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INTRODUCTION………
Mobilizing and allocating savings.
Financial intermediation – process by which funds
are mobilized from a large number of savers and
make them available to all those who are in need of
it.
Vital for industrial developments.
CAUSES OF FINANCIAL
INNOVATION
NEW FINANCIAL SERVICES
MERCHANT BANKING
Financial intermediary.
Transfer of capital.
Helps in –
o Portfolio management
Bank of
Tokyo
Mizhuo
Corporate
syndicated Bank
term loan Maybank
of $750
million
Sumitomo
Mitsui
Banking
Corporation
LOAN SYNDICATION
BA Asia DBS
BNP Paribas
VENTURE CAPITAL
Method of financing in the form of
equity.
Much thrust is given to new innovations and ideas.
botheration.
Exporter is protected against the risk of non payment
of debts.
Exporter gets 100% of the bill amount minus service
charges.
FACTORING Vs FORFAITTING
FACTORING FORFAITING
Short term financing. Medium term financing.
Employed for domestic and Export only.
export business.
Client gets 80% of the total
Client gets 100% of the
value.
value of export bill.
Bulk finance is provided
It is based on single export
against a number of unpaid
bill.
invoices.
DERIVATIVE SECURITY
A security whose value depends upon the values of
other basic variables backing the security.
These variables are the prices of the traded
securities.
It is used as risk management tool.
Examples –
• Forward contracts
• Options and futures.