Global_Financial_System_ ppt Overview.pptx

Global system

1. Overview of the Global Financial System Key Components, Functions, and Challenges

2. Introduction The global financial system facilitates the flow of capital across borders. It supports international trade, investment, and economic development. Key components include institutions, markets, instruments, and regulations.

3. Key Components: Financial Institutions Central Banks: Regulate money supply and maintain stability (e.g., Federal Reserve). Commercial Banks: Accept deposits, provide loans, and payment services (e.g., JPMorgan Chase). Investment Banks: Capital raising and advisory services (e.g., Goldman Sachs). Non-Banking Financial Companies: Provide financial services without accepting deposits (e.g., HDFC Ltd). Insurance Companies: Offer risk protection (e.g., Allianz). Sovereign Wealth Funds: State-owned investment funds (e.g., Norway’s Pension Fund).

4. Key Components: Financial Markets Equity Markets: Trade shares of companies (e.g., NYSE, NASDAQ). Bond Markets: Trade debt securities like government and corporate bonds. Foreign Exchange Markets: Trade currencies ($6 trillion daily volume). Commodity Markets: Trade raw materials like oil, gold, and grains.

5. Key Components: Financial Instruments Equity (Shares): Ownership interest in a company. Debt Instruments (Bonds): Loans to corporations or governments. Derivatives: Contracts derived from underlying assets (e.g., options, futures). Commodities: Trade of physical goods like metals and grains. Mutual Funds and ETFs: Pooled investment vehicles for diversification.

6. Key Components: Financial Regulations International Monetary Fund (IMF): Financial assistance and policy advice. World Bank: Focus on global poverty reduction and development projects. Basel Committee: Sets global banking standards (e.g., Basel III). Financial Stability Board (FSB): Promotes financial system stability.

7. Global Payment Systems SWIFT: Secure messaging network for cross-border transactions. CHIPS: Settles high-value international payments in USD. TARGET2: Real-time payments in euros for EU countries.

8. Functions of the Global Financial System Capital Formation and Investment: Mobilize savings for productive uses. Risk Management and Hedging: Use derivatives and insurance to manage risks. Liquidity and Price Discovery: Enable quick asset trades and price determination. Efficient Resource Allocation: Direct capital to productive sectors. Promoting Economic Growth: Support innovation and infrastructure development.

9. Challenges Facing the Global Financial System Systemic Risk: Interconnectedness leading to financial crises. Regulatory Challenges: Lack of uniform global regulations. Geopolitical Risks: Political instability and trade tensions. Technological Disruption: Rise of digital currencies and cybersecurity risks.