金融學(xué)-2-Overview-of-the-Financial-System-教學(xué)講解課件

Overview

oftheFinancialSystemChapterTwo:1Overview

oftheFinancialSysChapterPreviewWeexaminetheroleofthefinancialsysteminanadvancedeconomy.Westudytheeffectsoffinancialmarketsandinstitutionsontheeconomy,andlookattheirgeneralstructureandoperations.Topicsinclude:FunctionofFinancialMarketsStructureofFinancialMarketsInternationalizationofFinancialMarketsFunctionofFinancialIntermediariesFinancialIntermediariesRegulationoftheFinancialSystem2ChapterPreviewWeexaminethe2.1FunctionofFinancialMarketsAllowstransfersoffundsfrompersonorbusinesswithoutinvestmentopportunities(i.e.,“Lender-Savers”)toonewhohasthem(i.e.,“Borrower-Spenders”)Improveseconomicefficiency32.1FunctionofFinancialMarkFigure2.1FlowofFundsThroughtheFinancialSystem2.1.1FunctionofFinancialMarkets4Figure2.1FlowofFundsThro2.1.2FinancialMarketsFundsTransfereesLender-SaversHouseholdsBusinessfirmsGovernmentForeignersBorrower-SpendersBusinessfirmsGovernmentHouseholdsForeigners52.1.2FinancialMarketsFundsT2.1.3SegmentsofFinancialMarketsDirectFinanceBorrowersborrowdirectlyfromlendersinfinancialmarketsbysellingfinancialinstrumentswhichareclaimsontheborrower’sfutureincomeorassetsIndirectFinanceBorrowersborrowindirectlyfromlendersviafinancialintermediaries(establishedtosourcebothloanablefundsandloanopportunities)byissuingfinancialinstrumentswhichareclaimsontheborrower’sfutureincomeorassets62.1.3SegmentsofFinancialMa2.1.4ImportanceofFinancialMarketsFinancialmarketsarecriticalforproducinganefficientallocationofcapital,whichcontributestohigherproductionandefficiencyfortheoveralleconomy,aswellaseconomicsecurityforthecitizenryasawholeFinancialmarketsalsoimprovethelot(命運(yùn))ofindividualparticipantsbyprovidinginvestmentreturnstolender-savers,facilitiestoborrowers-spenders.72.1.4ImportanceofFinancial2.2.1ClassificationsofFinancialMarketsDebtMarketsShort-Term(maturity<1year)MoneyMarketLong-Term(maturity>1year)CapitalMarketEquityMarketsCommonStock82.2.1ClassificationsofFinan2.2.2CharacteristicsofDebtMarketsInstrumentsDebtinstrumentsBuyersofdebtinstrumentsaresuppliers(ofcapital)tothefirm,notownersofthefirmDebtinstrumentshaveafinitelifeormaturitydateAdvantageisthatthedebtinstrumentisacontractualpromisetopaywithlegalrightstoenforcerepaymentDisadvantageisthatreturn/profitisfixedorlimited92.2.2CharacteristicsofDebt2.2.3CharacteristicsofEquityMarketsInstrumentsEquityinstruments(commonstockismostprevalentequityinstrument)BuyersofcommonstockareownersofthefirmCommonstockhasnofinitelifeormaturitydateAdvantageofcommonstockispotentialhighincomesincereturnisnotfixedorlimitedDisadvantageisthatdebtpaymentsmustbemadebeforeequitypaymentscanbemade102.2.3CharacteristicsofEquitpreferredstock11preferredstock112.2.4CharacteristicsofFinancialMarketsDebtMarketsAlthoughlesswell-knownbytheaverageperson,debtmarketsinU.S.aremuchlargerintotaldollarsthanequitymarkets,duetogreaternumberofparticipantclasses(households,businesses,government,andforeigners)andsizeofindividualparticipants(businesses,andgovernment)122.2.4CharacteristicsofFinan2.2.5CharacteristicsofFinancialMarketsEquityMarketsAlthoughU.S.marketsarehighlyefficient,theworld’slargest,andmorefamiliartotheaverageperson,theyarefarsmallerthantheU.S.debtmarketslargelyduetothefactthattheonlyapplicableparticipantsarebusinesses132.2.5CharacteristicsofFinan2.2.6ClassificationsofFinancialMarketsPrimaryMarketNewsecurityissuessoldtoinitialbuyersInitialPublicOfferings首次公開(kāi)募股SecondaryMarketSecuritiespreviouslyissuedarebought

andsold142.2.6ClassificationsofFinan2.2.7ClassificationsofFinancialMarketsExchangesTradesconductedincentrallocations

(e.g.,NewYorkStockExchange)Over-the-CounterMarketsDealersatdifferentlocationsbuyandsellNYSEhomepage

nyse152.2.7ClassificationsofFinan2.3InternationalizationofFinancialMarketsInternationalBondMarketForeignbondsEurobonds(nowlargerthanU.S.corporatebondmarket)WorldStockMarketsU.S.stockmarketsarenolongeralwaysthelargest—atonepoint,Japan'swaslarger162.3InternationalizationofFi2.4FunctionofFinancial

Intermediaries(FIs)FinancialIntermediariesEngageinprocessofindirectfinanceMoreimportantsourceoffinancethansecuritiesmarketsNeededbecauseoftransactionscostsandasymmetricinformation172.4FunctionofFinancial

Int2.4.1FunctionofFinancialIntermediariesTransactionsCostsFinancialintermediariesmakeprofitsbyreducingtransactionscostsReducetransactionscostsbydevelopingexpertiseandtakingadvantageofeconomiesofscale182.4.1FunctionofFinancialIn2.4.2FunctionofFinancialIntermediariesAfinancialintermediary’slowtransactioncostsmeanthatitcanprovideitscustomerswithliquidityservices,servicesthatmakeiteasierforcustomerstoconducttransactionsBanksprovidedepositorswithcheckingaccounts(currentaccount往來(lái)帳戶(hù))thatenablethemtopaytheirbillseasilyDepositorscanearninterestoncheckingandsavingsaccountsandyetstillconvertthemintogoodsandserviceswhenevernecessary192.4.2FunctionofFinancialIn2.4.3FunctionofFinancialIntermediariesAnotherbenefitmadepossiblebythelowtransactioncostsoffinancialinstitutionstheycanhelpreducetheexposureofinvestorstorisk;Financialintermediariesdothisthroughtheprocessknownasrisksharing:theycreateandsellassetswithriskcharacteristicsthatpeoplearecomfortablewith,andtheintermediariesthenusethefundstheyacquirebysellingtheseassetstopurchaseotherassetsthatmayhavefarmorerisk.Thisprocessisreferredtoasassettransformation,becauseinasenseriskyassetsareturnedintosaferassetsforinvestors202.4.3FunctionofFinancialInFinancialintermediariesalsopromoterisksharingbyhelpingindividualstodiversifyandtherebylowertheamountofrisktowhichtheyareexposed.Diversification(多樣化)entailsinvestinginacollection(portfolio,資產(chǎn)組合)ofassetswhosereturnsdonotalwaysmovetogether,withtheresultthatoverallriskislowerthanforindividualassets.21Financialintermediariesalso2.4.4AsymmetricInformation:

AdverseSelectionandMoralHazardAdverseSelectionBeforethetransactionoccursAdverseselectioninfinancialmarketsoccurswhenthepotentialborrowerswhoarethemostlikelytoproduceanundesirable(adverse)outcome—thebadcreditrisks—aretheoneswhomostactivelyseekoutaloanandarethusmostlikelytobeselected.Becauseadverseselectionmakesitmorelikelythatloansmightbemadetobadcreditrisks,lendersmaydecidenottomakeanyloanseventhoughtherearegoodcreditrisksinthemarketplace.222.4.4AsymmetricInformation:2.4.5AsymmetricInformation:

AdverseSelectionandMoralHazardMoralHazardAftertransactionoccursHazardthatborrowerhasincentivestoengageinundesirable(immoral)activitiesmakingitmorelikelythatwon'tpayloanback232.4.5AsymmetricInformation:2.4.7FinancialIntermediaries242.4.7FinancialIntermediaries2.4.8SizeofFinancialIntermediaries252.4.8SizeofFinancialInterm2.4.9TypesofFinancialIntermediariesDepositoryInstitutions(Banks)CommercialbanksSavings&LoanAssociations(S&Ls)MutualSavingsBanks ContractualSavingsInstitutionsLifeinsurancecompaniesFire&casualtyinsurancecompaniesPensionfunds,governmentretirementfunds262.4.9TypesofFinancialInter2.4.10TypesofFinancialIntermediariesInvestmentIntermediariesFinancecompaniesMutualfundsMoneymarketmutualfunds272.4.10TypesofFinancialInte2.4.11DepositoryInstitutions(Banks)CommercialbanksRaisefundsprimarilybyissuingcheckable,savings,andtimedepositswhichareusedtomakecommercial,consumerandmortgageloansCollectively,thesebankscomprisethelargestfinancialintermediaryandhavethemostdiversifiedassetportfolios282.4.11DepositoryInstitutions2.4.12DepositoryInstitutions(Banks)S&Ls,MutualSavingsBanksandCreditUnionsRaisefundsprimarilybyissuingsavings,time,andcheckabledepositswhicharemostoftenusedtomakemortgageandconsumerloans,withcommercialloansalsobecomingmoreprevalentatS&LsandMutualSavingsBanksMutualsavingsbanksandcreditunionsissuedepositsassharesandareownedcollectivelybytheirdepositors,mostofwhichatcreditunionsbelongtoaparticulargroup,e.g.,acompany’sworkers292.4.12DepositoryInstitutions2.4.13ContractualSavings

Institutions(CSIs)AllCSIsacquirefundsfromclientsatperiodicintervalsonacontractualbasisandhavefairlypredictablefuturepayoutrequirements.LifeInsuranceCompaniesreceivefundsfrompolicypremiums,caninvestinlessliquidcorporatesecuritiesandmortgages,

FireandCasualtyInsuranceCompaniesreceivefundsfrompolicypremiums,mustinvestmostinliquidgovernmentandcorporatesecurities,302.4.13ContractualSavings

In2.4.14ContractualSavings

Institutions(CSIs)AllCSIsacquirefundsfromclientsatperiodicintervalsonacontractualbasisandhavefairlypredictablefuturepayoutrequirements.PensionandGovernmentRetirementFundshostedbycorporationsandstateandlocalgovernmentsacquirefundsthroughemployeeandemployerpayrollcontributions,investincorporatesecurities,andprovideretirementincomeviaannuities312.4.14ContractualSavings

In2.4.15InvestmentIntermediariesFinanceCompaniessellcommercialpaper(ashort-termdebtinstrument)andissuebondsandstockstoraisefundstolendtoconsumerstobuydurablegoods,andtosmallbusinessesforoperationsMutualFundsacquirefundsbysellingsharestoindividualinvestors(manyofwhosesharesareheldinretirementaccounts)andusetheproceedstopurchaselarge,diversifiedportfoliosofstocksandbonds322.4.15InvestmentIntermediari2.4.16InvestmentIntermediariesMoneyMarket

MutualFundsacquirefundsbysellingcheckabledeposit-likesharestoindividualinvestorsandusetheproceedstopurchasehighlyliquidandsafeshort-termmoneymarketinstruments332.4.16InvestmentIntermediari2.5RegulatoryAgencies342.5RegulatoryAgencies3435352.5.1RegulationofFinancialMarketsMainReasonsforRegulationIncreaseInformationtoInvestorsEnsuretheSoundnessofFinancialIntermediaries362.5.1RegulationofFinancialSEChomepage

2.5.2RegulationReason:

IncreaseInvestorInformationAsymmetricinformationinfinancialmarketsmeansthatinvestorsmaybesubjecttoadverseselectionandmoralhazardproblemsthatmayhindertheefficientoperationoffinancialmarketsandmayalsokeepinvestorsawayfromfinancialmarketsTheSecuritiesandExchangeCommission(SEC)requirescorporationsissuingsecuritiestodisclosecertaininformationabouttheirsales,assets,andearningstothepublicandrestrictstradingbythelargeststockholders(knownasinsiders)inthecorporation37SEChomepage

2.5.2Reg2.5.4RegulationReason:EnsureSoundness

ofFinancialIntermediariesBecauseprovidersoffundstofinancialintermediariesmaynotbeabletoassess

whethertheinstitutionsholdingtheirfundsaresoundornot,iftheyhavedoubtsabouttheoverallhealthoffinancialintermediaries,theymaywanttopulltheirfundsoutofbothsoundandunsoundinstitutions,withthepossibleoutcomeofafinancialpanicthatproduceslargelossesforthepublicandcausesseriousdamagetotheeconomy382.5.4RegulationReason:Ensur2.5.5RegulationReason:EnsureSoundness

ofFinancialIntermediaries(cont.)Toprotectthepublicandtheeconomyfromfinancialpanics(金融恐慌),thegovernmenthasimplementedsixtypesofregulations:RestrictionsonEntryDisclosureRestrictionsonAssetsandActivitiesDepositInsuranceLimitsonCompetitionRestrictionsonInterestRates392.5.5RegulationReason:Ensur2.5.6Regulation:RestrictiononEntryRestrictionsonEntryRegulatorshavecreatedverytightregulationsastowhoisallowedtosetupafinancialintermediaryIndividualsorgroupsthatwanttoestablisha

financialintermediary,suchasabankoraninsurancecompany,mustobtainacharterfromthestateorthefederalgovernmentOnlyiftheyareupstanding(正直的)citizenswithimpeccablecredentials(無(wú)犯罪記錄證書(shū))andalargeamountofinitialfundswilltheybegivenacharter.402.5.6Regulation:Restriction祖國(guó)／我對(duì)你意見(jiàn)太多／請(qǐng)不要怪我／因?yàn)槟愕某舐碇易鎳?guó)／我對(duì)你意見(jiàn)太多／請(qǐng)不要怪我／因?yàn)槲沂悄阒覍?shí)的兒子／你可以任意折磨我祖國(guó)／我對(duì)你意見(jiàn)太多／請(qǐng)不要怪我／因?yàn)槲依斫饽悖憧梢圆焕斫馕易鎳?guó)／我對(duì)你意見(jiàn)太多／請(qǐng)不要怪我／我愿意你十全十美／因?yàn)槟憔褪俏易鎳?guó)／我對(duì)你意見(jiàn)太多／請(qǐng)不要怪我／因?yàn)槲也荒芨淖儯揖褪俏?1祖國(guó)／我對(duì)你意見(jiàn)太多／請(qǐng)不要怪我／因?yàn)槟愕某舐碇?2.5.7Regulation:DisclosureDisclosureRequirementsTherearestringentreportingrequirementsforfinancialintermediariesTheirbookkeepingmustfollowcertainstrictprinciples,Theirbooksaresubjecttoperiodicinspection,Theymustmakecertaininformationavailableto

thepublic.422.5.7Regulation:DisclosureDi2.5.8Regulation:RestrictiononAssetsandActivitiesTherearerestrictionsonwhatfinancialintermediariesareallowedtodoandwhatassetstheycanholdBeforeyouputyourfundsintoabankorsomeothersuchinstitution,youwouldwanttoknowthatyourfundsaresafeandthatthebankorotherfinancialintermediarywillbeabletomeetitsobligationstoyou432.5.8Regulation:Restriction2.5.9Regulation:RestrictiononAssetsandActivitiesOnewayofdoingthisistorestrictthefinancialintermediaryfromengagingincertainriskyactivitiesAnotherwayistorestrictfinancialintermediariesfromholdingcertainriskyassets,oratleastfromholdingagreaterquantityoftheseriskyassetsthanisprudent442.5.9Regulation:Restriction2.5.10Regulation:DepositInsuranceThegovernmentcaninsurepeopleprovidingfundstoafinancialintermediaryfromanyfinanciallossifthefinancialintermediaryshouldfailTheFederalDepositInsuranceCorporation(FDIC),insureseachdepositoratacommercialbankormutualsavingsbankuptoalossof$100,000peraccount452.5.10Regulation:DepositIns2.5.11Regulation:DepositInsuranceSimilargovernmentagenciesexistforother

depositoryinstitutions:TheSavingsAssociationInsuranceFund(partoftheFDIC)providesdepositinsuranceforsavingsandloanassociations,andtheNationalCreditUnionShareInsuranceFund(NCUSIF)doesthesameforcreditunions462.5.11Regulation:DepositIns2.5.12Regulation:PastLimits

onCompetitionAlthoughtheevidencethatunbridled(無(wú)約束的)competitionamongfinancialintermediariespromotesfailuresthatwillharmthepublicisextremelyweak,ithasnotstoppedthestateandfederalgovernmentsfromimposingmanyrestrictiveregulations;Inthepast,bankswerenotallowedtoopenupbranchesinotherstates,andinsomestatesbankswererestrictedfromopeningadditionallocations.472.5.12Regulation:PastLimits2.5.13Regulation:PastRestrictions

onInterestRatesCompetitionhasalsobeeninhibited(被禁止)byregulationsthatimposerestrictionsoninterestratesthatcanbepaidondepositsTheseregulationswereinstitutedbecauseofthewidespreadbeliefthatunrestrictedinterest-ratecompetitionhelpedencouragebankfailuresduringtheGreatDepressionLaterevidencedoesnotseemtosupportthisview,andrestrictionsoninterestrateshavebeenabolished482.5.13Regulation:PastRestri2.5.15FinancialRegulationAbroadThosecountrieswithsimilareconomicsystemsalsoimplementfinancialregulationconsistentwiththeU.S.model:Japan,Canada,andWesternEuropeFinancialreportingforcorporationsisrequiredFinancialintermediariesareheavilyregulatedHowever,U.S.banksaremoreregulatedalongdimensionsofbranchingandservicesthantheirforeigncounterparts.492.5.15FinancialRegulationAbChapterSummaryThebasicfunctionoffinancialmarketsistochannelfundsfromsaverswhohaveanexcessoffundstospenderswhohaveashortageoffunds.Financialmarketscanbeclassifiedasdebtandequitymarkets,primaryandsecondarymarkets,exchangesandover-the-countermarkets,andmoneyandcapitalmarkets.50ChapterSummaryThebasicfunctChapterSummary(cont.)Animportanttrendinrecentyearsisthegrowinginternationalizationoffinancialmarkets.Eurobonds,whicharedenominatedinacurrencyotherthanthatofthecountryinwhichtheyaresold,arenowthedominantsecurityintheinternationalbondmarketandhavesurpassedU.S.corporatebondsasasourceofnewfunds.Eurodollars,whichareU.S.dollarsdepositedinforeignbanks,areanimportantsourceoffundsforAmericanbanks.FunctionofFinancialIntermediaries:Weexaminedtherolesofintermediariesinreducingtransactioncosts,sharingrisk,andreducinginformationproblems.51ChapterSummary(cont.)AnimpoFinancialintermediariesplayanimportantroleinthefinancialsystem,becausetheyreducetransactioncosts,allowrisksharing,andsolveproblemscreatedbyadverseselectionandmoralhazard.Asaresult,financialintermediariesallowsmallsaversandborrowerstobenefitfromtheexistenceoffinancialmarkets,therebyincreasingtheefficiencyoftheeconomy.52FinancialintermediariesplayTheprincipalfinancialintermediariesfallintothreecategories:(a)banks—commercialbanks,savingsandloanassociations,mutualsavingsbanks,andcreditunions;(b)contractualsavingsinstitutions—lifeinsurancecompanies,fireandcasualtyinsurancecompanies,andpensionfunds;and(c)investmentintermediaries—financecompanies,mutualfunds,andmoneymarketmutualfunds53TheprincipalfinancialintermThegovernmentregulatesfinancialmarketsandfinancialintermediariesfortwomainreasons:toincreasetheinformationavailabletoinvestorsandtoensurethesoundnessofthefinancialsystem.Regulationsincluderequiringdisclosureofinformationtothepublic,restrictionsonwhocansetupafinancialintermediary,restrictionsonwhatassetsfinancialintermediariescanhold,theprovisionofdepositinsurance,reserverequirements,andthesettingofmaximuminterestratesthatcanbepaidoncheckingaccountsandsavingsdeposits.54Thegovernmentregulatesfinan55555656Overview

oftheFinancialSystemChapterTwo:57Overview

oftheFinancialSysChapterPreviewWeexaminetheroleofthefinancialsysteminanadvancedeconomy.Westudytheeffectsoffinancialmarketsandinstitutionsontheeconomy,andlookattheirgeneralstructureandoperations.Topicsinclude:FunctionofFinancialMarketsStructureofFinancialMarketsInternationalizationofFinancialMarketsFunctionofFinancialIntermediariesFinancialIntermediariesRegulationoftheFinancialSystem58ChapterPreviewWeexaminethe2.1FunctionofFinancialMarketsAllowstransfersoffundsfrompersonorbusinesswithoutinvestmentopportunities(i.e.,“Lender-Savers”)toonewhohasthem(i.e.,“Borrower-Spenders”)Improveseconomicefficiency592.1FunctionofFinancialMarkFigure2.1FlowofFundsThroughtheFinancialSystem2.1.1FunctionofFinancialMarkets60Figure2.1FlowofFundsThro2.1.2FinancialMarketsFundsTransfereesLender-SaversHouseholdsBusinessfirmsGovernmentForeignersBorrower-SpendersBusinessfirmsGovernmentHouseholdsForeigners612.1.2FinancialMarketsFundsT2.1.3SegmentsofFinancialMarketsDirectFinanceBorrowersborrowdirectlyfromlendersinfinancialmarketsbysellingfinancialinstrumentswhichareclaimsontheborrower’sfutureincomeorassetsIndirectFinanceBorrowersborrowindirectlyfromlendersviafinancialintermediaries(establishedtosourcebothloanablefundsandloanopportunities)byissuingfinancialinstrumentswhichareclaimsontheborrower’sfutureincomeorassets622.1.3SegmentsofFinancialMa2.1.4ImportanceofFinancialMarketsFinancialmarketsarecriticalforproducinganefficientallocationofcapital,whichcontributestohigherproductionandefficiencyfortheoveralleconomy,aswellaseconomicsecurityforthecitizenryasawholeFinancialmarketsalsoimprovethelot(命運(yùn))ofindividualparticipantsbyprovidinginvestmentreturnstolender-savers,facilitiestoborrowers-spenders.632.1.4ImportanceofFinancial2.2.1ClassificationsofFinancialMarketsDebtMarketsShort-Term(maturity<1year)MoneyMarketLong-Term(maturity>1year)CapitalMarketEquityMarketsCommonStock642.2.1ClassificationsofFinan2.2.2CharacteristicsofDebtMarketsInstrumentsDebtinstrumentsBuyersofdebtinstrumentsaresuppliers(ofcapital)tothefirm,notownersofthefirmDebtinstrumentshaveafinitelifeormaturitydateAdvantageisthatthedebtinstrumentisacontractualpromisetopaywithlegalrightstoenforcerepaymentDisadvantageisthatreturn/profitisfixedorlimited652.2.2CharacteristicsofDebt2.2.3CharacteristicsofEquityMarketsInstrumentsEquityinstruments(commonstockismostprevalentequityinstrument)BuyersofcommonstockareownersofthefirmCommonstockhasnofinitelifeormaturitydateAdvantageofcommonstockispotentialhighincomesincereturnisnotfixedorlimitedDisadvantageisthatdebtpaymentsmustbemadebeforeequitypaymentscanbemade662.2.3CharacteristicsofEquitpreferredstock67preferredstock112.2.4CharacteristicsofFinancialMarketsDebtMarketsAlthoughlesswell-knownbytheaverageperson,debtmarketsinU.S.aremuchlargerintotaldollarsthanequitymarkets,duetogreaternumberofparticipantclasses(households,businesses,government,andforeigners)andsizeofindividualparticipants(businesses,andgovernment)682.2.4CharacteristicsofFinan2.2.5CharacteristicsofFinancialMarketsEquityMarketsAlthoughU.S.marketsarehighlyefficient,theworld’slargest,andmorefamiliartotheaverageperson,theyarefarsmallerthantheU.S.debtmarketslargelyduetothefactthattheonlyapplicableparticipantsarebusinesses692.2.5CharacteristicsofFinan2.2.6ClassificationsofFinancialMarketsPrimaryMarketNewsecurityissuessoldtoinitialbuyersInitialPublicOfferings首次公開(kāi)募股SecondaryMarketSecuritiespreviouslyissuedarebought

andsold702.2.6ClassificationsofFinan2.2.7ClassificationsofFinancialMarketsExchangesTradesconductedincentrallocations

(e.g.,NewYorkStockExchange)Over-the-CounterMarketsDealersatdifferentlocationsbuyandsellNYSEhomepage

nyse712.2.7ClassificationsofFinan2.3InternationalizationofFinancialMarketsInternationalBondMarketForeignbondsEurobonds(nowlargerthanU.S.corporatebondmarket)WorldStockMarketsU.S.stockmarketsarenolongeralwaysthelargest—atonepoint,Japan'swaslarger722.3InternationalizationofFi2.4FunctionofFinancial

Intermediaries(FIs)FinancialIntermediariesEngageinprocessofindirectfinanceMoreimportantsourceoffinancethansecuritiesmarketsNeededbecauseoftransactionscostsandasymmetricinformation732.4FunctionofFinancial

Int2.4.1FunctionofFinancialIntermediariesTransactionsCostsFinancialintermediariesmakeprofitsbyreducingtransactionscostsReducetransactionscostsbydevelopingexpertiseandtakingadvantageofeconomiesofscale742.4.1FunctionofFinancialIn2.4.2FunctionofFinancialIntermediariesAfinancialintermediary’slowtransactioncostsmeanthatitcanprovideitscustomerswithliquidityservices,servicesthatmakeiteasierforcustomerstoconducttransactionsBanksprovidedepositorswithcheckingaccounts(currentaccount往來(lái)帳戶(hù))thatenablethemtopaytheirbillseasilyDepositorscanearninterestoncheckingandsavingsaccountsandyetstillconvertthemintogoodsandserviceswhenevernecessary752.4.2FunctionofFinancialIn2.4.3FunctionofFinancialIntermediariesAnotherbenefitmadepossiblebythelowtransactioncostsoffinancialinstitutionstheycanhelpreducetheexposureofinvestorstorisk;Financialintermediariesdothisthroughtheprocessknownasrisksharing:theycreateandsellassetswithriskcharacteristicsthatpeoplearecomfortablewith,andtheintermediariesthenusethefundstheyacquirebysellingtheseassetstopurchaseotherassetsthatmayhavefarmorerisk.Thisprocessisreferredtoasassettransformation,becauseinasenseriskyassetsareturnedintosaferassetsforinvestors762.4.3FunctionofFinancialInFinancialintermediariesalsopromoterisksharingbyhelpingindividualstodiversifyandtherebylowertheamountofrisktowhichtheyareexposed.Diversification(多樣化)entailsinvestinginacollection(portfolio,資產(chǎn)組合)ofassetswhosereturnsdonotalwaysmovetogether,withtheresultthatoverallriskislowerthanforindividualassets.77Financialintermediariesalso2.4.4AsymmetricInformation:

AdverseSelectionandMoralHazardAdverseSelectionBeforethetransactionoccursAdverseselectioninfinancialmarketsoccurswhenthepotentialborrowerswhoarethemostlikelytoproduceanundesirable(adverse)outcome—thebadcreditrisks—aretheoneswhomostactivelyseekoutaloanandarethusmostlikelytobeselected.Becauseadverseselectionmakesitmorelikelythatloansmightbemadetobadcreditrisks,lendersmaydecidenottomakeanyloanseventhoughtherearegoodcreditrisksinthemarketplace.782.4.4AsymmetricInformation:2.4.5AsymmetricInformation:

AdverseSelectionandMoralHazardMoralHazardAftertransactionoccursHazardthatborrowerhasincentivestoengageinundesirable(immoral)activitiesmakingitmorelikelythatwon'tpayloanback792.4.5AsymmetricInformation:2.4.7FinancialIntermediaries802.4.7FinancialIntermediaries2.4.8SizeofFinancialIntermediaries812.4.8SizeofFinancialInterm2.4.9TypesofFinancialIntermediariesDepositoryInstitutions(Banks)CommercialbanksSavings&LoanAssociations(S&Ls)MutualSavingsBanks ContractualSavingsInstitutionsLifeinsurancecompaniesFire&casualtyinsurancecompaniesPensionfunds,governmentretirementfunds822.4.9TypesofFinancialInter2.4.10TypesofFinancialIntermediariesInvestmentIntermediariesFinancecompaniesMutualfundsMoneymarketmutualfunds832.4.10TypesofFinan