FINANCIAL IMPROVEMENT AND THE ROLE OF THE CENTRAL BANK
FINANCIAL IMPROVEMENT AND THE ROLE OF THE CENTRAL BANK

Summary/Abstract: Financial institutions are financial intermediaries in the process of transferring financial funds between participants in the financial system. The main participants in the financial system are: individuals, businesses, financial intermediaries and the government. Money owners are interested in investing their savings to make money. As compensation for this, they derive profits in various forms, such as interest, dividends, capital gains, etc. Borrowers also need additional financial funding to finance their investment or consumer programs. They are obliged to borrow those funds from financial institutions. For borrowed funds they pay a certain price to the lenders. With the mediation of financial institutions, it is possible to transfer financial funds from entities that have surpluses to entities that have a lack of financial funds, and at the same time need to provide them from external sources. Investment or consumption, if sufficient accumulation of the necessary financial funds was expected from own resources. The essence of financial intermediation lies in the collection of financial funds by many individuals and businesses that hold financial savings, and their investment in various forms. With the proclamation of the financial mediation process, we notice its multidimensional aspect, on the one hand as the collection of financial funds in various forms and their concentration, and on the other hand as investments of funds collected through various forms of loans to borrowers who need financial funding. Financial institutions do not only have the role of simple intermediation, because they also perform a whole set of analyzes and evaluations in the case of creating, providing and performing their services, both in terms of fundraising and concentration, and from aspect of potential investment of financial forms. In terms of fundraising, the analysis aims to assess the appropriateness of financial resources in terms of interest rate and term of use, while in terms of investing financial potential, the analysis aims to ascertain and determine economic reasonableness and financial financing of investment projects, and real opportunities for return on invested funds, together with a certain interest rate. Savings holders can also invest them directly in users who need financial support. They can also lend them to the government to finance additional budget spending programs. In the first case we are dealing with the issuance of shares and bonds by the company that need financial funds, and in the second with government bonds, through which the government provides financial funds to finance the budget deficit. In summary, financial institutions (financial intermediaries) enable the collection of financial savings of businesses and individuals, as well as their investment in various variable forms for the financing of development programs and commissions. By performing this function, financial institutions influence the optimization of economic-financial effects and increase the efficiency of micro and macroeconomic scales

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