Contemporary Issues in Financial Services Essay - 1

Contemporary Issues in Financial Services - Essay Example Financial intermediaries bring together borrowers and lenders in financial markets by interacting with savers and borrowers simultaneously and by producing a set of services facilitating the transformation of liabilities into assets like transforming deposits into loans. Though financial markets can also bring together lenders and borrowers directly, still the existence of financial intermediaries is of utmost importance. This is because the direct lending approach between savers and borrowers has proved inefficient as this process can be directly traced to the barter system where there is always a need for double coincidence of wants. This function of transformation is termed as intermediation. Through this process, financial intermediaries facilitate savers and borrowers to have indirect lending and borrowing. Financial intermediaries can be banks, building societies, financial advisor or broker, insurance companies, life insurance companies, mutual fund and pension fund. Firstly, national bank serves as a financial intermediary by accepting deposits and placing in various securities and mortgage loans. By doing this, individual investors are linked by banks with financial markets and demanders of credit. The intermediaries actually act as a middleman between firm raising funds and investors (Rampini & Viswanathan, 2012, pp.1-2). Requirement of financial intermediary Though financial markets can also bring together lenders and borrowers directly, still the existence of financial intermediaries is of utmost importance. This is because the direct lending approach between savers and borrowers has proved inefficient as this process can be directly traced to the barter system where there is always a need for double coincidence of wants. People with savings will want to lend the amount available with them for a particular time period. For this, one will have to find a person who needs approximately the same amount of fund for the same time period. Searching of such a person is a difficult task. Again, direct lending necessitates a negotiable contract. Transactions of repayments of principle and interest are required to account for. Direct lenders will have limited ability to diversify and minimum exposure to default risk by lending small amounts to many borrowers but the transaction costs would be relatively higher. Here financial intermediaries reduce the transaction costs and minimize risks. Thus, it improves the economic efficiency. Generally, the financial intermediaries perform the following functions: i. It facilitates transactions. ii. It creates a portfolio. iii. It spreads risks over time. iv. It eases household liquidity constraints. v. It reduces the problem of asymmetric information. In addition to intermediation, sometimes brokerage function also takes place by financial institutions in bringing together buyers and sellers to complete financial transactions. Stockbrokers specialize in brokerage to perform such task. Types of fina ncial intermediaries Fee based or advisory financial intermediaries These financial intermediaries charge a fee for rendering advisory financial services. Their services include: i. Issue management ii. Underwriting iii. Portfolio management iv. Corporate counselling v. Stock broking vi. Credit syndication vii. Mergers and acquisitions viii. Debenture trusteeship ix. Capital restructuring Asset based financial intermediaries The specific requirements of customers are met by these financial intermediaries. They provide the required asset or finance for rent or interest respectively. The income is earned by them from

CASE STUDY2 Essay Example | Topics and Well Written Essays - 3000 words

CASE STUDY2 - Essay Example In addition, the European Commission desired to confine isolated spot advertisements to short time slots during sports programs only (Lainer, 2005). According to Lainer (2005, pg. 1), "We are truly disappointed. We think they have missed an opportunity really to modernise advertising rules in a fast-moving environment with new technologies and competition." As previously mentioned, RLT is Europe's largest television group, having 32 stations in all. These include France's M6 and the United Kingdom's Channel Five. According to Lainer (2005, pg. 1), "Traditional commercial broadcasters pressed for more flexibility in using commercials amid increased competition for advertising. They also say tougher rules on commercials during children's and news shows could endanger programmer-making in these fields. The growth of digital channels, web-based TV and viewers' commercial skipping devices have fragmented audiences and challenged the core advertising-driven business of traditional free-to-air broadcasters." The European Commission stands up for itself by claiming that they tried to support traditional commercial broadcasters as much as possible when they were writing their proposal. A couple of things it proposed that would support advertisers include allowing them to have commercials during the first 20 minutes of television shows-which they currently cannot do-and allow for product placement in television shows. The proposal of the addition of product placement sparked much criticism, where some individuals feared that television in the UK would become commercial-soaked like it is in the United States (Lainer, 2005). One of the major forces impacting the European advertising industry is the European Advertising Standards Alliance. According to EASA (2008, pg. 1), "The European Advertising Standards Alliance (EASA) is a non-profit organisation based in Brussels. EASA brings together national advertising self-regulatory organisations (SROs) and organisations representing the advertising industry in Europe. EASA is, on behalf of the advertising industry, the single authoritative voice on advertising self-regulation issues and promotes high ethical standards in commercial communications by means of effective self-regulation, while being mindful of national differences of culture, legal and commercial practice." The advertising industry in Europe faces a number of key challenges today. Among these are socially responsible advertising. According to Perez-Latre (2003, pg. 1): In recent years, the European advertising industry has made a clear self-control effort since its goal is to provide a solid alternative to more governmental advertising regulation. But the last change in the European Commission's Directive, "Television without Frontiers" (COM/2002, 6.I. 2003), has provoked fresh thinking. Today's main controversial topics are alcohol advertising, time constraints for advertising on television, norms on interactive television, sponsoring, self-promotion, teleshopping, and other advertising/programming content. Extreme commercialization of television programs is having an impact: Clutter has increased to levels that are unbearable for viewers. Pretty much every European Union market is regulated with regard to its advertising industry. Children's advertising is particularly affected. For instance, in