Financial system, which consists of financial authorities, the banking system, and system non-bank financial institutions, primarily the order in the economy of a country that has a major role in providing facilities for financial services. Facilities such financial services provided by financial institutions, including money market and capital market.
Characteristics of the most dominant financial sector we can observe is so rapid changes occurring in it along with the rapid developments in the economic field. Policies on financial, monetary, and banking from time to time need to be adjusted following the economic dynamics as the impact of globalization in which the changes in the economy of a country, especially developed countries, surely will impact the economies of other countries, especially in activities on a country's stock market.
The financial system is one of the most crucial design in this modern time. We can not imagine, if all the financial activities of an institution with another financial institution, or between a country with other countries, carried out without the mediation of a good financial system, all financial transactions that occur will be chaotic or not can be fun all parties due to not well coordinated. Payment system and intermediation not possibly have taken place without the existence of the financial system.
The financial system can be defined as a collection of institutions, market, regulatory requirements, regulations, and techniques in which securities are traded, the interest rate is set, and financial services (financial services) produced and offered to all parts of the world (Peter S. Rose, 7th editionm 2000). So, can mean that the financial system is a collection of financial institutions (banks, insurance agencies, etc.), various government policies in the field of financial economics, which is structured in such a way as to memperlencar all financial transactions that take place, which supports the occurrence of financial transactions in a country, for the progress of the country's economy.
The main task of the financial system in a modern economy is to transfer funds from savers to borrowers who need funds, where funds would be used to purchase goods and services and to invest in new equipment so that the economy can grow and in turn will increase standard of living. Without a financial system, the strength and ability of business sector and households to meet their needs as well as in investment will be reduced. Meanwhile, the owner of the excess funds will not be able to optimize revenue from their excess funds and will make more and more idle money or money that is not used (idle money).
The financial system in the economy has at least 7 main functions, namely:
Function savings (savings function)
The financial system provides a mechanism and savings instruments, for example: bonds, stocks and other instruments traded in the money market and capital market that can provide income for their owners. Funds from the ownership of these instruments in turn can be used again to invest in the production of goods and services which in turn can spur economic activity better.
The function of wealth (wealth function)
A financial system provides a financial instrument which can store excess funds from the public in the form of bonds, stocks, government securities, and other instruments, where the value of these instruments will not be reduced instead will provide no small amount of revenue for the owner. Compare if the money owned to buy a car used as an option in the store property, the value of these cars will be reduced from time to time due to shrinkage.
The function of liquidity (liquidity function)
Wealth that is stored in the form of financial instruments can be converted into cash or cash with a fast and small risk, if the owner needed cash instruments. Money saved in the bank may experience impairment due to inflation, and also the results given from the savings funds in the bank is relatively small when compared to financial instruments in financial markets.
The function of credit (credit function)
Financial markets in addition to providing liquidity and facilitating the flow of savings funds, also provides credit facilities to finance consumption and investment needs. Consumers need credit to buy goods, such as houses and cars. While the business sector requires credit to finance production and investment made.
Functions of payment (payment function)
The financial system also provides an instrument to make a payment mechanism for transactions of goods and services. Instruments used include: checks, demand deposits, credit cards and debit cards. The services offered by the bank today vary widely in terms of payment services, such as: clearing, electronic transfers, phone banking, and more. Payment or transfer mechanism for on-line becomes a new trend by banks, and also can be an alternative for banks in obtaining fee income and enhance their income base.
The function of risk (risk function)
The financial system today give / offer protection against life, health, wealth, and risk of loss to all business units and customers. The insurance policy provided by an insurance company that provides protection against possible loss of income of their customers.
Accordingly, the financial system is basically an integral part and can not be separated from an economic system. A good financial system and integrated will be able to advance the economy and eventually will be able to advance the welfare of society is hoping to attain together.
Characteristics of the most dominant financial sector we can observe is so rapid changes occurring in it along with the rapid developments in the economic field. Policies on financial, monetary, and banking from time to time need to be adjusted following the economic dynamics as the impact of globalization in which the changes in the economy of a country, especially developed countries, surely will impact the economies of other countries, especially in activities on a country's stock market.
The financial system is one of the most crucial design in this modern time. We can not imagine, if all the financial activities of an institution with another financial institution, or between a country with other countries, carried out without the mediation of a good financial system, all financial transactions that occur will be chaotic or not can be fun all parties due to not well coordinated. Payment system and intermediation not possibly have taken place without the existence of the financial system.
The financial system can be defined as a collection of institutions, market, regulatory requirements, regulations, and techniques in which securities are traded, the interest rate is set, and financial services (financial services) produced and offered to all parts of the world (Peter S. Rose, 7th editionm 2000). So, can mean that the financial system is a collection of financial institutions (banks, insurance agencies, etc.), various government policies in the field of financial economics, which is structured in such a way as to memperlencar all financial transactions that take place, which supports the occurrence of financial transactions in a country, for the progress of the country's economy.
The main task of the financial system in a modern economy is to transfer funds from savers to borrowers who need funds, where funds would be used to purchase goods and services and to invest in new equipment so that the economy can grow and in turn will increase standard of living. Without a financial system, the strength and ability of business sector and households to meet their needs as well as in investment will be reduced. Meanwhile, the owner of the excess funds will not be able to optimize revenue from their excess funds and will make more and more idle money or money that is not used (idle money).
The financial system in the economy has at least 7 main functions, namely:
Function savings (savings function)
The financial system provides a mechanism and savings instruments, for example: bonds, stocks and other instruments traded in the money market and capital market that can provide income for their owners. Funds from the ownership of these instruments in turn can be used again to invest in the production of goods and services which in turn can spur economic activity better.
The function of wealth (wealth function)
A financial system provides a financial instrument which can store excess funds from the public in the form of bonds, stocks, government securities, and other instruments, where the value of these instruments will not be reduced instead will provide no small amount of revenue for the owner. Compare if the money owned to buy a car used as an option in the store property, the value of these cars will be reduced from time to time due to shrinkage.
The function of liquidity (liquidity function)
Wealth that is stored in the form of financial instruments can be converted into cash or cash with a fast and small risk, if the owner needed cash instruments. Money saved in the bank may experience impairment due to inflation, and also the results given from the savings funds in the bank is relatively small when compared to financial instruments in financial markets.
The function of credit (credit function)
Financial markets in addition to providing liquidity and facilitating the flow of savings funds, also provides credit facilities to finance consumption and investment needs. Consumers need credit to buy goods, such as houses and cars. While the business sector requires credit to finance production and investment made.
Functions of payment (payment function)
The financial system also provides an instrument to make a payment mechanism for transactions of goods and services. Instruments used include: checks, demand deposits, credit cards and debit cards. The services offered by the bank today vary widely in terms of payment services, such as: clearing, electronic transfers, phone banking, and more. Payment or transfer mechanism for on-line becomes a new trend by banks, and also can be an alternative for banks in obtaining fee income and enhance their income base.
The function of risk (risk function)
The financial system today give / offer protection against life, health, wealth, and risk of loss to all business units and customers. The insurance policy provided by an insurance company that provides protection against possible loss of income of their customers.
Accordingly, the financial system is basically an integral part and can not be separated from an economic system. A good financial system and integrated will be able to advance the economy and eventually will be able to advance the welfare of society is hoping to attain together.
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