Financial Markets and Financial Institutions in 2021

Financial Markets Financial Institutions

Financial markets are made up of institutions such as banks, insurance companies, and stock exchanges, which provide a variety of financial services to individuals, companies, and governments.

Role of financial markets

Financial markets consist of institutions such as banks, insurance companies, and stock exchanges that provide a variety of financial services to individuals, companies, and governments.

The main services of financial institutions are:

In order to make savings possible, both individuals and companies save a part of their income. For families, the reason to save can be long-term, such as investing in retirement or life insurance, or short-term, such as saving for the holidays. Businesses can save a portion of their profits to provide a safety net in the event of a breakdown or to raise enough money to purchase new facilities and equipment. Savings can be deposited into bank accounts, where interest is earned or used to buy shares on the stock exchange. This is more dangerous because stocks can fall in value, but can achieve higher long-term returns in the form of dividend payments and capital gains as their value increases.

Loans to companies, individuals, and public banks make the most of their profits by lending the savings deposited with them at a higher interest rate than savers. Families can borrow money to buy a house (with a mortgage) or to buy a car. Small and large companies can take out loans to finance investments.

Six important roles in the financial markets

To make saving easier for families and families: Provides a safe place to save money and earn interest

2. Loans for businesses and individuals: the financial markets are an intermediary between savers and creditors

3. Allocate resources for productive use: Financial markets allocate capital when the risk-adjusted return is highest

For the final exchange of goods and services, such as contactless payment systems, foreign exchange, etc. To facilitate To facilitate

5. Money supply and commodity markets: In futures markets, agents can insure themselves against price volatility

6. Provide a stock market: enable companies to raise new shares to fund their capital investment and expansion

Important financial markets to understand

Money Market

Short-term mortgage market for businesses and households

It also includes interbank loans, which are commercial banks that provide each other with liquidity

Capital market

Market in which bonds such as stocks and bonds are issued in order to obtain medium to long-term financing for companies and the government


A market where currencies are traded (foreign exchange)

Translate »