Page 217 - FM Integrated WorkBook STUDENT 2018-19

Financial markets and the treasury function

Introduction

The financial system is an umbrella term covering the following:

 financial markets – e.g. stock exchanges, money markets

 financial institutions – e.g. banks, building societies, insurance companies
and pension funds

 financial securities – e.g. mortgages, bonds, bills and equity shares

The financial system does the following:

 channels funds from lenders to borrowers

 provides a mechanism for payments

 creates liquidity and money

 provides financial services such as insurance and pensions

 offers facilities to manage investment portfolios

Security is a generic term for a medium of investment, for example a
share, a corporate bond or a money market instrument. Many
securities are traded on a market.

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