What is financial market? Financial market structure

Financial market is a familiar phrase for businesses. Learn more about the financial market through the concept, function, role, structure and current situation of Philippines’s financial market through the article below.

Financial market overview

The basis of the formation of the financial market is the relationship between the basic markets: the financial market, the market for goods and services, the market for the factors of production that interact with two producers. and consumers

The evolution of financial market forms

  • The simplest form of borrowing relationship between classes of the population or commercial credit relationship between businesses chief accountant class
  • The second form: Through intermediary financial institutions such as commercial banks, credit institutions, and financial companies.
  • The third form: The subject representing the investment capital needs actively seeks investment sources by developing valuable documents.

See also: What is monetary policy? The role of monetary policy in the economy

Financial market concept

Financial market is a market for trading financial assets such as stocks, bonds, bills, etc. Participants in transactions in the financial market include households, businesses, and financial institutions. The main intermediaries and the Government are the participants in the buying and selling of financial assets and commodities in the financial markets.

  • An economy that wants to develop must first meet the needs of investment capital. In order to have large and long-term investment capital, it is necessary to increase savings. This is the causal relationship between savings and investment and is the foundation for socio-economic development and expansion of production and business. construction accounting accounting
  • In the economy, the need for capital to invest and sources of savings can arise from different actors. Those with profitable investment opportunities lack capital, those with idle capital have no investment opportunities. Thereby forming the process of capital shifting from those who have idle capital to those who need capital to satisfy each other’s needs. learn practical accounting in hanoi
  • That capital movement is carried out in the financial market. In fact, the financial market is considered to be a place to focus on mobilizing capital sources in the society for short, medium and long-term financing for entities. need capital in the economy through the process of buying, selling and transferring financial and financial assets. skills in cv
  • The financial assets here can be equity instruments that confirm the contribution of entities such as stocks, can also be debt instruments to record a loan such as bonds, bills and also Derivative financial instruments such as futures contracts, options contracts, swaps, etc.

financial-market-2

Necessary conditions for the formation of financial markets

  • Developed commodity economy, stable currency
  • Financial tools must be diverse. Learn accounting online for beginners
  • Formation and development of financial intermediaries
  • Completing the system of legal basis for import and export operations
  • Building a material and technical basis for studying tax accounting in Ho Chi Minh City
  • Need a team of traders, managers knowledgeable about the financial market

The fundamentals of financial markets

Consists of 3 basic elements

  • The object of financial markets is the supply and demand for capital
  • Instruments to participate in financial markets include valuable documents issued by entities
  • Subjects of the financial market are natural and legal entities participating in financial markets, mainly financial companies, insurance companies, banks, investment funds, etc.

Functions of financial markets

  • Citing financial sources, demonstrating the ability to provide financial resources to subjects in need of financial resources
  • Function to stimulate savings and investment, where is the best place to study accounting in Hanoi?
  • Function of price formation of financial assets
  • The function to create liquidity (Convertability to money) for financial assets
  • Financial markets act as a channel for capital from savers to traders. Helping to move capital from people who do not have profitable investment opportunities to those with profitable investment opportunities.
  • The financial market promotes the accumulation and concentration of capital to meet the needs of building technical and material foundations, production and business. degree in chief accountant
  • Financial markets make capital more efficient, not only for those who have money to invest, but also for those who borrow money to invest. The lender will profit through the loan interest rate. Borrowers must calculate the most effective use of that loan because they have to repay both capital and interest to the lender and must generate income and accumulate for themselves. General accounting courses in HCMC
  • The financial market creates favorable conditions for the implementation of the Government’s economic reform and opening-up policies through forms such as issuing bonds abroad, selling shares, and attracting foreign investment capital. in addition to domestic production and business industries.
  • The function provides economic information and assesses the value of the business. Professional HR Administration Course.

See also: What is corporate governance? Contents of corporate governance

Current structure of Philippines’s financial market

Based on the time of using the mobilized financial resources

  • Money market: A financial market with only short-term instruments (maturity less than 1 year); conditions for studying chief accountant
  • Capital market: The market where long-term debt instruments such as stocks and bonds are bought and sold. The capital market is divided into three parts: the stock market, mortgage loans, and bonds.

State of the financial market

Currently, the Filipinos financial market has a strong development both vertically and in depth, including where the actual accounting markets are located.

  • Commercial banking system and logistics
  • Financial institutions
  • Bond and stock market
  • Insurance market

Current status of the commercial banking system and financial institutions

These are markets that play an important role in Philippines’s financial sector, which provides capital for all types of businesses. Credit growth has a direct influence on the growth rate of the economy.

Philippines’s banking system currently includes:

  • State commercial banks
  • State-owned joint stock commercial bank
  • Joint-stock commercial bank
  • Central People’s Credit Fund
  • Grassroots People’s Credit Fund
  • Joint-venture bank
  • Foreign bank branch
  • Bank with 100% foreign capital
  • Representative offices of foreign banks
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  • Financial leasing companies

The mechanism and impact of banks and financial institutions on the money market is reflected in the concentration of monetary policy management and central banking operations.

The State Bank switched to implementing the basic interest rate management mechanism with the form of monthly announcement of the basic interest rate, still stipulating about the basic interest rate.

  • Refinance interest rate
  • Discount rate
  • Foreign currency swap interest rate
  • Open market interest rate
  • Market interest rate for state treasury bill auction
  • Impact on
  • Market interest rate
  • Deposit interest rate
  • Loan interest rates of credit institutions

financial-market-1

When state banks have an increase in the required reserve ratio, it affects credit institutions, increasing investment costs.

The solution posed for credit institutions is to keep the capital mobilization interest rate unchanged, then increase the lending interest rate or, in other cases, increase the lending interest rate and raise the capital mobilization interest rate at the same time.

Along with the development of financial intermediaries, especially credit institutions, following the monetary policy management mechanism and central bank operations in line with international practices, the Banks and institutions actively involved in lending and raising activities compete strongly with each other in the money market, promoting the development of the money market.

Current status of deposit and capital mobilization market

In Philippines, this is the most vibrant and competitive market in attracting idle money in the community.
Financial institutions offer forms

  • Competition encourages customers to open personal accounts
  • Compete by attracting demand deposits from socio-economic organizations
  • Competition to attract savings deposits
  • Issuing certificates of deposit, issuing bonds, promissory notes for the purpose of mobilizing capital with a term of more than 6 months with low interest rates where to learn accounting principles

In recent years, there has been intense competition in the deposit and capital mobilization markets, especially financial intermediaries with diverse and rich implementations of income-generating products and services. attracting deposits and raising capital, but it is still limited as it has not been able to attract maximum demand deposits currently hidden in the population, a very large and important source of capital for the development of the money market.

The reason for the above situation

  • The central banks are not really strong, along with the limited management capacity on monetary policy and operational operations of the central bank, there is no effective operation from credit institutions. Bad debt is tending to increase again, so where is the good place to increase charter capital to ensure a safe ratio according to international accounting practices?
  • The equitization of state-owned commercial banks is still quite slow, hindering the development of Philippines’s stock market
  • The management of the managers of the joint stock commercial banks has not been decided yet, causing delays in the listing of shares.

Above, Financial Analysis has shared an article about the financial market, the concept, the function, the role, the structure and the current situation.

See also: What is IBAN? IBAN number of some banks in Philippines

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