Assignment Help on FINANCIAL INTERMEDIARIES
In this report, it has been asked to do proper research about the importance of financial institutions and market. There are several types of national and international financial intermediaries which are operating in Australia and all over the world. These financial intermediaries are supportive in areas such as reducing risk, high liquidity, low cost of transactions, advance payment and other transactions system between local and international people, stable pricing and pooling resources. The impact of these financial institutions and markets on the economy is positive because they provide support in several financial problems to the consumers. In short, without intermediaries, it is not simply feasible to develop and maintain a stable and constant economic growth.
There are many advantages of financial intermediaries such as low risk and liquidity associated with trade. In any country such as Australia, there are certain laws and legislations to form a financial intermediary. A bank, mutual fund and insurance company work according to Australian laws locally and they are secured by the government and other sub-government authorities such as central bank. Financial intermediary is much helpful for smooth working and trading locally and internationally.
The second use of financial intermediary is the liquidity; financial intermediary may quickly get cash for the depositor in case of need ad requirement. Like if you have bought bonds and but you need in replacement of bonds then you can just sell that bond to the financial intermediary or to any other person to fulfill your cash needs because of its liquidity but if you lend directly by leasing a house so you cannot quickly get cash against house because of other formalities and agreements between you and borrower.
There are numerous advantages of financial intermediaries which are as follows:
- A reliable way of making payments that is, exchanging value
- A means for pricing and pooling certain types of risks
- A way of transferring resources from savers to borrowers
- A way of transferring the returns back again, which requires that the savers’ money is not lost and which, in turn, requires monitoring of borrowers and managers; and
Financial intermediaries are providing heavy support to resolve so many issues of individual and business in automatic and advanced manners. Now, it is possible to send payment within minutes through western union money transfer service which is a kind of financial intermediary for transferring payments. People can do business transactions really easily and speedily now. Sale and purchase of any commodity, currency, goods and services is only easily possible with the help of financial intermediaries. The access that is crucial and guidance towards the financial market is provided by financial intermediaries. Due to these intermediaries, a lot of advanced and quick ways of trade have been incorporated.
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