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37 Cards in this Set

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System

Composed of several parts with interrelated functions

Financial system

Principally responsible for the flow of money or funds from the lender to the borrower

There is no standard structure of a financial system. The type of government and the economic system determine structure

Info slide

Bangko Sentral ng Pilipinas

Regulates the operations of financial institutions and financial intermediaries

1) Financial institutions


2) Financial markets


3) Financial instruments


4) Lenders and borrowers

Basic elements of a financial system

Financial institutions

Provide financial services in the form of loan, credit, fund administration, financing, depository, and safekeeping

Depository institutions

Financial institution that accept deposits, extend loans to borrowers, transfer funds, and manage funds for investment purposes

Banks

Accept deposits and bills payment, provide loans, and facilitate the transfer of funds domestically or abroad

Universal bank

Biggest bank in terms of assets, loan portfolio, and revenue

Minimum of 20 billion pesos

Commercial bank

Provides commercial loans and offers investment products in addition to the regular banking service

Financial intermediary

· Middleperson between the investors and the borrowers


· Receive money from one party and offer it to another as financial aid

Mutual Funds

Accumulate money by selling shares of stocks or bonds of publicly-listed corporations to individuals or corporate investors

Pension Fund

Set up by a business for purpose of paying the pension requirements of all private-sector employees who retire from the business organization

Insurance Companies

Pooling together the proceeds of insurance policies sold to the public and investing the accumulated funds in high-yield maturing securities from investment houses

Investment Institution

· Company engaged in buying securities of other companies which are listed in the stock exchange for investment purposes only


· Holds on to the securities it acquired from other companies

1) Depository institutions


2) Financial intermediaries


3) Investment institutions

Classification of financial institutions

Market

Place where sellers and buyers of goods and services meet

Financial Market

Place where selling-buying activity occurs to trade equity securities such as bonds and stocks, currencies, derivative securities, notes, and mortgages

Trading Activity

Selling-buying transaction happening in the financial markety

Capital Market

Market whete stocks and bonds are issued for medium and long term periods

Equity securities, debt securities

Stocks are treated as ________ while bonds are considered ________

Dividends

Investors who hold stocks receive return in the form of

Interest

Investors who hold bonds earn income in the form of

Philippine Stock Exchange

Capital market in the Philippines

Money Market

· Short-term security / trading securities


· Highly liquid & readily marketable

Primary Market

·Corporation can issue new shares of stock


· Between issuing corporation and investors

Secondary Market

Financi securities are traded between or among investors (no issuance of new shares)

Public Market

Financial securities of publicly-listed corporation are traded following a standardized contract agreement and procedures

Financial Instruments

Formation of financial assets of one entity and at the same time the creation of a financial liability or an equity instrument in another entity

Bond

Financial instrument that represents a contractual debt of the party issuing the bond (lol duh)

Bond Indenture

Certificate that evidences bond

Stock

Financial security that signifies ownership of the assets of the corporation

Shareholders / stockholders

Holders of the shares of stock (evidenced by the stock certificate)

Ordinary share

Another word of common stock

Common stock

· Same rights and privileges in terms of dividend or asset distribution with other stockholders


· Least priority on income of corporation


· Least preference on assets

Common stock

Voting stock (one share = one vote)

Preference Share

Preferred over common stock