1. Financial System Introduction to Financial Landscape
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Financial System
Introduction to Financial Landscape
Hello and welcome to this session! In today’s session, you will learn about the financial landscape.

2. Agenda In this session, you will learn about:
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Agenda
In this session, you will learn about:
Basics of Financial System
Evolution of Financial System
Objectives and Role of Financial System
Structure and Components of Financial System
(CLICK) In this session, you will learn about: (CLICK)
Basics of Financial System
(CLICK) Evolution of Financial System
(CLICK) Objectives and Role of Financial System
(CLICK) Structure and Components of Financial System

3. Rules that regulate the exchange
Introduction
Barter System
Let’s get started. (CLICK) But first, think back to your childhood or your college days when money was scarce but you still needed new things. What did you do? You simply found something valuable in your possession that you didn’t want anymore. You then found a friend who was interested in your item and likewise had some items to exchange of their own. (CLICK) This is nothing new - the Barter system has been in practice for ages even before the advent of money.
So, what are the key components in this system? Here, you have (CLICK) a buyer and (CLICK) a seller, (CLICK) items that are in demand that can be traded, (CLICK)and you have some unspoken rules around the system – for instance it is assumed that the items traded are roughly of the same monetary or perceived value. You are not going to trade your BMW car for a bicycle, no matter how close your friendship is, right?
The barter system is an example of a financial system, although the financial systems of today are a lot more complex.
Buyer
Items to trade
Seller
Rules that regulate the exchange

4. How Money Came into the Picture?
China was the first country to use recognizable coins.
Sometime around 1,100 B.C., the Chinese moved from using actual tools and weapons as a medium of exchange to using miniature replicas of the same tools cast in bronze.
The First Minted Coins:
In 600 B.C., Lydia's King Alyattes minted the first official currency.
(CLICK) China was the first country to use recognizable coins. Interestingly, by 1,100 BC, China moved from using actual tools and weapons as a medium of exchange to using miniature replicas of the same tools cast in bronze.
But nobody wants to reach into their pocket and impale their hand on a sharp arrow so, over time, these tiny daggers, spades and hoes were abandoned for the less prickly shape of a circle, which became some of the first coins.
(CLICK)Although China was the first country to use recognizable coins, the first minted coins were created not too far away in Lydia (now western Turkey) by King Alyattes in 600 BC.
(CLICK)Paper bills were first used by the Chinese, who started carrying folding money during the Tang Dynasty, around the year
This shows that the currency was introduced ages back. With this we end the session on origin of money and now we shall move on to different aspects of financial systems
Paper Currency:
Paper bills were first used by the Chinese, who started carrying folding money during the Tang Dynasty (A.D )

5. What is a Financial System?
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What is a Financial System?
What is a financial system? Q
You have now learnt about the evolution or history of the financial system, which now brings us to the present day. (CLICK)So, what is a Financial System? (CLICK)
In simple words, it is an organized and regulated structure where exchange of funds takes place between the lenders and borrowers.
It is an organized and regulated structure
where exchange of funds take place
between the lenders and borrowers.

6. Components of a Financial System
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Components of a Financial System
A Financial System is a system that brings together Financial Participants, Markets, Products, and Services.
PARTICIPANTS
MARKETS
PRODUCTS
SERVICES
So, what are the key components of a financial system? Let’s find out. ( Click)
A financial system is a system which brings together financial participants in the financial market with the available products and services offered. We will learn about each of these components in greater detail in the coming modules. (Click)
Participants include Investment Banks, Retail Banks, Mutual and Hedge Funds, Government, Stock Exchanges, Depository, Retail Investors, Insurance and Pension Funds, Registrars, Clearing Houses, Brokers and Custodians. Each of these participants plays a pivotal and active role in the financial market. ( click)
A market where investors and borrowers can trade in financial securities, commodities and other fungible items at low transaction costs and at
prices that reflect the demand and supply. (Click)
Products include debt and equity instruments such as derivatives, shares, bonds, foreign exchange and so on. ( Click)
Services are to corporate investors and also to individuals and includes Mergers and Acquisitions, Financial Research and Advise, Underwriting, Sales and Trading, Market Making, Asset Management and Specialized or Customized Financial Solutions.
FINANCIAL SYSTEM

7. Goal of Financial System
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Goal of Financial System
(CLICK)The primary goal of a financial system is the accelerated growth of an economy.
GOAL
The primary goal of a financial system is
accelerated growth of an economy.

8. Objectives of Financial System
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Objectives of Financial System
Saving Mobilization
Investments
National Growth
In order to achieve that primary role Financial system to accelerate growth in the economy, it needs to mobilize the savings which are then invested in desired products. Once these two objectives are met, overall economic development is possible, which then leads to national growth. Let’s look at each of these objectives in more detail. (Click)
Saving Mobilization requires obtaining funds from the hoarder and then redirecting them to the one who need those funds- that is the issuer. The issuer can be either private party like corporates or a public agency run by the government. (Click)
Financial system ensures the surplus funds are then invested in the desired market such as capital markets, commodity markets, etc and products such as Equity, Debt, money market, derivatives, etc. (click)
Financial system ensures continuous flow of surplus funds to deficit units. Based on demand and supply of the products offered, Financial system should be able to cater to the overall economic development.

9. Prices in a Financial Market
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Prices in a Financial Market
MARKET DEMAND
MARKET
SUPPLY
Prices
External Socio-Political Factors
(Click)Like any market, the price of securities is subject to the demand and supply logic and other social and political factors. (Click) As market forces determines the price of the securities, it is must for the Financial Markets to have transparent pricing, regulations, costs and fees and allow seamless and transparent flow of information. Investors in these markets have access to a variety of financial products through different exchanges.

10. Functions of Financial System
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Functions of Financial System
Functions of a Financial System
Facilitate the flow of funds to finance investments
Play the role of intermediaries to determine the flow of funds
Monitor and regulate the participants in the financial system
(Click)The broad functions of a Financial system are (click) One, To facilitate constant flow of funds, which are regularly monitored and regulated. (Click) Two, to play the role of intermediaries and thus determine the flow of funds, and (Click) to monitor and regulate the participants in the financial system.
Investments could be either in stocks, bonds or even short term fixed securities market, while the firms, government agencies or banking sectors could be either investors or borrowers or both.

11. How Financial System Works?
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How Financial System Works?
Indirect Finance
Financial Intermediaries
Funds
Funds
Funds
Lenders
Savers
Households
Business
Governments
Foreigners
Borrowers
Spenders
Households
Business firms
Governments
Foreigners
Financial markets
Funds
Funds
(CLICK) Now that we know more about the role and functions of the Financial System, we need to know how this system operates. There can be (CLICK) indirect financing, where the (CLICK) lenders can transfer funds through intermediaries like banks, pension funds, mutual funds, insurance funds etc. (CLICK) Or there can be direct financing where the investors(CLICK) directly finance the borrowers by directly investing in their various products.
Direct Finance

12. Financial Instruments Financial Participants
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Structure of the Modern Financial System
Financial System
Financial Market
Financial Instruments
Financial Participants
Financial Regulator
Financial Services
(Click)Let’s now look at the structure of Financial System. Each of the body of this structure is crucial for the functioning of a financial system.
(Click)We have financial market providing a place for financial transactions.
(Click)We have matured and developed financial instruments catering to the needs of both investors and borrowers.
(Click)Financial participants provides the required infrastructure and make the system more robust.
(Click)Financial Regulators are the watchdogs ensuring no fraudulent activities are undertaken.
(Click)Services could be either pre transaction or post transactions. These services are enhanced to meet modern day risqué craving.

13. Financial Instruments Financial Participants Certificate of Deposit
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Structure of Financial Market
Financial System
Financial Market
Financial Instruments
Financial Participants
Financial Regulator
Financial Services
Capital Market
Money Market
FX Market
Derivatives Market
(Click)Let’s now look at the structure of Financial Markets. Broadly, financial markets are of four types: . (Click)Capital Markets, (Click)Money Markets, (Click) Foreign exchange markets and (Click)derivatives market. Capital markets are further subdivided into (Click)primary and(Click) secondary markets. In both these markets we have (Click) debt and (Click) equity markets. We would learn each of these markets in details in consecutive sessions. While in money market we have (Click)treasury bills, (Click)certificate of deposit, (Click)call money and (Click) commercial paper. All this will be discussed in greater detail in subsequent modules
Primary Market
Secondary Market
Treasury Bills
Certificate of Deposit
Call/Notice Money
Commercial Papers
Debt Market
Equity Market

14. Instruments Offered in Financial Markets
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Instruments Offered in Financial Markets
Financial System
Financial Market
Financial Instruments
Financial Participants
Financial Regulator
Financial Services
Stocks
Bonds
Foreign Exchange
Derivatives
Money Market Instruments
Commodities
(Click)In a financial system, there is a wide range of financial products that are offered. (Click)These include Stocks (that is equity, preference and common shares), (Click) Bonds (which are Short term and long term), (Click)Foreign exchange, (Click)Derivatives, (Click)Money Market Instruments and (Click)Commodities. Each of these instruments will be explained in greater detail in later sessions.

15. Financial Participants
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Financial Participants
Financial System
Financial Market
Financial Instruments
Financial Participants
Financial Regulator
Financial Services
Issuers
Investors
Brokers and Dealers
Depositories
Custodians
Registrars
(Click) So, who are the key players in a financial system? Participants include (Click) Issuers, (Click) Investors (Click) Brokers and Dealers, (Click) Depositories, (Click) Custodians, (Click) Registrars, (Click) Lead Managers and (Click) Depository Participants. These participants play a pivotal and active role in the financial market. Again, we will learn about each of these participants later on in the course.
Lead Managers
Depository
Participants

16. Financial Instruments Financial Participants
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Financial Regulators
Financial System
Financial Market
Financial Instruments
Financial Participants
Financial Regulator
Financial Services
India US UK
(Click)The Financial System is incomplete without Market Regulators which are also called market watch dogs. Each country has its own regulatory body or bodies. (Click)For instance in India, (Click)you have the Reserve Bank of India which is an apex bank and (Click) the Securities and Exchange Board of India, or SEBI to regulate markets. (Click) In the US we have (Click)Federal Reserve and Pension Co’s and (Click) Securities Exchange Commission (SEC). (Click) In the UK it is (Click)Bank of England and (Click) the Financial Conduct Authority or FCA, along with Prudential Regulatory Authority.
Banks: Reserve Bank of India
Markets: Securities & Exchange Board of India
Banks: Federal Reserve
& Pension Co’s
Markets: Securities Exchange Commission
Markets: FCA / Prudential Regulatory Authority
Banks: Bank of England / FCA

17. Financial Services Offered
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Financial Services Offered
Financial System
Financial Market
Financial Instruments
Financial Participants
Financial Regulator
Financial Services
Mergers & Acquisition
Research & Advise
Underwriting
Sales & Trading
Market Making
Finally we come to financial services. (Click)Financial Services include (Click)Mergers and Acquisitions, (Click)Financial Research and Advise, (Click) Underwriting, (Click)Sales and Trading, (Click)Market Making, (Click) Asset Management and (Click)Specialized or Customized Financial Solutions. Generally these services are limited to corporate investors. But some of these can also be extended to retail investors. We will cover each of these components in further detail as we proceed in this program.
Asset Management
Specialized Financial Solutions

18. Thank You That’s it for now. Thank You.
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