Other Financial Institutions

3 Key excerpts on "Other Financial Institutions"

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  eBook - ePub

  Monetary Management

  Principles and Practice

  • A. B. Cramp(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  Just how reasonable it is to concentrate attention on equilibrium positions is a question raising large issues into which it is inappropriate to delve very far here, because they are difficult if not impossible to solve. These issues centre around stock-flow problems that we have already encountered in various aspects. It is arguable that analysis of successive positions of full stock equilibrium in financial asset markets is of somewhat academic interest unless such equilibria are restored, following a disturbance, quickly in relation to the time horizon of interest for the particular analysis being undertaken. In this book, our primary focus of interest is on short and medium-term monetary and financial policies, implying a time horizon not exceeding, perhaps, 6–12 months. Empirical work on the length of the time lags involved in reaching desired (equilibrium) portfolio positions has been attempted, but the results to date are inconclusive, and it is not easy to be optimistic that this situation will change.

  In any case, before we can judge how far to press the re-assessment implied in the foregoing conclusions, it is desirable to return to specific consideration of the o.f.i.s in relation to leg 2 of the orthodox dichotomy, which sees o.f.i.s as pure intermediaries who cannot create credit flows, and whose activities do not (in contrast to the banks) add to the private sector’s asset stock ‘from the supply side’.

  On this point we may note first that we have already encountered one theoretically possible manner in which o.f.i.s can create credit in the rather restricted sense of a flow of loans that would not otherwise have been available. If the relative preferences of wealth-holders for M and N are more accurately depicted in Fig. 6:2 than in Fig. 6:3 , and if o.f.i.s can raise their deposit rates relative to those of the banks

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  System of National Accounts 2008

  • International Monetary Fund(Author)
  • 2009(Publication Date)
  • INTERNATIONAL MONETARY FUND

    (Publisher)

  17.227 When considering the financial sector alone or in connection with other statistics such as monetary and financial statistics, it is usual to speak of financial institutions rather than financial corporations. No change in definition or coverage is implied by this change in terminology. When subsectoring the financial sector, as explained in chapter 4, a distinction is made between those financial corporations that are primarily involved in financial intermediation, which are called financial intermediaries, and Other Financial Institutions.

  17.228 Financial intermediation is the activity of matching the needs of borrowers with the desires of lenders. It is carried out by financial institutions preparing alternative sets of conditions under which clients can borrow and lend. These conditions allow for variations in the rate of return that may be expected from an investment with, often, higher returns being less certain than lower returns or involving forgoing access to the funds for a longer period. There are now very many, very diverse ways in which money can be borrowed and lent. The act of financial intermediation is thus one of devising financial instruments that encourage those with savings to commit to lend to the financial institutions on the conditions inherent in the instruments so that the financial institutions can then lend the same funds to others as another set of instruments with different conditions. This activity encompasses financial risk management and liquidity transformation.

  17.229 All financial intermediation in the SNA is carried out by financial institutions. However, some corporations in the financial sector are not themselves intermediaries but simply provide services auxiliary to financial intermediation. For example, they may provide advice to clients about the terms available for specific types of borrowing and lending, such as a mortgage broker or provide certain sorts of financial resources such as a foreign exchange bureau that exchanges one currency for another. These are the units described as Other Financial Institutions.

  17.230 Financial institutions provide services and charge for them. The ways in which they charge, however, are not always obvious. When a bank offers “free banking” it only signifies that there are no explicit fees, not that there are no implicit fees. Fees may be charged indirectly by means of charging those purchasing a financial asset more than the seller of the same asset receives. For example, dealers in foreign exchange typically buy and sell at different rates; the differences between those rates and the mid-point represent service charges paid by the customers.

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  International Corporate Finance (RLE International Business)

  Markets, Transactions and Financial Management

  • Harvey Poniachek(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  5 Financial Institutions in International Finance Alexander E. Fleming

  DOI: 10.4324/9780203076590-7

  CHANGES in the international economic and financial environment during the 1970s and 1980s have brought with them marked changes in the ways in which international financial intermediation is conducted. There have been significant shifts in the roles played by private financial institutions (especially commercial banks and investment banks) on the one hand and official financial institutions (especially the IMF and World Bank) on the other. There have also been important shifts in the roles played by institutions within each category. This chapter examines some of the factors that have influenced the nature and scale of participation of the different types of institution in international finance.

  International Financial Intermediation: An Overview

  The international financial system—encompassing institutional, governmental, and market arrangements for transactions between countries—performs on a global basis what national financial systems execute domestically. It provides a payments mechanism, offers facilities for borrowing funds and employing surpluses, creates different types of financial assets and liabilities, and intermediates between a variety of agents with portfolio preferences.

  The demarcation between national and international financial systems has never been rigid because domestic institutions and markets have always to some extent performed international functions. Until the late 1960s, however, a reasonably coherent distinction could be made between the two systems. International financial intermediation and the financing of international payments imbalances were based mainly on governmental arrangements and official international organizations. Balance-of-payments financing was not, therefore, done predominantly through market mechanisms but rather through nonmarket operations. Except for trade financing, most domestic financial institutions operated primarily in the domestic domain. But since the late 1960s the international and national financial systems have become more closely integrated. The formal distinctions between the intermediation mechanisms used by the two have become less obvious as national financial institutions have increasingly come to supply international financial intermediation services.

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