The global financial system (GFS) is the financial system consisting of institutions and regulators that act on the international level, as opposed to those that act on a national or regional level. The main players are the global institutions, such as International Monetary Fund and Bank for International Settlements, national agencies and government departments, e.g., central banks and finance ministries, private institutions acting on the global scale, e.g., banks and hedge funds, and regional institutions, e.g., the Eurozone.
Deficiencies and reform of the GFS have been hotly discussed in recent years.
Contents |
The history of financial institutions must be differentiated from economic history and history of money. In Europe, it may have started with the first commodity exchange, the Bruges Bourse in 1309 and the first financiers and banks in the 15th–17th centuries in central and western Europe. The first global financiers the Fuggers (1487) in Germany; the first stock company in England (Russia Company 1553); the first foreign exchange market (The Royal Exchange 1566, England); the first stock exchange (the Amsterdam Stock Exchange 1602).
Milestones in the history of financial institutions are the Gold Standard (1871–1932), the founding of the International Monetary Fund (IMF) and World Bank at Bretton Woods 1944, and the abandonment of fixed exchange rates in 1973.
The most prominent international institutions are the IMF, the World Bank and the WTO:
Also important is the Bank for International Settlements, the intergovernmental organisation for central banks worldwide. It has two subsidiary bodies that are important actors in the global financial system in their own right - the Basel Committee on Banking Supervision, and the Financial Stability Board.
In the private sector, an important organisation is the Institute of International Finance, which includes most of the world's largest commercial banks and investment banks.
Governments act in various ways as actors in the GFS , primarily through their finance ministries: they pass the laws and regulations for financial markets, and set the tax burden for private players, e.g., banks, funds and exchanges. They also participate actively through discretionary spending. They are closely tied (though in most countries independent of) to central banks that issue government debt, set interest rates and deposit requirements, and intervene in the foreign exchange market.
Players active in the stock-, bond-, foreign exchange-, derivatives- and commodities-markets, and investment banking, including:
Examples are:
There are three primary approaches to viewing and understanding the global financial system.
The liberal view holds that the exchange of currencies should be determined not by state institutions but instead individual players at a market level. This view has been labelled as the Washington Consensus. This view is challenged by a social democratic front which advocates the tempering of market mechanisms, and instituting economic safeguards in an attempt to ensure financial stability and redistribution. Examples include slowing down the rate of financial transactions, or enforcing regulations on the behaviour of private firms. Outside of this contention of authority and the individual, neoMarxists are highly critical of the modern financial system in that it promotes inequality between state players, particularly holding the view that the political North abuse the financial system to exercise control of developing countries' economies.
Among the many critics of the GFS are:
|
|||||