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Mike Buckle and John Thompson

2.1   Introduction We saw in chapter 1 that financial intermediation is one of the key functions of a financial system, connecting savers and borrowers and directing funds towards productive investments. In this chapter our primary aim is to describe the process of financial intermediation and in doing so we examine the arguments as to why we

in The UK financial system (fifth edition)
Theory and practice
Authors: Mike Buckle and John Thompson

The early part of the twenty-first century has witnessed a sea-change in regulation of the financial system following the financial crisis of 2007-2008. Prior to that financial crisis, the official policy was directed to deregulating the financial system, whereas after 2008 the move is towards increased regulation. This book begins the study of the UK financial system with an introduction to the role of a financial system in an economy, and a very simple model of an economy. In this model the economy is divided into two distinct groups or sectors. The first is the household sector and the second is the firms sector. The book describes the process of financial intermediation, and in doing so, it examines the arguments as to why we need financial institutions. It highlights the nature of financial intermediation, and examines the various roles of financial intermediaries: banks as transformers, undertaking of transformation process, and providers of liquidity insurance. The nature of banking, the operations carried out by banks, and the categories of banking operations are discussed next. The book also examines the investment institutions and other investment vehicles. It examines the role of central banks in the financial system in principle, particularly, the role of the Bank of England. Primary market for equity issues, secondary market, the global stock market crash of October 1987 and efficient markets hypothesis are also covered. The book also looks at the trading of financial derivatives, risk management, bank regulation, and the regulation of life insurance companies, pension funds.

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Types of banks and the risks they face
Mike Buckle and John Thompson

possessed by other firms (i.e. they possess monopoly powers in certain directions) or because they have a comparative advantage in the marketplace. In recent years banks have seen their monopoly position eroded as the kind of technological developments discussed above have lowered barriers to entry. The process of financial intermediation can be subdivided into a number of constituent

in The UK financial system (fifth edition)
Why China survived the financial crisis
Shalendra D. Sharma

banking sector is the single most essential element of a healthy financial system. This is particularly relevant in transitional economies like the PRC, where markets for corporate securities are limited and much of the lending unsecuritized. In such settings the banking sector constitutes the main institutions that can (and must) effectively evaluate and monitor the risks and returns on financial intermediation, including the evaluation of borrowers’ creditworthiness, and can enforce financial contracts, loan recovery and the realization of collateral. Given these awesome

in The Asian financial crisis
Mike Buckle and John Thompson

how changes in the financial environment and the changing preferences of borrowers and international banks have led to a move away from international financial intermediation through banks to direct financing through greater use of the international capital markets. 11.2   Eurobonds In this section we examine the nature of eurobonds, the reasons for

in The UK financial system (fifth edition)
Mike Buckle and John Thompson

is provided by the functional approach to financial intermediation (see chapter 2 ). Allen and Santomero ( 1998 ) argue that to understand developments in financial intermediation we should focus on the functions provided by intermediaries rather than on the institutions. It has been argued by Davis ( 2000 ) that the reason for the greater growth of investment

in The UK financial system (fifth edition)
The case of British Labour
John Callaghan

. It was now thought that the Thatcher reforms had 88 European social democracy under global economic crisis reinvigorated the British economy and restructured it to succeed in conditions of globalisation. Success was all the shinier for the fact that Germany was struggling economically after reunification and the Japanese economy was stagnant. One common economic experience, however, concerns the activities of the financial institutions. The growth in financial intermediation was outstripping the growth of economies. The trend accelerated from the early 1980s and

in European social democracy during the global economic crisis
Abstract only
From the Bank of Scotland’s origins to HBOS and crisis
Jonathan Hearn

control. Central banks are the obvious paradigmatic case, with their special responsibilities, in various articulations with government treasuries, for such things as currency supply and interest rates. Many other banks and financial organisations are situated more clearly in the private sphere, but because all are collectively involved in national and transnational patterns and flows of financial intermediation and investment, they are perennially of concern to governments. If modern capitalist society is characterised by this mutual reinforcement of core economic and

in Salvage ethnography in the financial sector
Open Access (free)
Issues, debates and an overview of the crisis
Shalendra D. Sharma

policy responses to large capital inflows, weaknesses in domestic financial intermediation and poor corporate governance resulted in the build-up of vulnerabilities, while banking fragility, high leverage and currency and maturity mismatches made these economies highly susceptible to reversals in capital flows. However, these weaknesses remained unnoticed as long as these economies were growing. Despite these similarities, each country also suffered from its own unique sets of problems, and varied in its response to the crisis. Also, since the most common criticism of the

in The Asian financial crisis
Mike Buckle and John Thompson

bank will lead to a ‘run’ on that bank (see section 15.2.2 ); the danger that the problems affecting one bank will lead to loss of confidence in other banks (i.e. systemic risk, also discussed in section 15.2.2 ). banks perform essential services to the economy such as financial intermediation and operation of the payments mechanism and interruption of

in The UK financial system (fifth edition)