Components of Financial System E.g. Banks, Insurance, NSE, SEC, CSCS - SS2 Accounting Lesson Note
The financial system is made up of several components, each of which plays a critical role in facilitating the flow of funds between savers and borrowers, managing risk, and promoting transparency and accountability in financial markets. The main components of the financial system include:
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Banks: Banks are financial institutions that provide a range of services, such as accepting deposits, providing loans, and managing investments. They act as intermediaries between savers and borrowers, and they play a vital role in facilitating economic activity.
Insurance: Insurance companies provide protection against financial losses due to unexpected events, such as accidents, illnesses, or natural disasters. They collect premiums from policyholders and use those funds to pay out claims.
Stock Exchanges: Stock exchanges are marketplaces where stocks and other securities are bought and sold. They provide a way for companies to raise capital by issuing stocks, and they provide investors with a way to invest in those companies.
Securities and Exchange Commission (SEC): The SEC is a regulatory agency that oversees the securities markets. It is responsible for enforcing securities laws, regulating stock exchanges and brokers, and protecting investors.
Central Securities Clearing System (CSCS): The CSCS is a financial institution that provides clearing, settlement, and depository services for securities transactions. It acts as an intermediary between buyers and sellers, ensuring that trades are settled in a timely and efficient manner.