International Banking and Capital Markets Lesson 2

17 Questions

What is the purpose of the Capital Markets Union (CMU)?

To unlock funding for Europe's growth

According to the provided information, which type of financial structure tends to have more severe recessions during a financial crisis?

Bank-oriented financial systems

The results of the paper confirm that both banks and markets are important for economic growth. Banks provide services which differ from those offered by financial markets and that such services prove to be particularly beneficial for __________ countries.

less developed

What is the primary function of financial systems in the economy?

Channeling funds from lender-savers to borrower-spenders

According to the structural approach, the financial system of an economy consists of financial markets, financial intermediaries, and financial regulators.

True

Define financial intermediaries and their role in fund channeling.

Financial intermediaries are economic agents that facilitate the movement of funds between lenders and borrowers. They play a crucial role in channeling funds from entities with surplus funds to those in need of funds.

Banks are considered intermediaries as they transform risks, volumes, and ____, thereby acting as intermediaries in the financial system.

maturities

Match the following roles with their corresponding entities in the financial system:

Depositor = Saver Stockholder = Saver Auto loan = Borrower Mortgage = Borrower

Le banche forniscono servizi diversi da quelli offerti dai mercati finanziari.

True

Qual è lo scopo dell'unione dei mercati finanziari?

Tutte le precedenti

Secondo che cosa la crescita ulteriore dell'attività finanziaria potrebbe addirittura rallentare invece di contribuire alla crescita economica?

dati del testo non forniscono una risposta diretta

Qual è una delle ragioni chiave per cui il trasferimento di fondi dai risparmiatori agli spenditori è importante per un'economia finanziarizzata?

I risparmiatori hanno surplus di fondi disponibili ma non sempre opportunità di investimento redditizie.

Secondo l'approccio strutturale, il sistema finanziario di un'economia è composto da tre componenti principali: mercati finanziari, intermediari finanziari e regolamentatori finanziari.

True

Nella diretta trasferenza di fondi, non c'è un'entità che "separa" il fornitore e il ricevitore delle risorse finanziarie. Questo significa che non c'è bisogno di ____________. (intermediari)

intermediari

Per quale motivo le imperfezioni di mercato e le teorie dell'intermediazione dimostrano che l'ipotesi di mercati perfetti non si verifica nella realtà?

Alti costi di transazione e asimmetrie informative.

Gli intermediari finanziari svolgono un ruolo importante nel trasformare il rischio di liquidità, regolare i volumi e rendere compatibili gli orizzonti temporali.

True

Cosa sono i tre componenti principali del sistema finanziario di un'economia secondo l'approccio strutturale?

mercati finanziari, intermediari finanziari, regolamentatori finanziari

Study Notes

Role of Banks and Markets in Developed Economies

Financial systems perform the essential economic function of channelling funds from entities with surplus funds (lender-savers) to units with a shortage of funds (borrower-spenders).

Functions of Financial Markets

Financial markets are markets in which funds are moved via issuing/underwriting and then trading securities.
Securities are financial claims on the issuer's future income or assets.
They represent financial liabilities for the firms or Governments that issue them in order to fund raising and financial assets for the investors that underwrite them.

Financial Intermediaries

Financial intermediaries are economic agents who make financial channeling possible.
The first, basic, distinction must be done between banks and investment firms.

Financial Regulators

Financial regulators are institutions that supervise and control a financial system.
Their objective is to guarantee - at least - fair and efficient markets, financial stability, and investor protection.

Direct vs. Indirect Transfer of Funds

The transfer of funds from savers to spenders can be realized:
1. Via the banking system - indirect/intermediated transfer
2. Via capital markets - direct transfer

Market Imperfections and Theories of Intermediation

Theories of intermediation have identified the various shortcomings of the financial market:
1. Uncertainty
2. Transaction costs (information is not free and immediately available)
3. Information asymmetries

Theories of Intermediation: Heterogeneous Preferences

Intermediaries play an important role and capital markets carry out a fundamental function since they:
1. Transform liquidity risk
2. Transform volumes
3. Make time horizons compatible

From Theory to Reality

The results of the paper confirm the widely accepted view that both banks and markets are very important for economic growth.

Bank-Oriented vs. Market-Oriented Financial Systems

The capital markets union (CMU) is a plan to unlock funding for Europe's growth.
The Commission published an updated list of indicators to monitor progress towards the CMU objectives.

Steps towards the Capital Markets Union

2019: The Commission published a progress report showing that the Commission has tabled all the legislative proposals it committed to in the CMU action plan and mid-term review.
2017: The Commission mid-term review updated and complemented the CMU action plan by strengthening existing actions and introducing new measures in response to evolving priorities and challenges.

Overview of CMU Indicators 2023

Indicator 13: SME use of equity across EU Member States, 2022.

Note: The above study notes cover the main points from the provided text.### Financial Intermediaries

Financial intermediaries play a crucial role in the economy (Gambacorta et al., 2014)
They facilitate financial transactions, provide financial services, and improve financial efficiency

Financial Structure and Growth

The financial structure of an economy affects its growth (Gambacorta et al., 2014)
A well-functioning financial system is essential for economic growth and development

EU Capital Markets Union

The EU aims to create a single capital market for all EU member states (EC, 2021)
The Capital Markets Union (CMU) aims to improve access to finance for Small and Medium-sized Enterprises (SMEs)
The CMU package includes measures to simplify listing rules for companies, especially SMEs (EC, 2022)

EU Financial Reforms

The EU has implemented reforms to improve the functioning of its capital markets (EC, 2021)
The reforms aim to increase funding opportunities for SMEs and improve the overall efficiency of the financial system

Italy's Market Reform

Italy has been pushing for market reforms to improve its financial system (Financial Times, 19/09/2023)
However, amendments to the reforms have threatened to complicate the process (Financial Times, 19/09/2023)

Dutch Banking Tax

Lawmakers in the Netherlands have voted for a higher tax on banks (Financial Times, 23/09/2023)
The move has led to a decline in shares of Dutch banks

European Commission Resources

The European Commission provides resources on the Capital Markets Union, including a factsheet and video (EC, CMU)
The Commission also hosts an EU finance podcast, "Future Finance" (EC, 2021)