Characteristics of financial market
The main subjects of the market are households, firms and businesses, financial institutions and the State.
Market actors can act as the borrower and the investor. And financial institutions play the role of mediator in it.
Borrowers - are natural or legal persons that attract funds from other entities to develop their activities.
Investors - individuals and legal persons of the country as well as foreign citizens, businesses, government decision-makers about investing personal loan or borrowed funds in investment objects.
Financial institutions - are intermediaries that provide meeting investor and borrower. These include banking institution (equity, commercial, mortgage, investment, foreign banks) and specialized non-bank institutions (insurance companies, finance companies, pension funds, savings institutions).
The main function of financial intermediaries - is to help in the transfer of funds from potential savers to potential borrowers and vice versa. Their activities are beneficial to investors and borrowers, because:
- Eliminates the need to search for each other;
- The risk of non-repayment of the loan or inefficient investments;
- Follows from the above increase in interest income of savers;
- Lowering the total cost of the borrower to obtain a loan by reducing the moral, physical effort and time required to raise capital more savers to get the required amount of the loan;
- Financial intermediaries reduce the costs of financial transactions. This is achieved through harmonization and expertise that enable better explore the market, the financial situation of potential customers and generate more profit.