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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

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Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Plans & Membership

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Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Introduction to Financial Markets

Introduction to Financial Markets

Lindsey Matthews

30 years: Risk management & derivatives trading

In the first video of his series on Financial Markets, Lindsey Matthews first outlines the key participants (lenders and borrowers). He then explains the role that banks play in connecting the lenders and borrowers and finally discusses the role of money markets in facilitating cash flow.

In the first video of his series on Financial Markets, Lindsey Matthews first outlines the key participants (lenders and borrowers). He then explains the role that banks play in connecting the lenders and borrowers and finally discusses the role of money markets in facilitating cash flow.

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Introduction to Financial Markets

10 mins 12 secs

Overview

There are a multitude of players within the financial markets, however at its simplest, the financial markets start with lenders, those who have capital to invest, and borrowers, those who need capital. Between the two groups is a vast array of markets and facilitators they can use to ensure the flow of capital between the two groups including banks, securities and money markets, funds and hedging markets, hedging markets being those where you can transform risk.

Key learning objectives:

  • Outline who the lenders and borrowers are in the financial markets

  • Understand how banks facilitate the flow of capital

  • Outline how money markets facilitate the flow of capital

  • Describe how the FX markets facilitate the flow of capital and transform risk

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Summary

Who are the lenders and borrowers?

Lenders and borrowers could be anyone! They could be individuals, corporates or governments on either side. 

Individual lenders could be regular retail investors, as well as high net worth individuals. Corporates, charities and endowments all also invest money. Governments can also lend money either directly or through their sovereign wealth funds. 

On the borrowing side, again we have individuals, who may be looking to borrow for a mortgage, or a personal loan. We have corporates looking to raise finance. And some government borrowers, whether that is national, regional, municipal or local governments looking to borrow. 

How do banks connect investors and fund raisers? 

The oldest way of connecting lenders and borrowers is via banks. Investors deposit their money for safekeeping and hopefully to earn interest. Banks use these deposits to lend out money to individuals, for loans or mortgages, and corporates, which could be a small loan, or it could be a corporate borrowing hundreds of millions. 

Banks have to deal with the issue of maturity transformation. They act as an intermediary between lenders and borrowers, and often the deposits placed with them to finance the loans they give out are short term, whereas the loans are typically long term. Therefore the bank is relying on their deposits being replaced when one is withdrawn. 

How do the money markets facilitate the flow of capital between lenders and borrowers? 

Money markets are one of the oldest financial markets and is the market where banks borrow and lend amongst themselves. 

These money markets allow banks to manage their cash balances.  If a bank takes in more money on deposit than they need to lend out, then they can lend the excess funds to another bank through the money markets. These deposits tend to be for a very short period of time, often from 1 day to the next, known as overnight.

The money markets also include markets for governments, and some larger companies, to borrow money by issuing securities - governments may issue short term treasury bills for example. 

How does the FX market facilitate the flow of capital?

The foreign exchange market is the market for exchanging one currency for another. The FX markets are used by all market participants.  

The market for foreign exchange involves both parties paying money to the other one at the same time, but in different currencies. Individuals may use the market when going on holiday, companies will use the market to transact with other companies that use different currencies and the central banks might use them to support their own currencies. 

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Lindsey Matthews

Lindsey Matthews

Lindsey runs Perfordiant, an investment risk and performance consulting firm. He has worked in financial markets since 1992. Lindsey became an MD in fixed income and equities, ran a Risk function, and was on the management team of an Asset Management fintech business. Lindsey is now a Visiting Fellow at the Henley Business School, and resides on the board of CFA UK.

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