What role does the financial system play in the economy?
Money is a vital resource. It needs to flow to where it can be used best. The financial system allows this to happen.
The financial system is made up of different parts. These include banks, other institutions (such as insurers) and the financial markets that connect them together.
You can think of the financial system as the wheels of the economy. It provides crucial services which keep the economy moving:
- It offers a way for us to make payments so we can buy and sell goods and services
- It allows us to manage and insure against risks
- It gives us a way to manage our savings
- It allows households and businesses to borrow money to invest and grow