The global financial system and its structure
He global financial system It is a complex network that connects markets, institutions, and countries, facilitating the global flow of capital.
This network ensures monetary stability, promotes economic development, and supports international trade through an organized and regulated structure.
Its structure is composed of banks, stock exchanges, and international organizations that regulate and supervise financial relations between nations.
Main components of the financial system
The financial system primarily includes the banks, stock exchanges and international organizations that coordinate global financial supervision.
Banks act as intermediaries between savers and productive sectors, offering loans, managing deposits, and facilitating payments.
Stock exchanges allow the trading of stocks and bonds, giving access to capital to companies and governments worldwide.
International organizations, such as the IMF and the World Bank, regulate the system and guarantee financial cooperation between countries.
Objectives of the global financial system
The global financial system seeks to promote macroeconomic stability and facilitate the efficient flow of resources between different economies.
Its main objective is to promote sustainable economic development and support growth by mobilizing capital globally.
Furthermore, it works to minimize financial risks, ensure monetary stability, and adapt to technological and geopolitical changes.
Functions and roles of banks
Banks are fundamental pillars of the financial system because of their ability to intermediate resources and manage key operations for the economy.
They work by connecting those with financial surpluses with those who need financing, facilitating the circulation of capital.
Furthermore, they fulfill essential functions that guarantee the stability and efficiency of the global financial system.
Financial intermediation and credit
Financial intermediation is the process by which banks channel individuals' savings into productive investments through loans.
Banks assess risks and grant loans that finance everything from small businesses to large corporate and state projects.
This role allows for maximizing the efficient use of available financial resources in the economy, fostering development.
Functions of central banks
Central banks control monetary policy to maintain price stability and prevent financial crises.
They also oversee the banking system, regulate the money supply, and act as lenders of last resort in emergency situations.
Their work contributes to confidence in the currency and the financial system, a crucial element for the global economy.
Deposit and payment management
Banks manage customer deposits, ensuring the safety of their funds and facilitating quick access to them.
They also manage payment systems, enabling efficient and secure transactions both domestically and internationally.
This function is vital for the proper functioning of commerce, investment, and the daily lives of individuals and businesses.
Stock exchanges and financial markets
Stock exchanges are platforms where financial instruments are traded, enabling investment and financing on a global scale.
These markets facilitate the efficient allocation of capital, connecting investors with companies and governments seeking financing.
Its operation is key to liquidity and transparency in international financial transactions.
Traded financial instruments
Stock exchanges primarily trade shares, which represent partial ownership in companies, and bonds, which are debt issued by public or private entities.
In addition, there are other instruments such as derivatives and exchange-traded funds that allow diversification and management of financial risks.
These instruments offer different levels of risk and return, adapting to the needs of diverse investors.
Global access to capital for businesses and governments
Financial markets provide an important avenue for companies and governments to raise funds on a large scale through the issuance of securities.
This global access allows for the financing of infrastructure projects, business growth, and public policies with investors from around the world.
The internationalization of capital improves the diversification of sources and contributes to sustainable economic development.
International organizations and regulation
The international organizations They play a crucial role in supervising and regulating the global financial system to ensure stability and cooperation.
These institutions work to coordinate economic policies, provide financial assistance, and facilitate cooperation between countries in a globalized environment.
Its role is fundamental to addressing challenges such as financial crises, economic inequalities, and technological evolution.
Functions of the IMF, World Bank and BIS
The International Monetary Fund (IMF) monitors macroeconomic stability and provides financial assistance to countries in economic difficulty.
The World Bank finances development projects in emerging economies, promoting sustainable growth and poverty reduction.
The Bank for International Settlements (BPI) facilitates cooperation between central banks and regulates international liquidity to maintain financial stability.
International agreements and multilateral organizations
The international agreements and multilateral organizations such as the World Trade Organization (WTO) promote the liberalization and stability of global trade.
These agreements establish rules and coordinate policies to ensure a balanced financial market and reduce systemic risks globally.
Multilateral cooperation strengthens trust between nations, promoting an environment conducive to global economic and financial development.
