take deposits from investors and lend money from this pool of deposited money to people who need loan. Banks commonly provide money in the form of loans.
– Financial Instruments:
This is an important component of financial system. The products which are traded in a financial market are financial assets, securities or other type of financial instruments. There is a wide range of securities in the markets since the needs of investors and credit seekers are different. They indicate a claim on the settlement of principal down the road or payment of a regular amount by means of interest or dividend. Equity shares, debentures, bonds, etc are some examples.
With my understanding of how the financial system works from the writings above, I disagree with Revell (1973) on his argument that “financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system” because most of the activities going on in the financial system are been regulated directly or indirectly by the financial institutions and financial thereby making them an essential feature of the financial system and without them any financial system will fail to thrive.

NAME: UGWU SERAH IZUNNA.
DEPARTMENT: ECONOMICS.
REG NUMBER: 2018/247399
COURSE CODE: ECO 324
COURSE TITLE: FINANCIAL MARKETS AND INSTITUTIONS.

ASSIGNMENT.
Understanding the Financial System.

What Is a Financial System?
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.

KEY TAKEAWAYS
A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds.
Financial systems can be organized using market principles, central planning, or a hybrid of both.
Institutions within a financial system include everything from banks to stock exchanges and government treasuries.
Understanding the Financial System
Like any other industry, the financial system can be organized using markets, central planning, or some mix of both.

Financial markets involve borrowers, lenders, and investors negotiating loans and other transactions. In these markets, the economic good traded on both sides is usually some form of money: current money (cash), claims on future money (credit), or claims on the future income potential or value of real assets (equity). These also include derivative instruments. Derivative instruments, such as commodity futures or stock options, are financial instruments that are dependent on an underlying real or financial asset’s performance. In financial markets, these are all traded among borrowers, lenders, and investors according to the normal laws of supply and demand.

In a centrally planned financial system (e.g., a single firm or a command economy), the financing of consumption and investment plans is not decided by counterparties in a transaction but directly by a manager or central planner. Which projects receive funds, whose projects receive funds, and who funds them is determined by the planner, whether that means a business manager or a party boss.

Most financial systems contain elements of both give-and-take markets and top-down central planning. For example, a business firm is a centrally planned financial system with respect to its internal financial decisions; however, it typically operates within a broader market interacting with external lenders and investors to carry out its long term plans.

At the same time, all modern financial markets operate within some kind of government regulatory framework that sets limits on what types of transactions are allowed. Financial systems are often strictly regulated because they directly influence decisions over real assets, economic performance, and consumer protection.

Financial Market Components
Multiple components make up the financial system at different levels. The firm’s financial system is the set of implemented procedures that track the financial activities of the company. Within a firm, the financial system encompasses all aspects of finances, including accounting measures, revenue and expense schedules, wages, and balance sheet verification.

On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds. Regional financial systems include banks and other institutions, such as securities exchanges and financial clearinghouses.

The global financial system is basically a broader regional system that encompasses all financial institutions, borrowers, and lenders within the global economy. In a global view, financial systems include the International Monetary Fund, central banks, government treasuries and monetary authorities, the World Bank, and major private international banks.
What Are Financial Systems?
A financial system is an economic arrangement wherein financial institutions facilitate the transfer of funds and assets between borrowers, lenders, and investors. Its goal is to efficiently distribute economic resources to promote economic growth and generate a return on investment (ROI) for market participants.

The market participants may include investment banks, stock exchanges, insurance companies, individual investors, and other institutions. It functions at corporate, national, and international levels and is governed by various rules dictating the eligibility of participants and the use of funds for different purposes. Aside from financial institutions
, financial markets
, financial assets
, and financial services are the components of the financial system.

Key Takeaways
A financial system consists of individuals like borrowers and lenders and institutions like banks, stock exchanges, and insurance companies actively involved in the funds and assets transfer.
It gives investors the ability to grow their wealth and assets, thus contributing to economic development.
It serves different purposes in an economy, such as working as payment systems, providing savings options, bringing liquidity to financial markets, and protecting investors from unexpected financial risks.
A specific set of rules drafted under different government policies is required for a stable financial system operating at corporate, national, and international levels.
Explanation
In any functional economy, economic resources are limited, with individuals having unlimited wants and desires. This problem, referred to as scarcity, is one of the significant drivers of an economy. However, it challenges an economy in determining when, where, to whom to distribute its resources. Consequently, it resulted in a financial system structure capable of efficiently allocating economic resources to stimulate growth. Also, it allows participants to benefit by:

Providing a way of making payments (banks)
Giving participants a way of earning interest in the form of time value (investment institutions)
Protecting them against financial risks
(insurance)
Collecting and distributing financial information
(credit agencies)
Governing regulations to maintain stability (central banks and governments)
Maintaining liquidity
and converting investments into cash (banks and financial institutions)
Financial institutions
are at the core of the financial system, giving individuals the ability to save and invest whenever and wherever they want. Investors put their money in these institutions, which offer them a reward for saving and use it to lend to borrowers. The borrowers can use these funds to build goods and services or fund other projects. All this activity helps promote economic growth
– either by creating additional jobs or generating a profit and contributing back to the economy.

The money or funds flow from the lender to the borrower in one of two ways:

Market-Based
Centrally Planned
In a market-based economy, borrowers, lenders, and investors can obtain funds by trading securities, such as stocks and bonds
in the financial markets. The law of supply and demand will determine the price of these securities. With a centrally planned economy, governing authority or central planner makes the investment decisions. In most instances, there will be a mix of both types of economies.

Components of Financial Systems
There are several financial system components to ensure a smooth transition of funds between lenders, borrowers, and investors.

Financial System
You are free to use this image on your website, templates etc, Please provide us with an attribution link

Financial Institutions
Financial Markets
Tradable or Financial Instruments
Financial Services
Currency (Money)
#1 – Financial Institutions
Financial institutions act as intermediaries between the lender and the borrower when providing financial services. These include:

Banks (Central, Retail, and Commercial)
Insurance Companies
Investment Companies
Brokerage Firms
#2 – Financial Markets
These are places where the exchange of assets occurs with borrowers and lenders, such as stocks, bonds, derivatives
, and commodities
.

Financial markets help businesses to grow and expand by allowing investors to contribute capital. Investors invest in company stock with the expectation of it producing a return in the future. As the business makes a profit, it can then pass on the surplus to the investors.

#3 – Financial Instruments
Tradable or financial instruments enable individuals to trade within the financial markets. These can include cash, shares of stock (representing ownership), bonds, options, and futures.

#4 – Financial Services
Financial services provide investors a way of managing assets and offer protection against systemic risk
. These also ensure individuals have the appropriate amount of capital in the most efficient investments to promote growth. Banks, insurance companies, and investment services would be considered financial services.

#5 – Currency (Money)
A currency is a form of payment to exchange products, services, and investments and holds value to society.

Examples
Financial systems are an essential part of an economy, and without them, the flow of funds would cease to exist. It keeps evolving considering the regional or global economic situations.

An example of this is the G20’s virtual summit held in March 2020, discussing the role and significance of the global approach to the financial crisis caused by the coronavirus pandemic. The center of discussion was the ability of the global financial system to operate effectively and efficiently. Financial markets have mitigated systemic risk due to the improved financial market infrastructures, systemically important financial market utilities, risk management standards, and centralized clearing houses.

Here is another example to understand its importance in everyday life.

Business Loans

When a business requires capital to fund new projects or develop new technology, it applies for a business loan. There are several options to get it done, such as getting a line of credit or an installment loan.
To qualify for the loan, the lender looks at several business components like its credit score or balance sheet
to determine the systemic risk of giving out the loan.
The financial institution (bank) then allocates the necessary funds to the business. The business can use the money to fund a future project to generate additional income.
The bank then requires the business to make payments towards the loan, including interests for its time value.
Functions of Financial Systems
A financial system allows its participants to prosper and reap the benefits. It also helps in borrowing and lending when needed. In simpler words, it will circulate the funds to different parts of an economy. Here are some of the financial system functions:

Functions of Financial Systems
You are free to use this image on your website, templates etc, Please provide us with an attribution link

Payment System – An efficient payment system allows businesses and merchants to collect money in exchange for their products or services. Payments can be made with cash, checks, credit cards, and even cryptocurrency in certain instances.
Savings – Public savings allow individuals and businesses to invest in a range of investments and see them grow over time. Borrowers can use them to fund new projects and increase future cash flow, and investors get a return on investment in return.
Liquidity – The financial markets give investors the ability to reduce the systemic risk by providing liquidity
. It thus allows for easy buying and selling of assets when needed.
Risk Management – It protects investors from various financial risks through insurances and other types of contracts.
Government Policy – Governments attempt to stabilize or regulate an economy by implementing specific policies to deal with inflation
, unemployment, and interest rates.

Understanding Financial Systems
Financial markets involve various players, including borrowers, lenders, and investors that negotiate loans for investment purposes. The borrowers and lenders tend to trade money in exchange for a return on the investment at some future date. Derivative instruments are also traded in the financial markets as well, which are contracts that are determined based on an underlying asset’s performance.

When determining the guidelines of raising capital within a financial system, the project being funded and who funds them are decided upon by the planner, who can be a business manager. Thus, the financial system is typically organized through central planning, a market economy, or a combination of both.

A centrally planned economy is structured around a central authority, such as a government, which makes economic decisions regarding the manufacturing and distribution of products for a specific country. A market economy is when the pricing of goods and services is dictated by the aggregated decision of citizens and business owners, often resulting in the effects of supply and demand.

Financial markets operate within a government regulatory framework that filters the sort of transactions that can be conducted. Financial systems are heavily regulated due to their influence and facilitation capabilities to contribute to the growth of real assets.

Financial System Components
The financial system is composed of many components depending on the level. From a company’s perspective, its financial system includes procedures that follow its financial activities. It would include aspects such as finances, accounting, revenue, expenses, wages, and more.

From a regional standpoint, the financial system, as mentioned above, facilitates the exchange of funds between borrowers and lenders. Players on a regional level would include banks and other financial institutions such as clearinghouses.

On a global scale, the financial system includes the interactions between financial institutions, investors, central banks, government authorities, the World Bank, and more.

Example
An example of one player within the financial system is the Bank of Canada (BoC). The BoC promotes economic and financial welfare for Canadians by cultivating a financial system whereby banks, credit unions, financial markets, and other factors interact to ensure the economic landscape continues to operate effectively for its citizens. The BoC achieves its objectives through the following:

Providing central bank services such as liquidity and credit facilities: The Bank of Canada sources liquid funds to the financial system and is often known as the lender of last resort.
Developing and implementing national policy: The federal government introduces legislation to implement a new retail payments framework. The BoC would oversee the service with operational and financial requirements, ensuring regulations are maintained.
Oversees financial market infrastructures: The Canadian central bank conducts regulatory oversight and acts as the resolution authority for financial market infrastructures. They include payments systems and clearing and settlement systems.
Companies have several choices when it comes to setting up the business structure of their business. Companies can be either private or public. In each case, the framework for managing the capital structure is primarily the same but the financing options differ greatly.

Overall, the financial structure of a business is centered around debt and equity.

Debt capital is received from credit investors and paid back over time with some form of interest. Equity capital is raised from shareholders giving them ownership in the business for their investment and a return on their equity that can come in the form of market value gains or distributions. Each business has a different mix of debt and equity depending on its needs, expenses, and investor demand.

Some financial analysts believe that a financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.
However, Revell (1973), argues financial institutions and financial markets ‘are not the whole of financial system, and they are not even an essential feature of any financial system. I agree with Revell that the essential feature of any financial system consists of a number of financial inter-relationships between the persons and bodies that make up an economy, and the basic structure of a financial system has three features: (1) the extent of these financial inter-relationships, (2) the forms of the financial claims in which the inter-relationships are expressed and (3) the pattern of relationships between persons and bodies of different kinds, between independent ‘economic units’. Of course, no financial system can develop very far without the aid of specialised financial institutions and financial markets, but there are still primitive economies in which they play little or no part.
financial intermediaries—was the last stage in the long process of development of a modern financial system. They are called financial intermediaries because they greatly improve the efficiency of the financial system by coming between surplus units and deficit units, taking up the direct claims issued by the deficit units and issuing secondary or indirect claims which, in one way or another, are better suited than direct claims to the needs of surplus units.

NAME: NGADI GOD’S PROMISE CHICHOROBIM
REGNO:2018/242405
DEPT:ECONOMICS

War on Poverty

Throughout his tenure at the Bank, McNamara struggled to gain a clear understanding of the problems the developing countries were facing. He traveled extensively, and consulted with a wide group of development thinkers. He insisted on spending time in the field, visiting schools and population clinics, talking to farmers and extension workers. And he pushed the Bank to be more inquisitive about development issues. The Bank’s economic research capacity expanded under the leadership of Hollis Chenery. The collection and processing of data became an important institutional response to the quest for better understanding and more effective solutions.

From the beginning, McNamara tried to grasp the causes of economic underdevelopment. He knew that economic development was a multifaceted, multidimensional process, yet was always looking for some single key to the problem. This constant search for answers was reflected in the sequence of dominant themes in the work of the Bank during the McNamara period.

One issue that came to characterize the McNamara presidency was the problem of population growth. McNamara believed that rapid population growth was the greatest barrier to economic progress. The Bank’s first financing for family planning was in 1970 in Jamaica.

McNamara realized that economic growth without equitable distribution did little to change the worst economic problems. He turned to Hollis Chenery, head of the Bank’s economic research department, who focused on the problems related to the uneven income distribution in developing countries. Chenery’s Redistribution with Growth was published in 1974. McNamara presented the results of Chenery’s research at the 1972 UNCTAD Conference in Santiago, Chile. He stated that in the early stages of a country’s economic growth the poorest segment of society was liable to suffer the most. This was most evident in subsistence agrarian economies, and McNamara recommended measures such as land and tenancy reform and programs to increase the productivity of small farmers.

He also emphasized the need for projects supporting education. During his tenure lending for education increased threefold.

Rural development was the centerpiece of the second five-year plan, introduced in Nairobi in 1973. To raise the productivity of the rural poor, the Bank increased lending to agriculture by over 40 percent, and three out of every four projects included components to help smallholder farmers. The integrated rural development project became the prototype for this assistance. Rural development programs benefited millions of people, but still rural laborers and the landless benefited, at best indirectly. Institutional weaknesses, such as tenant and land reform, hindered progress, and progress was slowest where it was most needed – in Sub-Saharan Africa.

McNamara also launched an attack on urban poverty, where he again attempted to raise the productivity of the poor. Urban assistance programs aimed at increasing employment opportunities, improving services, sites-and-service projects, squatter settlement programs, small-scale enterprise financing, and plans for basic services in transport, electricity, water supply, and education.

McNamara also urged governments to meet the “basic human needs” of their populations. Despite annual growth, malnutrition was common, infant mortality high, life expectancy low, illiteracy widespread, unemployment growing, income distribution skewed, and the gap between the rich and poor countries was growing. He devised strategies to address specific needs: literacy, nutrition, reduction in infant mortality, and health. McNamara’s obsession to assist those in “absolute poverty” remained the backbone of his presidential tenure

The school of thought I aligned with in understanding the financial system is ;
Goldsmith
(1969) refers to this as the relationship between the
super structure (a set of financial institutions,
intermediaries and instruments) and financial
infrastructure (real wealth or national income). This ratio is known as financial inter-relation’s ratio (FIR).
The ratio differs markedly between countries, even
between highly developed countries with sophisticated
financial systems. Under normal circumstances a high
ratio should signify financial development. However, a
number of factors affect this ratio and it is only when
we understand these factors that one appreciates its
interpretation. The factors include
The extent of dependency on ‘external
finance’. The greater the extent to which
independent economic unit depend on funds
from outside to finance their capital formation
the larger the claims issued hence the increase
in the numerator of the ratio, therefore the
value of the ratio will increase. Conversely the
greater the reliance of the economic units on
their own internal savings, the smaller the
volume of claims issued. This implies a
decline in the value of the numerator of the
ratio and consequently a fall in the value of the
ratio.
Involvement of the financial institution in
transactions. The more the financial
institutions are involved in economic
transactions in the system the more claims are
issued hence the increase in the ratio.
If
greater economic activities take place without
financial intermediaries, less financial claims
will be issued thereby reducing the value FIR.Effect of inflation. The values of some
financial claims rise
with inflation. For
instance, ordinary shares have values which
rise with inflation. In such cases the value of
FIR will be high because the numerator of the
ratio will be high. The value of some other
claims tends to decline with inflation. For
instance the value of bonds falls with inflation.
In such cases the value of FIR will decline.
Generally however the value of physical assets
fully reflects the general price level

Name: Nwogwugwu Chisom Jennifer
Reg no: 2018/245129
Department: Economics
Eco 324 Assignment

Clearly discuss the school of thought you have aligned with in your understanding of the financial system.

The financial system plays a critical role in the economy. It enables the financial intermediation process which facilitates the flow of funds between savers and borrowers, thus ensuring that financial resources are allocated efficiently towards promoting economic growth and development. 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.
The basic structure of a financial system has three features;

1.) The extent of these interrelationships

2.) The forms of financial claims in which the inter relationship are expressed; and

3.) The pattern of relationship between persons and bodies of different kinds, between independent economic units.

A financial system is a super structure erected on the basis of wealth of an economic system.
Goldsmith (1969) refers to this as the relationship between the super structure ( a set of financial institutions, intermediaries and instruments and instruments) and financial infrastructure.

 The financial system is all about taking money from someone who has ample of it and making it to reach those who have the best opportunities to utilise it. This way the economic resources are allocated most efficiently and best returns are ensured.  Economic transactions are done by various organisations like banks, pension funds, organised exchanges and insurance companies and many more.

NAME : OGENYI, CHUKWUEBUKA FREDERICK
department : ECONOMICS
REG. NO : 2018/241864
COURSE : ECO 324 ( FINANCIAL MARKET AND INSTITUTIONS )

ASSIGNMENT :

Clearly discuss the school of thought you have aligned with in your understanding of the financial system.

ANSWERS :

Meaning of financial market :

The financial institution deals with finance-related services. These are gaining popularity day by day nowadays. The attractive rate of returns on the customer’s investment is very demanding. It also provides specialized services like hire purchase and leasing, etc. The simple and organized procedure of the institutions is becoming very complementary. It provide a broad range of business opportunities. There are different types of financial institutions. The goal of all the institutions is different and they provide different services and have different levels of risk associated with it. All the financial institutions have unique features and it works in a specialized way. The financial institution is gaining immense popularity in broadening the finance-related services in the country.

2. .Basic features of Financial institutions :

1. It provides a high rate of return to the customers who have invested in the financial institution.
2. It reduces the cost of financial services provided.
3. It is considered very important for the development of financial services in the country.
4. It also advises the customers on how to deal with the equity and the other securities bought and sold in the market.
5. It helps to improvise decision making because it follows a systematic approach to calculate all the risks and rewards.

Financial Institutions are referred to as a company that deals in all types of finance-related businesses. They are different from banks and play a very important part in broadening the financial services in the country. They provide a very attractive rate of returns to the customers in comparison to any government-centric banks. It deals in loans and advances and also specializes in some specified sectors like hire purchases and leasing etc.

Role of Financial Institutions :

The financial institution provides varied kinds of financial services to the customers.
The financial institution provides an attractive rate of return to the customers.
Promotes the direct investment by the customers and making them understand the risk associated with that as well.
It helps in forming the liquidity of the stock in case of an emergency in the financial markets.
Features of financial institutions
Perry Mehrling, a professor of International Political Economy at Pardee School of Global Studies, Boston University, discusses three theories of banking which are guiding bank regulation and research. These are credit creation theory, fractional reserve theory and debt intermediation theory.

1. It provides a high rate of return to the customers who have invested in the financial institution.
2. It reduces the cost of financial services provided.
It is considered very important for the development of financial services in the country.
3. It also advises the customers on how to deal with the equity and the other securities bought and sold in the market.
4. It helps to improvise decision making because it follows a systematic approach to calculate all the risks and rewards.

The reason why I agree.
How it work?
Financial institutions work like banks in some ways. They give loans and advances to the customers and also set a platform for the customers to do some investments. The customers get exciting offers and returns from them and therefore these institutions are gaining popularity. It also provide consultancy services to the clients on their investments related to the financial markets where the huge amount of risk is involved. Moreover, the customers who are handing over their hard-earned monies to such institutions should check for the history and origin of this financial institution.

Financial school of thought :

Financial school of thought is based on capital seeking process.It focuses on the search for seed capital and growth capital by the entrepreneur.Mobilization and utilization of venture capital is regarded vital to entrepreneurship development.

it is important to be educated on and understand that there are three main financial schools
thought:

1 : Financial Literacy:

What is financial literacy? There are many definitions out there on what financial literacy is, who it is for, and what it can accomplish for those who possess it. At its core, financial literacy is a skill that encompasses a wide spectrum of topics relating to personal finance, money management/budgeting, and common financial themes and terms (at least at a conceptual level). Financial literacy does not require that the individual be an “expert” on the subject matter, but rather they can comfortably navigate conversations around their finances. Financial illiteracy means that someone lacks skills to make better decisions around their finances. As a result, someone who lacks certain knowledge about products and services could potentially become a victim of poor spending and money management habits. These habits could lead to debt, worsening credit ratings, and even predatory lending.
How does one obtain financial literacy? There are many products, services, and tools out there that are marketed for improving financial literacy. For the do-it-yourselfer, there are numerous free videos and articles that are available online, as well as some fairly popular books on the subject such as Rich Dad Poor Dad, The Millionaire Next Door, and The Total Money Makeover.
For certain demographics such as employees in a 401(k) plan, or seniors approaching retirement, there may even be sponsored events and seminars where presenters may discuss very specific topics such as when to take Social Security or why they may want to purchase an annuity. While these sessions can be educational, it is important to note that they are often a thinly veiled sales presentation and should be attended with an attentive if not skeptical approach.

2. Financial Wellness :

What is financial wellness? As with financial literacy, a simple search may land you over a dozen or so definitions, however, at My Financial Coach, we feel that financial wellness is best defined as a person’s relationship with their finances and money.
To expand on this definition, we believe financial wellness also involves some “light” financial planning, as financial wellness is also a bit of financial awareness. Put another way, financial wellness is about the personal feelings towards finance and also a cursory snapshot of a person’s financial situation. The end goal is that financial literacy and wellness could work together and build up to the more analytical and optimization based financial planning approach. As a discipline, financial wellness seems more easily defined. However, as a product and service, there can be a wide variety of what constitutes financial wellness in comparison to financial planning.
Today, more and more employers are offering “financial wellness” programs to their employees. Just as health solutions, paid time off, and other benefits have allowed employers to retain talent, financial wellness is beginning to be looked at as a must have benefit. As a result, some companies may offer their version of financial wellness.

On the lower end, it could be a service that surveys employees about how they feel about their finances, their work benefits, debts, retirement, etc. The employee may even be supplied with some rudimentary steps forward as well as summary statements that might highlight their total benefits or “rewards”. These programs may provide some great education, but ultimately do not go as far as they could to motivate or encourage employees to make changes and progress towards their goals.
Fortunately, more employers are now looking to more comprehensive solutions to offer financial wellness, and so we have seen the rise of new firms such as Financial Finesse, Brightside, and SmartDollar. A common theme among many of these firms is that they often provide an online portal to take a temperature gauge of a person’s feelings towards their finances, as well as tools to monitor progress on aspects of their financial wellbeing, and often live representatives who can help provide additional guidance as needed.
Financial wellness as an employee benefit is a growing field, and so it is important to fully understand the costs associated with such programs, as well as how bare or comprehensive each service may be.

3. Financial Planning :

What is financial planning? Of all of the terms that we are looking to define today, financial planning is both at once easy to conceptualize and yet describable in hundreds of different ways depending on who you ask.
Financial planning is really a culmination of educating a client (financial literacy), assessing the psychology and health of a person’s relationship with money and their current situation (financial wellness), and then bringing it all together to present optimization and modeling (such as how to achieve retirement/get out debt/save for the individual. While financial planning may have variations of this definition, what is more commonly described is the financial plan. A financial plan is usually defined as a comprehensive prepared document that outlines an individual or couple’s financial goals presenting both the current snapshot as well as recommendations and projections for future success. A financial planner must take a client through a detailed process to ensure that they are providing the best advice tailored to their client. As a result, the financial plan itself may be very well the least complex feature of the planning process. What that process looks like however can vary widely depending on who you work with, and what credentials the advisor holds. The CFP Board, for example, has defined the financial planning process in six steps:

A. Establishing and defining the relationship with a client
B. Gathering client data
C. Analyzing and evaluating the client’s financial status
D. Developing and presenting financial planning recommendations
E. Implementing the financial planning recommendations
F. Monitoring. Though not all financial advisors are CERTIFIED FINANCIAL PLANNERS™, those that are, are expected to adhere to those planning steps and even many who are not, follow a fairly similar path.

While there are a number of different designations, titles, and methods used by advisors, the most important aspect of choosing an advisor should be in their trustworthiness, competence, and willingness to listen to their clients. In recent years the biggest “buzzword” has been about making sure your advisor is a fiduciary, and there is a good reason for this as a fiduciary’s primary function is to always act in good faith on behalf of their client.

Name: Aneke Hannah
Reg No: 2018/242453
Dept: Economics

Do you agree? Clearly discuss the school of thought you have aligned with in your understanding of the financial system.
Answer
A financial system is a very important factor in an economy which leads to economic growth and development. A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that allows the exchange of funds. It enables borrowers, lenders and investors to exchange funds for the sole aim of returns on their investment. Financial systems operate at national and global levels.
Financial institutions consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.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.

There are mainly four components of the financial system:
Financial markets – the market place where buyers and sellers interact with each other and participate in the trading of bonds, shares and other assets are called financial markets.
Financial assets – the products which are traded in the financial markets are called financial assets. Based on different requirements and credit seekers, the securities in the market also differ from each others.

Financial institutions – financial institutions are acting as a mediator between the investors and borrowers. They provide financial services for members and clients. It is also termed as financial intermediaries because they act as middlemen between the savers and borrowers. The investor’s savings are mobilized either directly or indirectly via the financial markets. They offer services to organisations who want to raise funds from markets and take care of financial assets (deposits, securities, loan, etc).

Financial services – services provided by assets management and liabilities management companies. They help to get the required funds and also make sure that they are efficiently invested. (eg. banking services, insurance services and investment services).

The market participants may include investment banks, stock exchanges, insurance companies, individual investors, and other institutions. It functions at corporate, national, and international levels and is governed by various rules dictating the eligibility of participants and the use of funds for different purposes.

NAME: MBA COLLINS CHIDUMEBI
REG NO.: 2018/242336
DEPARTMENT: ECONOMICS
COURSE: ECO 324 FINANCIAL MARKETS AND INSTITUTIONS
Discussion Quiz 1: Understanding the Financial System
Do you agree with Revell`s argument about what the financial system entails? Clearly discuss the school of thought you have aligned with in your understanding of the financial system.
I don`t agree with Revell`s argument about the financial system. Those markets and financial institutions he claims are `not even an essential part of the financial system`, are in my view, the lifeblood of the financial system. Without these markets and institutions they won`t be any inter-relationships to speak of in the first place.
The financial system is a juxtaposition of two words, financial and system.
A system is a set of things working together as parts of a mechanism or an inter-connecting network.
Financial means relating to finance, that is, the management of money.
The financial system in simple terms is an inter-connecting finance network.
Financial system is a network or structure of markets, institutions, regulatory bodies, agents, investors etc, as well as some principles, procedures, rules and regulations working together to facilitate the movement of funds from surplus units or lenders (mainly households) to deficit units or borrowers (mainly governments and business firms). Borrowers and lenders meet to exchange funds either for consumption or productive investment purposes as well as ensure returns on their financial assets.
The financial system acts as an intermediary and eases the flow of funds from surplus units to deficit units. The goal of the financial system is to efficiently allocate or distribute economic resources (e.g. funds, assets etc.) to promote economic growth and generate a return on investment for participants. They perform functions such as:
The provision of finances to cater for the borrowing needs of individuals, corporations, households and governments.
The provision of savings facilities
Risk management
The provision of an efficient and effective payment system

Name: UGWUEZE MARTHA CHIOMA
REG NO:2018/247847
DEPT: ECONOMICS
COURSE CODE:Eco 324
DATE:15/01/2022
Assignment
Understanding the financial system
Financial System?
A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the exchange of funds. Financial systems exist on firm, regional, and global levels. Borrowers, lenders, and investors exchange current funds to finance projects, either for consumption or productive investments, and to pursue a return on their financial assets. The financial system also includes sets of rules and practices that borrowers and lenders use to decide which projects get financed, who finances projects, and terms of financial deals.

TAKEAWAYS
A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds.
Financial systems can be organized using market principles, central planning, or a hybrid of both.
Institutions within a financial system include everything from banks to stock exchanges and government treasuries.
Understanding the Financial System
Like any other industry, the financial system can be organized using markets, central planning, or some mix of both.
Financial markets involve borrowers, lenders, and investors negotiating loans and other transactions. In these markets, the economic good traded on both sides is usually some form of money: current money (cash), claims on future money (credit), or claims on the future income potential or value of real assets (equity). These also include derivative instruments. Derivative instruments, such as commodity futures or stock options, are financial instruments that are dependent on an underlying real or financial asset’s performance. In financial markets, these are all traded among borrowers, lenders, and investors according to the normal laws of supply and demand.

In a centrally planned financial system (e.g., a single firm or a command economy), the financing of consumption and investment plans is not decided by counterparties in a transaction but directly by a manager or central planner. Which projects receive funds, whose projects receive funds, and who funds them is determined by the planner, whether that means a business manager or a party boss.

Most financial systems contain elements of both give-and-take markets and top-down central planning. For example, a business firm is a centrally planned financial system with respect to its internal financial decisions; however, it typically operates within a broader market interacting with external lenders and investors to carry out its long term plans.

At the same time, all modern financial markets operate within some kind of government regulatory framework that sets limits on what types of transactions are allowed. Financial systems are often strictly regulated because they directly influence decisions over real assets, economic performance, and consumer protection.