What are five core principles of financial system Discuss it in-00408

Financial System

In finance, the financial system is the system that allows the transfer of money between savers and borrowers. Five Core Principles of the Financial System & Details:

According to Mr. Brown, five core principles of Financial System, as outlined below:

1. First, transparency means bringing the so-called 'shadow banking system' into the regulatory system, not operating parallel to it. And across the world, financial institutions need to be supervised not on what name they give themselves - be it banks, hedge funds or investment funds - but on what they do. We also need to ensure that all jurisdictions - such as offshore havens - and all important markets are covered by global supervision.
2. Second accountability means boardroom integrity, where boards of directors must understand and be held responsible for the risks they undertake. And credit rating agencies need to be free of conflicts of interest and be properly licensed.
3. Third, responsible risk taking means an end to the excesses from short-termism; instead rewarding people for long term success not short term deals. But to be most effective it has to be done internationally. A race to the bottom is in no one's interest. So we should agree a new international approach to pay and bonus structures.
4. The fourth principle of prudential regulation means taking into account the effect of a bank's capital, liquidity, solvency and conduct on the whole financial system.
5. Finally, he stated: "Lastly, international co-operation lies at the heart of all our changes - recognizing that financial institutions that work across borders need to be under cross border supervision too and regulators in one country must co-operate far more closely with regulators in other countries to create a global network of regulation that captures the risks to us all.

Other Principles of Financial are below:

1. Facilitate Payments
2. Channel Funds from Savers to Borrowers
3. Enable Risk Sharing