THREE REPORTS

Three Reports



Three Reports

Report 1: Discuss the Major Outcomes of Financial Intermediation

Financial intermediation is an activity that is to raise money or other resources of the general public and place (lend) to third parties. Is the typical activity of banks, savings banks and savings associations. The financial intermediary is an institution that provides communication between lenders and borrowers, taking money from lenders and allowing them to borrowers. The amount of funds accumulated and used by financial intermediaries, significantly exceeds the volume passing through the other sectors. There are financial intermediaries between financial institutions themselves, such as user home in England, appeared as institutions, carried out the placement of commercial banks' treasury bills, i.e. as intermediaries between commercial banks and the central bank. A number of financial institutions, including leasing, factoring companies, financial houses, most of its funds as are loans from other financial institutions (Lore 2010, pp. 3).

For lenders, the benefits of financial intermediation can be expressed, first, that with their help is achieved reducing credit risk. Under the conditions of incomplete and imperfect information specific to a modern market economy, high credit risk, i.e. risk of non-repayment of principal and interest. Intermediaries shall diversify risk by spreading investments by categories of financial instruments. Financial Intermediation involves two operations: the passive, which are the collection of resources, and credit transactions, which are the delivery of these resources to third parties (mainly in the form of loans).

However, banks also perform other operations, primarily to provide services such as custody of securities, investment advisory, brokerage in foreign trade operations, certain types of insurance, etc while traditional banking functions, are not financial intermediation. Because after all financial intermediation involves managing resources that are not themselves, all states regulate this activity to a greater or lesser extent, to ensure, where possible, that public money is not wasted, and banking systems not collapse, which would be a disaster for any nation (Mikdashi 2001, pp. 5).

Financial intermediaries facilitate other economic agents which search for reliable borrowers. The mediators are developing a system of checking the solvency of borrowers and organize a distribution system for their services. It will also eventually reduce the credit risk and cost of credit. Financial intermediaries also provide liquidity in the resolution of problems of economic agents (Gorton 2002, pp. 1). Financial institutions can maintain the necessary level of liquidity of its clients, which determines their ability to freely perform its obligations to counterparties. This is achieved by ensuring that financial institutions have the opportunity to keep in cash a portion of their assets. In addition, for certain types of financial institutions, the state sets the legal rules governing liquidity. Thus, for the commercial banks through reserve requirements provided by law to maintain the minimum balances on accounts with the central bank and the cashier.

Report 2: Provide an Overview and Classification of Financial Institutions in the UK

Among developed countries, the UK is traditionally the third largest in terms of capitalization of domestic companies nearly $ 4 trillion dollars at the end ...