International Financial Systems
International Financial Systems
The responsibility of reserve bank is to ensure that the bank’s policies are double checked by the county’s government when the bank formalizes important changes to financial regulatory structures. It may include the change of duties for the supervision of bank to a better improved regulator, for example, the Australian Prudential Regulation Authority (APRA). Growth in economic activities can only be improved by making sure that there is a strong financial system, where investors and other customers are able to enjoy the b...
Need essay sample on "International Financial Systems"? We will write a custom essay sample specifically for you for only $13.90/page
...enefits that financial intermediaries and market infrastructures provide. Lack of enough fund in a county can lead to poor economy and hence intermediation process is paralised. The best way to protect and sustain the strength of finance in a country is to carefully consider the future plans of the economy for that country. This system helps a county to realize the most crucial things within the the financial process and where need may be, take mitigation action. Most of these crucial conditions affect the entire household and the cooperate sector entries, price fluctuations also interfere with the distribution of financial problems within the economy.
These conditions help the financial intermediaries and other participants relate well with the market prices and risks that they always encounter. Well built crisis management structures are meant to help solve problems of disturbed financial organizations so as to maintain position of the public within the financial structure. Systematic consequences help the reserve banks to maintain their obligation of ensuring that there are no frequent financial disturbances this will them ensure that there is no financial shortages experienced. Hence the reserve banks will ensure that rules are put in order to prevent the negative effects that these financial disturbances can cause.
Maintaining low and very stable inflation rates and manageable economic growth help the reserve banks to reduce the frequent occurance of financial instability. Seasons of extended credit growth, as a result of high asset price inflation always lead to a financial crisis which affects negatively the development of a country’s economy. An example of the policies that the reserve banks implement to control the situation of the financial system on a continuous basis, helps the bank to evaluate a number of economic and financial reports which also help to provide effective and efficient financial systems. The Payments System Board which are found within the bank has powerful authority for payments system rules. These rules help to maintain the payments system making it reliable and trustworthy, It will assist in minimizing the subject of difficulties in a single organization to be passed on to different organizations.
In oder for a financial system to operate effectively the bank officials always come together through meetings that help them share ideas on how to go about the factors that affect the running of their organizations internally and externally. These kind of meetings are chaired by bank governors who try so much to join together the entire bank. However, in matters affecting international financial system, the reserve banks help in ensuring that there is maximum exchange of information and co-operation in financial management internationally ( Alsem, 2001).
Globalization, is it a threat or an opportunity to the international financial system? This is the transfer of human labor and knowledge across the world. It can be facilitated through trade and financial movements. Globalization is important in the development of infrastructure especially in the financial structure and hence it make it difficult for the government to control the economic activity of a country, also the government is given limited authority to control the tax rate and tax systems. Countries with less capital flow are always faced with shortages of microeconomic stability. Therefore, in a world of improved financial markets, countries will always get it continually threatening to a bide with rules that do not encourage financial stability. Hence this can result in to an elevated price markups and salaries which will lead to low competition in a country.
Short-term investors may continue to invest even if the economic policies of a country have become less competitive. This however, will result into a greater problem when the economy trend changes, hence the country might end up experiencing a shortage of capital. Change in technology also ensures that there are variety of incentives for the government to be able to meet good economic rules. This will help other sectors like the private sectors to draw meaningful statements of risks. The main aim of the international financial structure is to create expectations that are based on principles that are only internationally accepted, globalization can sometimes lead to elimination of such activities that are not bringing any development to the business.
Crises are as a result of exposure to the internal capital markets and quality growth records of financial systems. The main causes of ambiguous crises are due to briefing and debriefing of things to happen in national procedures and the international financial processes. For example,lately countries has been working on ways to reduce crises in the near future. International markets also interfere with the national records of economic achievements, and the that countries that are involved are sometimes caught unawares. The following are considered as important aspects of trade for countries that participate in the international markets. They include: good governance, macroeconomic stability and financial goodness. The efforts to maintain the structure of the monetary and financial system are only realized when the international community is evaluating the global crisis.
Consequently, for everyone to benefit through globalization, international community should promote the international financial structures, trade and by helping the developing countries improve in the international economy, so as to be able to grow faster and to avoid poverty at all cost. The main reason as to why there has been a slow integration process amongst the less-developed countries is as a result of poor policies of different organizations in these countries (Wannatas, 2000).
Stability of banking system is required so as to enable a successful risk assessment at the least level of an organization. It will help the organization to evaluate the invisible risks in the bank’s balance sheet recordings of a financial system. The main importance of the Basel accord is to help local banks reach an international level so as to represent their grievances to the international financial structure. Like in the case of US where many organizations do not consider the Basel proposal but they still involve in duties that are considered as banking activities in most countries in the world. These organizations are an example of international financial system.
Operational risk is that loss which is experienced due to lack of a appropriate internal systems and external operations, it also comprises legal risk. Hence the Basel committee can be consulted for support to enable organizations choose the most reliable software and hardware programs which will help them meet the organization’s requirements (Drafto,N & Felly, V, 2006).
With the increasing integration all over the world, concerns have been maintained to curb the threats to international financial stability. The international community, which is faced by advanced information technology and communications are in apposition to affect rapidly the world economy. These strategies were developed due to the increase in international financial instability, where lack of fund in one country led to another country’s nightmare. Because of these concerns the international market has decided to develop an improved international financial system in the following ways: by motivating concern to the ignored earlier response of customers intrigues, encouraging international shared standards which are utilized by all the financial organizations across the globe and also to facilitate co-ordination and good communication within the organization, this will help the managers to maintain financial stability (Gordon, 2001).
The main reason for the establishment of the international stability forum is to help in encouraging the international financial stableness by making sure that there is enough information and co-ordination in the various international financial organizations. This kind of forum is important because it units experts from international groupings of governance, committees of banks and other authorities responsible for the stability of finance. The forum also ensures one on one communication between members and non-members of international finance system. These meetings are meant to evaluate the vulnerabilities in the international financial architecture.
The forum also helps in exposing institutions to discover improved risk awareness and good management functions. Serious difficulties faced by the financial systems can be solved through this kind of forum, whereby its main objective is to solve issues that are experienced when an institution is faced by complex international financial problems. Another benefit of this forum is its activity in credit risk transfer, which enables the reserve bank to form working groups which are meant to enable the rest of the workers in the organization understand and manage the risks involved in the finance department. Better financial structures can only be achieved in an organization when that organization practices transparency in the monetary and financial policies. These practices help an institution to eliminate any form of corruption which might interfere with its standards of auditing, payment systems and the entire security of an organization.
The forum has goals which encourage the external markets to implement these standards mentioned above, the effectiveness and efficiency of the financial system (Dalh, R , 2006)
The financial committee also encourages the work of central banks to ensure advanced economies which provide support that softens the problems that interbank markets face, and hence call for the solutions to deal with the financial strains. Increase in capital and mobilized fundings will lead to a stable confidence in the financial institution’s reports on the losses and statements of the balance sheet. This can be realized by the committee, in the different fora which are meant to manage and sustain activities from the financial strain as a break through to the global financial system stability which ensures the effectiveness of the regulatory and supervisory systems. In this way the work of funds in areas like the international financial stability report and also the report by the International Monetary Fund (IMF) contains financial policy lessons for these funds checkup.
This combination of the committee and the IMF improves the effectiveness of the lessons from the agreed policies and shared crises. It also ensures the advantages of fund’s financial control management which is included in the financial sector assessment policy, and its ability to spot risks in the future. Increased inflation too has brought forward risks to new markets and the developing countries, which are now facing financial constrains. Lack of stabilization gains may create a room for further worsening of the external surrounding of other countries. Hence the maintenance of economic diversification process is important because the exporting countries are in a position to discover the changes in commodity prices and the risks that are encountered due to such fluctuations in the market. Populations that are considered poor are often faced with serious situations of low-income and high food prices, the financial community records these cases and persuades these countries to seek information from the World Bank and other related partners on matters concerning policies and finance (Walker, O, 2006)
Globalization is the transfer of new innovation across the world, this process of technology transfer is irreversible and can never be ignored meaning that companies and organizations only survive through globalization. This process gives companies an opportunity to spread their wings in order to maximize organizational profits and to capture large market share. To manage foreign exchange risk, managers need to familiarize themselves with financial markets, and social economic structures. Businesses also require enough knowledge so as to be able to mitigate risks that they face. Other requirements for proper management of foreign exchange risks are good knowledge of currency exchange rates and also being able to sort out complex situations. Managers are advised to master foreign risk mitigation so as to be able to discover the risks and opportunities essential to a successful international business (Quiggn , 2008).
In conclusion, the main objective of financial system forum is to encourage financial organizations to practice risk management, so that they are able to evaluate organizational stress which might lead to low productivity. Developed transport and communication in infrastructure also enable many organizations to avoid international foreign risks. More development of infrastructure is required for the increasing market segments mostly in trading and settlement areas (Dahl, 2005).
Alsem, K.T. (2007), Reserve Bank of Australia, The McGraw-Hills Companies Inc.
Belly, S. & Wannato, J. (2002), Globalization: Harcourt Brace Jovanovishia Group (Australia).
Quiggnt, (2001) Financial Stability Forum: The Political Studies v35 September 524-32
Gordon, (2006) International Finance Stability System, The McGraw-Hill Company Inc.
Dahl, (2005) RBA: Financial Stability Forum: Central Bank of Australia.
Drufto, N. & Felly, V. (2006). Basel II: European Committee Forum.
Ewero, P (2001) The Basel committee Accord.
Walker, O. (2006), The International Monetary Fund, The Central Bank: RBA
Gordon, (2001). Years twelve: The Reserve Bank of Australia. The Australian Financial Systems Review.
Quiggn, (2005) Risk Mitigation Techniques.