Close examination of global financial systems Essay

Close examination of global financial systems - Essay Example Not only is the existing function of German universal banking overemphasized, it perhaps never was as important as advocated, even at its peak by the turn of the century. The image that appears is not constant with the claim that German universal banks applied considerable power on industrial businesses and offered large amounts of funding (Bongini et al, 2009, p. 76). Even though there were a number of instances of this, these were the exceptions to the general rule, which was for businesses to support themselves on the inside largely. Pragmatic study on the relative values of bank-based as well as market-based financial systems has focused on â€Å"Germany and Japan as bank-based systems and the United States and the United Kingdom as market-based systems† (World Bank, 2012, p. 111). The bank-based idea emphasizes on the constructive function of banks in activating resources, categorizing good ventures, supervising executives, and dealing with risk. The bank-based approach a s well emphasizes on the relative limitations of market-based systems. Especially, highly sensitive markets promptly expose data within public markets, which diminishes the inducements for individual shareholders to obtain information. Therefore, better market expansion may hinder inducements for classifying pioneering ventures that encourage development. Banks, on the other hand, alleviate this setback as they create continuing links with businesses and do not disclose data instantaneously within public. Advocates of the bank-based approach as well highlight that liquid markets form a prejudiced investor environment. In liquid markets, investors can economically trade their shares, so that they have smaller number of inducements to apply thorough corporate control. As a... After bringing up the main the main topic of the essay, we see that it makes a few valid points to argue about. Whereas the function of financial systems is argued, the performance of different types of financial systems is even more greatly argues. Banks in Germany are mainly accountable for the growth of the nation, having promoted and developed its industries. To them, more than any other group may be attributed the wonderful outcomes yet realized. The essay goes deeper into the topic by bringing other examples. Pragmatic study on the relative values of bank-based as well as market-based financial systems has focused on â€Å"Germany and Japan as bank-based systems and the United States and the United Kingdom as market-based systems† (World Bank, 2012, p. 111). The essay says that theoretically, the financial services notion is completely compatible with both the bank-based as well as market-based approaches. Later, we are given pieces of advice, such as: when trying to con trol the design of a financial system, the study recommends that supervisory bodies should not intently concentrate on banks and markets independently, but rather see them as essential components of a co-developing system. In conclusion, we see that when trying to control the design of a financial system, the study recommends that supervisory bodies should not intently concentrate on banks and markets independently, but rather see them as essential components of a co-developing system.