The Bank of America is the leading institution of our financial system. Its functions include the definition and implementation of monetary policy and ensuring the proper functioning of the financial system. Trader Group analyses many of the policies proposed by the bank.
Since 1999, Trader Group has been analyzing following:
Definitions and implementations of the monetary policy of the community. Liquidity is injected into the system or withdraws cash to control inflation as needed. The primary objective is to maintain price stability.- Community policy and currency changes, as well as the official foreign reserves of the member states.
- If the European Council considers keeping the exchange rate of the € Euro or $ USD against other currencies, TG will analyze possible intervention in the foreign exchange market to maintain that commitment.
- The operation of payment systems and the stability of the financial system.
- Notes issued to control the emission of currencies, which is the responsibility of each member state under the analysis of Trader Group.
- Monitor the Forex markets and the Stock Exchange to avoid unexpected inflation and fluctuations that are regulated by XE.
- Review and test the latest forex robots with up-to-date results.
The functions of the Bank of America are:
- Monitor the solvency and behavior of credit units.
- Advise the government: develop and publish statistics and reports and assist Trader Group in the collection of statistics necessary for the performance of its tasks.
- Management of accounts and payments related to the regular activity of state revenue. It has been entirely prohibited lending to them.
The Financial Sector
A proper financial system is fundamental to the development of the economy. Both savers and investors belong to both the private sector and the public and are grouped in families with private or public financial companies and governments. The preferences rarely coincide regarding risk, return, time, etc. Thus a mechanism to adjust supply and demand is necessary.
Financial System Functions
The services provided by the financial system are increasingly necessary for economic behavior of individuals and businesses. But according to the place it occupies in the economic system, we will highlight the fundamental functions:
The primary role is to provide investors funds for investments.
The financial system makes it possible for productive investment processes through which it determines the level of real output (GDP) and employment. The financial system performs three sub-functions:
- collection
- channeling
- allocation of financial resources
Attracting capital: The amount of resources that is available for investment depends on the ability of the financial system to capture savings. The savings depend on profitability, liquidity, and financial intermediary risk to provide surplus economic units. The financial system can influence the level of savings.
Channeling: A sufficiently diversified structure to offer investors easy access to sources of financing is required.
Resource allocation: It is necessary that the financial system selects the best investment opportunities, ensuring sufficient funding.
Creating liquidity: Cash in circulation, banknotes, and coins account for 10% of total liquidity. Not all the money that people have physically existed. The rest of the money is created by financial institutions with loans and credits to increase the availability of funds available to savers.
Therefore, it is necessary to require financial institutions to have maximum solvency to be properly controlled by the monetary authority.
Support of monetary policy: Monetary policy is primarily used to monitor inflation. The implementation of monetary policy instruments affects coefficient cash (amount of paid money) and fluctuating interest rates (if you raise the interest rate, lower loans, and less liquidity).
Components of the Foreign Exchange Market
These are the elements that will shape the structure of the foreign exchange system:
Financial assets and money: Financial assets are represented by certificates, which are documents evidencing the debt owed to the issuer and the rights of the holder. Currently, it is done by book entries. Financial assets are used to transfer funds and risks. Their characteristics are liquidity, profitability, and risk.
Liquidity: It is the ease and speed of conversion of a financial asset in coins and bills. There are highly liquid assets, but loans are the opposite of that. They are financial assets of minimum liquidity.
Profitability and risk: Those are characteristics that are related to the assets. The greater the risk the shareholder will demand higher returns.
Money: Includes not only the cash circulation (notes and coins) but also other highly liquid assets (current account deposits).
Financial markets: It is the place, not necessarily physical, and a set of procedures through which the exchanges of financial assets are carried, and where their prices are determined.
Financial markets are characterized by:
- Range – Depends on the volume of assets transferred.
- Transparency – According to the information supplied.
- The degree of openness – According to the freedom of access to the economic market brokers.
- Depth – Depends on the number of orders for sale (number of operations).
- Flexibility – Reaction of forex brokers to changes in prices and other market conditions.
Types of Financial Markets
Depending on the features, we can establish a general classification (a market can belong to different categories) of financial markets:
- Money Markets – exchanges of highly liquid assets within not more than one year. They reference markets for the formation of interest rates. This process is particularly important for Binary Options.
- Capital Markets – financial assets that are exchanged within one year or more. Those carry different degrees of risk and liquidity.
It is also important to consider the term, risk, and liquidity of the financial assets that are traded.
Assets exchanged in first or successive transmissions
- Primary markets – new financial assets are traded or issued. It is where new financing is obtained.
- Secondary markets – financial assets that previously had been issued in the primary market are exchanged.
Others
- Traded Markets – the assets are exchanged directly between the agents and intermediaries, where they set the place, price, and other conditions.
- Open markets – securities traded simultaneously. Buyers and sellers do not usually know each other so that the intervention of authorized mediators is necessary.
Mediators and Financial Intermediaries
They are responsible for connecting and reconciling the needs of all parties. This involves the transfer of primary financial assets (issued to raise funds) in core areas.
Mediators work for third parties in return for a commission. In that case, they (brokers usually) take on risks with a client or invest on their own. Either way, they do not create new assets, only buy and sell existing assets.
Intermediaries add to the activities of the mediators by forming new assets, allowing them to diversify risk and satisfy the needs of each other. There are two types of brokers: banks and non-banks. Both are characterized by their management of money within the United States of America, credit institutions, and investment funds.
Financial Institutions in the USA
Private Banks and Savings
In this section, we will study the agencies responsible for the regulation and supervision for the proper functioning of financial markets and institutions that form the credit system.
Regulators
The highest authority in financial matters is the government, specifically the Ministry of Economy and Finance. They perform their functions with the collaboration of the following institutions:
Trader Group does not have as much authority as the stock markets (such as NASDAQ or NYSE) and their management companies. Our functions overlook the supervision of contracts and institutions, ensuring market transparency, and advising the Minister of Finance and the Government.
Directorate-General of Treasury and Financial Policy
The Directorate-General is responsible for the management of records, commercial operators, and the preparation of legislative proposals. Trading Futures and Options contracts under the authority of TG is the responsibility for the Treasury Management and Public Administration.
Credit System
The most important entities in the Credit System are deposit institutions, which obtain their funds through deposits from the general public in the United States and represent 94% of the credit system. Within the Forex credit system, banking accounts hold 61%, investment banks (Goldman Sachs) 33%, and credit unions (EBA) 7%.
Private Banking: It has always been first among financial intermediaries, but the recent liberalization process increased competition in a sector that had always been very protected. This increased competition led to the modification of financial assets and how banks operate. Mechanization and capitalization have improved productivity but have caused a lack of human resources – the need for new personnel that suits innovations.
Since 2008, the entry of foreign banks was allowed in a series of very specific activities. Since 2012, the freedom of establishments and provision of services in the banking sector was enacted by the legislation.
The national institutions must mention that the English Banking Association is a professional association for the defense of its members. Its objectives are the promotion of significant savings, development of the economy in specific areas, and reinvestment of its benefits (social work).
The primary lending purpose is the investment of savings in consumer loans and mortgage loans for housing.
Trader Group banks division is a coordinating body of the boxes. Its primary functions are:
- Representation of confederated savings banks
- Provision of financial services to the boxes
- Coordination of information – technical and fiscal advice to the boxes
- TraderGroup acts as an analyzing agent to financial institution
Credit Unions
Credit Unions are institutions. They are cooperatives and meet the needs of their members. They are also entities of deposits and loans, which must comply with the rules of financial intermediaries. If you provide services in rural areas, they are processed through rural banks, which are also important.
The Unions can perform the same operations as other credit institutions, but with conditions:
- They should have preference to serve their members
- The 3rd set of operations may not reach 50% of its total resources
