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A financial system comprises a range of financial institutions, financial instruments and financial markets which interact to facilitate the flow of funds through the financial system. Overseeing the financial system, and sometimes taking a direct role, is the central bank and/or the prudential supervisor. There are four participants in the financial system such as lenders, borrowers, financial intermediaries and regulatory bodies.

Firstly, lenders are a saving surplus unit is one whose income exceeds its expenditure for a particular period. Many individual are not aware that they are lenders, but almost everybody does lend money in many ways. A person lends money when he or she puts money in a saving account at a bank; contributes to a pension plan; pays premiums to an insurance company; invest in government bonds; or Invests in company shares.

Companies tend to be borrowers of capital. When companies have surplus cash that is not needed for a short period of time, they may......

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Approximate Word Count: 967
Approximate Pages: 4 (250 words per double-spaced page)

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