The Financial System and Its Levels

Generally, a financial system is a number of certain actions which track the financial activities on the world-wide, national or company basis.

It is definitely complex and includes financial services, organizations, and markets which connect depositors and investors.

The financial system of a certain company is a group of activities to monitor its financial well-being. If we take a bigger system like a regional-level financial system, we’ll see that it includes the financial transactions and money exchange between the participants. The worldwide level is even bigger and it connects the organizations and participants of the world economy.

There are multiple elements which differ from level to level. For example, the company’s financial system includes accounting protocols, schedules of profit and expenses, wages, etc. The regional one will work with bigger components like banks and markets. The global level focuses on the International Monetary Fund, World Bank and other central ones which work in many countries.

All of them are under total control as they control the financial markets. They must be stable enough to keep the economy in check. That’s why it is managed by various financial institutions like banks (public and commercial, and cooperative) but there are other components as well. Another component is the financial markets. It trades commodities and securities.

Moreover, market brokering and services concerning investments and risks are not regulated (they are not considered to be the bank financial institutions) but still belong to a financial system.

Besides, we should not forget the financial instruments which are subdivided into cash and derivative tools. Cash tools imply loans, deposits, and securities, while the derivative ones depend on the underlying asset’s performance.

The financial systems use the different medium of exchange. They include money, credit, and finance and are used to determine the value of goods and services.

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