Question

A financial system consists of both financial institutions and financial markets. Financial markets bring the “key players” together and their funds. For this discussion, choose one of the functions of the financial markets and discuss how financial institutions play a role in this process.

Answer 1

Let's discuss on Primary Markets & how financial Institutions play a key role

Primary Markets - Here, the financial Institutions helps in raising the capital for the firms that need money, mostly for business expansion.

Let's say, ABC Super Markets is looking for opening another store, they need some amount in order to do this. Now they approach XYZ Bank for money.

XYZ Bank is a financial Institution which can offer many of the below services. Now bank will analyze the ABC Super markets money requirements and suggest the best way of raising capital.

1. Direct Loan from single bank or multiple banks

2. IPO Offer or Private placement of shares

3. Bond Issuance.

XYZ Bank can help the ABC Super market in raising the funds and charge them fee for the same