Role of financial intermediaries in the financial system, Financial Management

Role of Financial Intermediaries in the financial system:

Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor in order to garner the requisite amount. When the borrower of funds approaches the financial market to raise funds, mere issue of securities will not suffice. Adequate information of the issue, issuer and the security should be passed on to the supplier of funds for the exchange of funds to take place. There should be a proper channel within the financial system to ensure such transfer.

To serve this purpose, Financial Intermediaries came into existence. In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower. This service was offered by banks, FIs, brokers, and dealers. However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened. Major changes were witnessed in the type of issuers and investors participating in the markets. Financial innovations, technological upgradations and most importantly changing regulatory mechanism made the process of raising funds from the market place a complex task. Investors' preferences for financial assets have also changed. Designing instruments that catch the investors' attention has now become a specialized service. Likewise, proper expertise is also necessary for establishing transactions in the financial markets. Large volume of transactions taking place in the markets will have to be recorded promptly and accurately. Finally, since the money raised through these markets comes from various sectors including the individual investors, there is a need to ensure that these funds flow into proper investment channels.

Change has become a constant phenomena of a financial system as it has to relate to the shifting demands of the lenders and the borrowers, the technological developments etc. Due to this, the dynamics of the financial system keep changing, thereby requiring the services of specialized agencies to operate in the market. Some of the important intermediaries operating in the financial markets include: investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers, financial consultants, primary dealers, satellite dealers, self-regulatory organizations, etc.

 

Posted Date: 9/11/2012 3:20:00 AM | Location : United States







Related Discussions:- Role of financial intermediaries in the financial system, Assignment Help, Ask Question on Role of financial intermediaries in the financial system, Get Answer, Expert's Help, Role of financial intermediaries in the financial system Discussions

Write discussion on Role of financial intermediaries in the financial system
Your posts are moderated
Related Questions
Woody Construction is considering a new 3 year expansion project that requires an initial fixed asset investment

Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.

Routine functions For the efficient execution of the managerial finance functions, routine functions have to be executed. Such decisions concern procedures and systems and incl

Internal Rate of Retur n The discount rate at which the net current value (the value of all future cash flows, in excess of the real investment, expressed  in today's d

It is, usually, not possible to totally eliminate both translation exposure and transaction exposure.  In few cases, the elimination of one exposure will as well eliminate the othe

I am trying to solve this formula: 2/10, net 30. In the book I am reading they have 2% x 360 ------- ------ = 2.04% x 18=36.72% 100-2% (30-10) I want to know how the

Restatement of investment appraisal In the following solution the tax allowances in relation to the initial outlay on equipment are evaluated separately. Other approaches are a

describe the impact of different types of standards on motivation, and specifically , the likely effects on motivation of adopting the labor standards recommended for geeta & compa

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang

You plan to retire in 35 years and can invest to earn 7 percent. You estimate that you will need $85,000 at the end of each year for an estimated 25 years after retirement, and you