Financial system - Financial definition
Concise definition of the term financial system
A financial system is a network of institutions, markets, and instruments that facilitate the flow of funds between savers and borrowers. It includes entities such as banks, stock exchanges, and insurance companies.
Comprehensive definition of the term financial system
The financial system plays a crucial role in the economy by enabling capital formation, liquidity provision, and risk management. It encompasses a variety of financial institutions, including commercial banks, investment banks, insurance companies, and pension funds, which interact in markets such as stock exchanges, bond markets, and foreign exchange markets.
Practical examples include using savings accounts for personal finance management, obtaining loans for business expansions, or trading securities for investment purposes. Market practices within the financial system involve regulations and oversight by entities like central banks and securities regulators to ensure stability, transparency, and efficiency.