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Added on  2020-05-16

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   Added on 2020-05-16

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qwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmrtyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwThe Financial System[Type the document subtitle][Pick the date]Desmond
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ContentsPart A...............................................................................................................................................2Question1.....................................................................................................................................2Question 2....................................................................................................................................3Part B...............................................................................................................................................5Question 1....................................................................................................................................5Question 2....................................................................................................................................6Question 3....................................................................................................................................7Question 4....................................................................................................................................7
Qwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnmqwertyuiopasdghjkl_2
Part AQuestion1 A financial system is the arrangement of all financial entities within a country or a society. Any financial system consists of regulatory authorities (such as Monetary Authority of Singapore), financial intermediaries (such as Commercial Banks) and various stakeholders such as depositors, investors, borrowers etc. A financial system also comprises of the instruments that are used in the process of transactions. For example, currency, securities, Treasury bonds etc are examples of instruments.[ CITATION Fra01 \l 1033 ][ CITATION Mon18 \l 1033 ]Figure 1 Financial System of Singapore : An OverviewSource: Prepared by Author. Adapted from [ CITATION Mon18 \l 1033 ][ CITATION Ewa14 \l 1033 ][ CITATION Fra01 \l 1033 ]Any Financial System primarily consists of Banking and Non Banking Financial companies as intermediaries as well as exchange markets as market places. For example, the Singapore CapitalMarkets serve as a market place for borrowers and lenders. These include the Stock Exchange, the Equity Capital Market exchange and Foreign Exchange markets.[ CITATION Mon18 \l 1033 ]Monetrary Authority of Singapore Banking Sectore.g Commercial BanksOther Financial Companiessuch as Non- Banking Financial Companies, Financial Advisories, Insurance Companies etc.Capital MarketsEg Singapore Stock ExchangeEquity Capital MarketsForeign Exchange Markets
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Figure 2 Role of Financial System. Adapted from [ CITATION Cla06 \l 1033 ][ CITATION Dou96 \l 1033 ]Financial intermediaries perform the function of monitoring and assignment of credit by accepting deposits from depositors and channeling them to borrowers. In this process, the risks associated with earning returns on assets are transferred to the banks and depositors do not necessarily have to bear them.[ CITATION Cla06 \l 1033 ]Financial instruments help in creation of liquidity and credit creation. Financial intermediaries are able to provide loans based on the deposits made by depositors.[ CITATION Cla06 \l 1033 ] In order to attract depositors, interest is offered to individual and institutional depositors. Financial markets also, mobilize credit amonst themselves.[ CITATION Joh15 \l 1033 ] For example, banks may borrow from whosesale markets in order to meet demand for credit in periods when there is not enough liquidity to provide credit during high growth periods. Similarly, stuructured financial instruments help package individual deposits into tradeable securities, thereby facilitating credit creation.Financial intermediaries collect assets in the form of currency , securities etc. High risk assets can be converted into lower risks assets due to the financial system. For example, a bond or a loan may be re-issued or re-secured. The maturity of the bond or the loan is extended. This is known as the transformation of the risks characteristic of an asset.[ CITATION Cla06 \l 1033 ]Creation of Liquidity and Risk SharingActing as channel of savings and investmentActing as a channel of Credit, thereby promoting risk sharingReducing Information AssymetryFinancial systems collect and disburse information in the marketsAdverse selction is reduced due to this functionTransformation of Risk Characteristics of AssetsRisk characteristics of assets such as maturity dates can be transformed by financial systems
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