Sample Business Finance Paper on International Financial Markets

The international financial markets have changed over the years. Laws and regulations involving
these markets are adjusted from time to time. Meetings conducted in the early 1980s between
powerful forces resulted in a major flowage of funds around the globe. This led to the
desegregation of financial markets and increased the complexity of transactions. The
mechanisms of transactions also have been altered progressively, from banks to non-banks
financial exchange such as pension funds, brokerage houses, insurance companies, and security
firms. Loans have also been altered to securities.
The extraordinary fluctuation of the world markets has developed consequences for acquiring
information and public policy. As a result of policies, world fund transfer growth on other
republic affecting the domestic market. This has made the need for information and how the
global financial market is growing, however due to the changes in the international financial
1.1 Types of international financial institutions and financial markets
Types of international financial institutions include internet banks, savings, and loans
associations, brokerage firms, investment banks and companies, mortgage companies, insurance
companies, retail and commercial banks, and central banks.
Central banks oversee and manage the rest of the banks, they are in charge of laws and
regulations making regarding the country’s funds. They do not have individual customers rather
big institutional financial institutions deal with them to provide services to the public. An
example is the European Central Bank.
Internet banks are similar to normal banks but offer their services online instead of buildings and
or permanent locations. Savings and loan associations are financial institutions that are

International financing markets 4
commonly owned and loan 20% and less to businesses. An example is Mountaintop Savings
Brokerage firms are institutions that help in the trading of securities such as stocks, mutual
funds, and bonds among investors. An example is the fidelity investments. Mortgage companies
are firms that fund mortgage loans. An example is the luxury mortgage.
An insurance company facilitates consumer transfer risk. Types of insurances that are offered are
death, accidents, property damage among others. An example of an insurance company is the
Allstate insurance company. Retail offers services to individuals while commercial banks do the
same to businesses. An example is the gulf international bank.
1.2 Foreign currency market functions in international financial markets
The foreign exchange market is where the exchange rate of currencies fixed on. The customers
trade with the currencies.
They include investors, banks, foreign exchange retailers, investment banks, and commercial
The market has two major functions in the international financial markets that include putting
currency prices comparing to other countries’ currencies. The other function is to facilitate the
trading of funds between countries hence aiding in liquidity in case one has or does not have.

1.3 Global financial system promoting the economic growth of a country
My country of choice would be Togo, a third-world country found in the west of Africa. Togo
has been helped by the International Monetary Fund since its request in 1979. Togo had two
programs, the Paris club debt, and World Bank loans at the time. In order for the IMF to help the
country, it had to restructure major goals for the country’s business and rural development which

International financing markets 5
removed monopolies, privatized the state businesses, and simplified taxes. This greatly improved
their economy.
Togo became better also due to the international financial institutions' programs.
1.4 MNC usage of global markets to raise capital
MNC is the abbreviation of multinational corporations. They are an organization that has
dominance in one or more countries other than itself. The MNC uses the global market to raise
capital through two different ways that are equity and debt financing.
1.4.1 Equity Financing
This is whereby companies trade their shares so to acquire funds. It may be due to wanting to
invest or clearing of bills. Companies can trade shares outside their own country. The majority
repeated ways of acquiring equity is cross-listing on a domestic exchange in other countries.
Global equity matters more for multinational corporations than local ones. Foreign proprietorship
of corporation grows with foreign sales.

1.4.2 Debt financing
Debt financing is the process where a corporation raises funds by trading to investors, debt
instruments. The significant types of debt financing are publicly traded bonds and bank debt. 20
% of the funds raised in a company are commonly from bonds traded from outside the country.
Loans are elements of funds from a number of countries due to the majority of big bank loans
originate from various countries are managed by multiple banks. Debt financing’s advantage to
equity financing is that the corporation still maintains its sole proprietorship.

International financing markets 6
1.4.3 International financial institutions helping the Foreign Direct Investors to establish
Financial Direct Investing is when a company or an individual makes an investment in other
enterprises in another country. It goes through when an investor gets assets in a foreign firm.
Financial institutions may facilitate the FDI in becoming MNC’s by making it conducive for
FDIs in pursuing their business. For example, the central bank could establish laws and
regulations of a smooth transition from FDIs to MNCs. Banks issuing loans to FDIs may also
ensure smooth flowing of FDIs transitioning to the MNCs.

1.5      Finance mechanism outside the banking system
The global financing system promotes trade through financing mechanisms outside the banking
system, like trade credit, hedge funds, etc. In order to understand this matter, we look into (Tsai.,
2009) and how he explains how China survived with shadow banking. This will help us to have
an overall understanding of how this mechanism works on a global stage.
The most productive part of the Chinese population does not have access to formal credit. Over
30 million enterprises owned by the private sector have come up in China over the last two
decades, however out of these they only 1.3% had attained loans from the banks.
So how were these businesses financed through the non-banking system? Most of China’s
private businesses depend on informal financing. Informal financing involving interest-free loans
from relatives and friends to a well-organized financial mechanism that go around banking in
innovative ways. This is one way those global financial systems promote trade through non-
banking finance systems.
A definite level of leakage has happened to the private sector from the national banks.

International financing markets 7

The international financial systems are changing every day the question is are people ready to
change with, to conform, to adapt, and embrace the new global financial error. Having the
knowledge of how the financial system works both locally and internationally may improve this.
Rules and regulations also need to change how the global financial system operations so as to
ease the way in which people conduct their business.

International financing markets 8
Tsai, K. S. (2009). Beyond banks: the local logic of informal finance and private sector
development in China. Informal finance in China: American and Chinese perspectives, 80-103.