Chapter 1 - Regulatory theory and framework

Summary

The financial system fulfils several quintessential roles within the economic framework. For instance, it expedites transactions by administering a secure and robust payment system. This mechanism not only assures the secure transference of financial assets but also accommodates transactions across borders, thus facilitating arm’s-length commercial interactions on a macro-economic scale. The financial system is also instrumental in mobilising savings from households that possess financial resources surplus to their immediate consumption needs. In doing so, it enables these households to accrue returns on their capital, thereby enhancing their consumption possibilities in subsequent periods.