The financial system is a set of institutions, means and markets that channel the savings of persons and entities towards other people or entities that need financing.
The financial system includes:
- Financial instruments (money, shares…)
- Financial institutions (banks, savings’ banks…)
- Financial markets (the stock exchange…)
The most well known actors within this financial system are banks and savings’ banks, but they are not alone; there are also the stock exchange markets, guarantee asociations, venture capital companies…
The purpose of the financial system is to facilitate relations among people with a surpluss of money and people needing money. This means that the main objective of a financial entity is to act as a mediator between savers and financed people.
The traditional financial system achieves this by trying to maximize profits. However, this no longer the only objective of traditional banking, it als carries out large investments in financial markets, which are often spectulative, without considering the financial product they are buying nor the activity, sector or company they are financing, and only looking for proffitability.
An ethical financial system, also plays the role of a financial mediator, but with the aim that the money that is collected are only an instrument to favour projects with an added value for society from the social, environmental, cultural, educational and democratic point of view, among others. It aims at recovering the social and original use of money as something that is used as an instrument to generate productive resources, but not a goal in itself.