Definition
The term financial system refers to a variety of organizations that facilitate the exchange and tracking of assets between investors, lenders, and borrowers. A financial system can range from the resources used by a single company to the global network of financial institutions.
Explanation
A financial system can be as simple as the process, procedures, and resources used by a single company to track and report their financial results. On a global level, a financial system is as complex as all of the financial institutions facilitating services between investors, lenders, and borrowers.
Examples of the financial institutions that are part of the global financial system are as follows:
Financial Markets: includes both the primary and secondary markets that facilitate the trading of securities, commodities, and derivatives between buyers and sellers.
Non-Bank Financial Institutions: includes organizations offering services such as risk pooling.
Banking Institutions: includes regulated businesses that accept deposits from customers and lend money to borrowers.
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