Financial system
In a narrower sense, the central bank and the banks of a currency area taken together. – In a broader sense, the insurance companies and certain other capital collection agencies are included in addition to those mentioned below. – In the broadest sense, the totality of institutional conditions that serve the coincidence of supply and demand for capital as well as all related services; system understood here as a mesh of individual components that together form a purposeful, interrelated and interdependent unit. The financial system in this sense also includes financial intermediaries, securities exchanges, the entire payment system, including payment systems, supervisory authorities and the general regulatory framework, up to and including accounting guidelines and insolvency law. In many cases, the state is also included in the financial system. This is because it has been shown that a collapse of the financial system in particularly dangerous situations – as in the course of the subprime crisis – can ultimately only be prevented by commitments made by the state. – The financial system in this broader sense varies from country to country because of the specific regulatory framework typical of each financial system. On the other hand, a financial system is always in flux. Since around 1990, the greater role of new financial intermediaries – such as hedge funds – and new types of financial products – especially structured products for passing on credit risks – have made the overall network of relationships between institutions, financial markets and the real economy at the national and global level considerably more complex and, consequently, more opaque. The resulting information gaps made it difficult to identify systemic risk, as was then suddenly revealed during the subprime crisis. – A secure, smoothly running financial system is regarded as a public good that is at least as important in today’s society as a functioning transportation system, health care system, communications and information system, legal system or education system. It is even rightly pointed out that a well-ordered financial system is a prerequisite for the orderly functioning of all social systems. – See bail-out, banking crisis, banking collapse, Bradford nationalization, crash, deposit insurance, Elizabeth question, specialist banking system, finance matters, financial architecture, financial industry, financial waste, financial market, advanced education, growth importance, financial market stability, financial stability report, financial terrorist, money lender of last resort, money purpose, Hypo Real Estate bailout, IndyMac bankruptcy, institution, cobra effect, credit card fiasco, lending rule, Air Securities, Market Discipline, Moneymatters Theorem, Ninja Loans, Moral Hazard, Mortgage Equity Withdrawal, Papers, Toxic, Pay Green Initiative, Risk, Systemic, Setback Effect, Run, Shadow Banking, Shock Recovery, Soul Massage, Stress Test, Systemic Conflict, Financial Market, European Systemic Risk Council, Overflow System, Loss Absorption, Personal, Asset Levy, Conspiracy Theories, Contractual Fidelity, Trust, Forced Expropriation.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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