financial

Savers/Depositors (Surplus-

spending units)

● Individuals

● Households/ Families

● Companies

● Government

Borrowers/ (Deficit-spending

units)

● Individuals

● Households/ families

● Companies

● Government

Financial Asset Markets

(i) The money market

● Treasury bills ● Commercial

papers, ● Certificates of

deposits ● Bills of exchange ●

Eurocurrency

(ii) The Bond markets

● Domestic treasury notes and

bonds, ● Domestic corporate

bond ● International bonds

● Eurobonds

(iii) Stock markets

● Common stock ●American

depository receipts

(iv) Derivative instruments

(v) Mortgage-backed securities

Direct Finance

Financial Intermediaries

● Commercial Banks

● Building societies

● Alternative banks (payday lenders, pawn shops etc.)

● Mutual funds (or unit trusts, or investment companies)

● Pension funds

● Insurance companies

● Independent financial advisers

● Finance companies

● Investment banks

Indirect Finance Surplus Funds

(Deposit)

Funds (Loans, grants

and credit card loans)

Funds Funds

Funds

Factor

Payment

s

Factor

payments

Lecture 1 (Chart 1): Flow of Funds through the Global Financial System

Factor

Payments

Factor Payments

●Wages

●Dividend/ Interest

●Capital gains

Money access through

●ATM

●Checks

●Online

●Smartphone