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Financial Markets and Intermediaries

In: Banking and Currency in Hong Kong

Author

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  • Y. C. Jao

    (University of Hong kong)

Abstract

To understand fully and evaluate the role of banking institutions in economic development, one has to study them in a wider context of financial markets and other non-bank financial intermediaries. The commercial bank is but one of the many financial intermediaries, even though it may be the most important one. Banking activities moreover exert their impact on the liquidity position of the economy through financial markets. The economic system may be visualised as consisting of various financial and real markets, whose continuous interactions determine the levels of real output and prices. On the other hand, the structure of the financial markets and the development of non-bank financial intermediaries can have an important bearing on the behaviour pattern of the banking system, especially in a laissez-faire regime without a central bank such as Hong Kong. For example, the extent to which the stock market acts as an adequate source of equity capital will affect the role of commercial banks as suppliers of long-term finance, while the existence of intermediaries which specialise in financing a particular industry or sector (e.g. housing development) will affect the portfolio of earning assets of commercial banks.

Suggested Citation

  • Y. C. Jao, 1974. "Financial Markets and Intermediaries," Palgrave Macmillan Books, in: Banking and Currency in Hong Kong, chapter 4, pages 72-101, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-02199-4_4
    DOI: 10.1007/978-1-349-02199-4_4
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