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Chapter 2
An Overview of
the Financial
System
1. Function of the Financial System
Channel funds from those who have surplus funds to
those who need the funds
(Indirect Finance)
Financial
Intermediates
(Direct Finance)
US (outstanding Amount):
size of debt market > share market
(US$41 trillion) (US$18 trillion) end 2005
(US$35 trillion) (US$19.5 trillion) end 2008
(US$43 trillion) (US$17.2 trillion) end 2010
(US$42 trillion) (US$21.3 trillion) end 2013
(new) funds raised in bond market is even more
important
not the case in many other countries including
Singapore (bank loans and share market fund raising
tend to dominate that of the bond market)