The financial market as one of the levers of economic development

Each country has its own specific financial institutions that can differ in many ways: the type of activity, the size, the range of services provided. But at the same time, all institutions of this kind have a number of common functions that do not depend on distances and local specifics: with their help, the economy develops and international relations are established.

The loan capital market or financial market is a kind of mechanism that ensures the redistribution of capital between borrowers and creditors with the help of intermediaries. The financial market has an organizational form - a set of credit institutions that redirect funds from borrowers to owners and vice versa.

Financial market: the essence and functions

Loan capital is the basis on which the financial market rests, since money is the main "commodity" in the financial market, they are sold, bought and taken in the form of loans. The financial market consists of a money market (which in turn includes the interbank market, the accounting market and the foreign exchange market) and the capital market (it consists of the securities market, and the market for medium-term and long-term loans). The money market is represented by short-term credit operations (up to a year). The capital market "deals" with stocks, bonds, medium- and long-term loans. The credit market provides long-term investment resources for the government, banks and corporations.

The interbank market is an integral part of the loan capital market; In this market, temporarily free money is placed between banks in the form of interbank deposits for a short period of time. In the accounting market, the main instruments of circulation are very mobile and liquid - these are promissory notes and short-term liabilities. Currency markets deal with international payment turnover and monetary obligations of individuals (legal and physical) of different countries.

The main function of the financial market is the transfer of temporarily idle cash into loan capital. The financial market, like all markets, performs a number of other functions:

- mobilization and accumulation of temporarily free cash. The financial market offers various ways of investing money. In order to receive income from temporarily idle funds, you can invest them in securities or open a deposit account with a bank. In the future to raise funds enough to sell securities or take a loan from the bank.

- distribution of free financial resources. The financial market provides for the movement of capital between different sectors. The market provides investment with the capital necessary for terms and structure. Free money is combined in large amounts, sufficient for investment, and then turn into loan capital.

Redistributive function. Once all the money is mobilized and distributed, the main task for the financial market is to ensure a constant movement and distribution of funds.

- improving the efficiency of the economy. The economy can function normally only with the constant flow of funds between firms, individuals, banks, enterprises and the state. The main mechanism that ensures this constant transfusion of capital is the financial market.

In addition to the redistribution of funds, the redistribution of risks also takes place in the financial market. For example, if you give your friend a debt and he does not return it to you, the risk of a non-return will be entirely yours, and you will not get not only no profit, but your own money. But if you put money into a deposit account in a bank, and your acquaintance will take out a loan in this bank, the risk of non-return will be distributed to the bank as well. And you will additionally receive income in the form of interest from the placement of temporarily free cash.