1、Chapter 2Financial systemThe teaching purpose of this chapterThe student will learn about the functions of the financial systemthe participants in the financial systemthe financial intermediaries and their respective functionsCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall2Financial
2、 systemThe composition of Financial system:Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall3Everyone has some contact with the financial system.We are all aware of financial institutions like banks,building societies,and insurance companies,each providing in its own way for some of o
3、ur everyday needs.For example,payments facilities through banks,convenient savings and access to home loans from building societies,and car,house,or life insurance.be aware of:了解 Other financial institutions,such as investment trusts,venture capital companies,and discount houses-to name only a few-a
4、re less well-known and carry out more specialized functions.investment trusts：信托投资公司venture capital companies：风险投资公司Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall4Most people also know something about financial markets,like the Stock Exchange where securities are bought and sold,th
5、ough comparatively few are directly concerned with their activities.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall5All these financial institutions and markets fit together into a network which comprises the financial system.There are other important but less familiar financial mar
6、kets,like the money market in which large sums are borrowed and lent for very short periods,and the foreign exchange market in which dealings in foreign currencies take place.Major functions:channel household savings to corporate sector allocate investment funds among firmsAllow smooth consumption b
7、y households and expenditures by firmsenable households and firms to share risksCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall6The participants in the financial system:Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall7savers;investors and other borrowers;financial in
8、termediaries;brokers and advisers;regulatorsSavers and investors：The end-users of the financial system are the savers,whose current spending is less than their income and who have money available to lend to others;Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall8and the investors,who
9、 want to borrow money in order to buy capital goods or increase the scale of their business,as well as other borrowers who want to spend more than their incomes.In between lie the financial institutions and markets.Ensuring that money flows smoothly from savers through institutions and/or markets to
10、 investors is an important function of the financial system.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall9It is the ultimate savers and ultimate borrowers who are,as it were,on the periphery of the financial system,whose needs it serves and who provide the rationale for its existe
11、nce.Periphery：外围，边缘；on the periphery of：在 的外围，边缘Rationale：（决定、信念、计划的）基本原理，理论基础Financial intermediaries are institutions which attempt to serve the needs of both lenders and borrowers.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall10Savers wish to hold their savings-for example bank
12、deposits-frequently differ from the ways in which borrowers would like to obtain their funds-for example long-term loans.Financial intermediaries are often able to reconcile these divergent requirements.In addition they provide a variety of specific services which savers and borrowers value in their
13、 own right.in their own right=based on their own needsExamples are money transmission facilities and advice on corporate finance in the case of banks,life assurance cover in the case of insurance companies.corporate finance（公司理财）:Financial decisions regarding fund raising,business expansion,mergers
14、and acquisitions,financial planning,cash management and so on.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall11brokers and advisers：In a competitive financial system(like that in Britain)institutions compete for business in broadly construed“markets”for saving and lending business,t
15、hey seek to attract funds from savers and supply funds to borrowers.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall12But there are also organized markets which provide facilities for economic agents to borrow and lend or to buy or sell securities.The main role of brokers and adviser
16、s is to help these organized markets to function properly.1)Brokers and advisers provide information to participants in the markets,and attempt to ensure that lenders and borrowers,buyers and sellers,have the facts they need to strike a fair bargain.Copyright 2010 Pearson Education,Inc.Publishing as
17、 Prentice Hall132)They also perform the vital task of putting actual lenders and borrowers in touch with each other.By obviating the need for individual borrowers or lenders to search out counterparts themselves,the brokers substantially reduce transactions costs.For example,the money-market broker
18、brings together the lender who has money to spare with the borrower who wants it temporarily.=In most organized markets there are also market makers,professional dealers whose function is to ensure that lenders and borrowers are always able to find a counterpart for their deals.market makers：做市商Copy
19、right 2010 Pearson Education,Inc.Publishing as Prentice Hall14Regulators：Historical experience in many countries has shown that where large sums of money are involved in financial markets there is a considerable danger of fraud or other malpractices.Copyright 2010 Pearson Education,Inc.Publishing as
20、 Prentice Hall15Most countries therefore need regulators,who control their financial institutions and regulate dealings in securities markets with the objects of ensuring that the financial institutions are able to honor their commitments,that people have access to relevant information before they e
21、nter into contracts,and that dealing in securities is fair.These rules come under the general heading of prudential regulations.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall16But more general economic controls are also needed.Copyright 2010 Pearson Education,Inc.Publishing as Pren
22、tice Hall17反义词：Expansion(contractions)Boom(slump)Compel:force；Curb:control or limit；expansion of credit:信贷膨胀 Sharp expansions or contractions of activity in financial markets are often associated with booms and slumps in the economy at large,and the intimate connection between money,credit and econo
23、mic stability compels countries to curb the expansion of credit in some periods and to stimulate it in others.Economic controls may also be required to guard against monopolistic structures or practices in the financial system.Financial instrumentsThe financial system deals in financial instruments.
24、deal in=trade in 经营These are mostly more or less sophisticated forms of IOUs or claims-they are an asset of one party and a liability of another.In most instances the former party is entitled to repayment at a specified time,and receives a promise of some interest,share of profits,or other service a
25、s compensation for the loan.be entitled to sth.=to have the right to demand sth.Eg:Every citizen is entitled to equal protection under the law.每个公民都有权依法受同等保护。as compensation for sth.作为的补偿Eg:He received one years salary as compensation for loss of office.Copyright 2010 Pearson Education,Inc.Publishin
26、g as Prentice Hall18For example,deposits are liabilities of banks or other institutions,are generally repayable on demand or in the fairly near future,and usually bear interest.Loans are often liabilities of ultimate borrowers,are usually repayable by the end of some predetermined period,and carry a
27、n obligation to pay interest.And ordinary shares are liabilities of firms,which confer on their owners the right to a share of the profits earned but,in contrast with loans,do not have to be repaid.repay on demand:随时偿还bear interest=carry on obligation to pay interestCommon stock(US)=ordinary shares(
28、GB)；Confer=entitleCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall19As well as claims there are also derivative instruments-contracts relating to the prices of securities,interest rates or foreign exchange rates at some date in the future.as well as=in addition toCopyright 2010 Pears
29、on Education,Inc.Publishing as Prentice Hall20Although a wide variety of financial instruments exists,differing significantly in detail,the major distinctions rest on three characteristics-risk,liquidity,and real-value certainty(that is,their susceptibility to loss of value due to inflation).suscept
30、ibility:the ability to be influenced 敏感度Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall21Risk：A distinction can be drawn between on the one hand deposits and loans,which are generally made only if repayment of capital and interest is confidently expected,and on the other company sha
31、res,which are claims to a share of the surplus income after prior claims have been met.A distinction can be drawn between A and B.capital=principle 本金；Confidently expected=guaranteedCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall22People think of their deposits with financial instit
32、utions as safe,and loans are usually secured on assets or made conditional on the borrowers financial performance,to give the lender added confidence in the safety of the funds,though there is usually some small chance of partial or total loss.to be secured on sth.以为担保To be made conditional on sth.以
33、为附加条件Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall23The risk of loss,and conversely the possibility of gain,is heavily concentrated on equity assets,mainly the ordinary shares of companies.The shareholder is entitled to a share of the companys profits but must also accept the chan
34、ce of experiencing some loss.Indeed,the effects on the shareholders of success or failure of a company are magnified if the company has loans outstanding as well as ordinary shares.magnify=increase Loans outstanding 尚未偿还的贷款Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall24Liquidity r
35、efers to the ease and speed with which savings in nonmonetary form can be turned into cash,and reflects both the maturity of financial instruments and their marketability.By maturity we mean the time which elapses before a deposit or loan is due to be repaid.Deposits which are repayable on demand ha
36、ve a short maturity,mortgage loans due for repayment after 25 years a long one.savings in nonmonetary form=marketable securities 适销证券适销证券是指证券持有人在需要现金或希望将持有的证券转化为现金时，能够迅速地在证券市场上出售的证券。marketability（适销性）Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall25Thus maturity covers a very wide r
37、ange,and the shorter is the maturity of a deposit or loan the greater is its liquidity.But assets which are marketable may also be liquid,even if they are not automatically repayable in the near future.For example,ordinary shares in many companies can be sold at short notice and their value turned i
38、nto cash,though at a price which is uncertain.at short notice=without warning 随时Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall26Real value certainty:Neither deposits nor loans,whose values are fixed in money(or nominal)terms,provide their holders with protection against price level
39、 changes.Ordinary shares stand a good chance of doing better on this score,because profits can be expected in the end to rise roughly in line with the general price level,though there may be prolonged periods when this does not hold good.on this score=in this respectIn line with=at the same timeProl
40、onged=very longThe same goes for property,where rents can be expected to mirror general price changes over long periods-though as with ordinary shares there may be considerable fluctuations in prices around any long-term trends.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall27Functi
41、ons:Means of paymentsStore of valueTransfer of riskCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall281)As store of valueBank loans-short/medium/long-termBonds(债券)Secured bonds(担保债券)Unsecured bonds/debentures(无担保债券)Government bondsTreasury notes and bonds(国债)Municipal bonds(市政债券)Equit
42、y(stock/share)Corporate bondsCommon stock/ordinary sharesPreferred stock/preference sharesConvertible notes(quasi-equity instrument)Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall292)As transfer of riskInsurance contracts/policiesDerivative securities/instruments:value based on/deri
43、ved from value of underlying assets(基础资产)Forwards contract（远期合约）Futures contract（期货）Options contract（期权）Swaps agreement（互换）Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall30Financial institutionsFinancial institutions:financial intermediary,firm that provides access to financial mark
44、ets,both to savers and borrowers.Roles:reduce transaction costsCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall31ClassificationDepository institutions(存款金融机构)Commercial banksServices to firms and individualsMajor business:deposit taking,credit lending and so on.Savings banks:Services
45、 to households and individualsDepository credit union(信用社，互助会)：services to membersNondepository institutions（非存款金融机构）Investment banks（投资银行）;Factoring company;Leasing company;Finance company;Mortgage banksVenture capital co.;Discount house;Mutual fund;Insurance company;Pension fund;Building societyCo
46、pyright 2010 Pearson Education,Inc.Publishing as Prentice Hall32Types of bank deposits1)Demand/checking/transaction deposit 活期存款Demand deposit 个人的活期存款transaction deposit 企业的活期存款工具：Checkbook 支票簿Debit card 借记卡2)savings deposit储蓄存款工具：passbook 银行存折3)time/term deposit定期存款工具：Passbook;Certificate of deposi
47、tCopyright 2010 Pearson Education,Inc.Publishing as Prentice Hall33Interpretation of the conceptpayment facilities支付工具:means of payment including credit cards,checks,travelers checks,letters of credit,and payment orders such as documents against payment and documents against acceptance.Copyright 201
48、0 Pearson Education,Inc.Publishing as Prentice Hall34investment trust(company)投资信托公司:a financial intermediary that pools the funds of individuals and invests those funds in securities such as stock,bonds and money market instruments.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall35v
49、enture capital company风险投资公司:a financial intermediary that supports and promotes investments and technological development in firms by temporarily holding shares in the capital of those firms.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall36venture capital 风险资本:is risk money,funds w
50、hich are invested for the initial risks of a new and potentially rapidly growing company or a newly developed growth product.It is used for the risk expenses which cannot usually be financed by a bank loan.Copyright 2010 Pearson Education,Inc.Publishing as Prentice Hall37discount house 贴现行:a financi
