Australain Financial System

The Structure of the
Australian Financial System


1 Describe the difference between direct and indirect financing?

Savers (investors) can lend money (acquire financial assets) in two ways:

ľ Directly - lending funds to actual users of funds e.g. companies obtaining funds directly from a syndicate of lenders. In direct finance, financial institutions often provide financial services to the borrowers and lenders, such as, financial advice and broking services.

ƒæ Indirectly ¡V investors lend to financial institutions that in turn pool these funds to lend to various borrowers. The ultimate borrower and lender have no legal relationship or claim on each other, but each has a separate legal relationship with the financial intermediary involved.





2 What is meant by the term ¡¥Financial intermediary¡¦?

Financial intermediaries basically are the ¡¥middlemen¡¦ in the financial sector. They provide the link between those with money and those who need mone...