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Finance and Banking

Finance and Banking (Money & Banking)

Money is anything that is generally accepted by society at any one time. and in any area as a medium for exchanging goods and services However, it has to be determined in monetary units and is a definite unit of measure.

Evolution of money

• Commodity money
• Metals and Coins (Coins)
• Banknotes (Paper Money)
• Current Deposits (Demand Deposits)

Properties of good money

• is a rarity
• has a fixed value
• have a flexible quantity
• Easy to bring along
• can be divided into subunits
• durable

Exchange

• Barter System
• A system that uses money as a medium of exchange (Money)
• A system that uses credit as a medium of exchange (Credit)

Duty of money

• as a medium of exchange
• It is a measure of value (Standard of Value).
• It is a standard for future debt payments (Standard of Deferred Payment).
• It is a machine to maintains the value (Store of Value).

Money Supply

Narrow money supply (M1) refers to financial assets. used as a medium of exchange These include coins , banknotes and current deposits. All in the hands of people, companies, shops and other business organizations. at any moment

M1 = coins + banknotes + current deposits

*** Not including banks, not including central banks. and the Ministry of Finance

Broad money supply (M2) refers to the narrow money supply (M1) plus financial assets . that gives returns and can be easily converted to money that is used as a medium of exchange No cost at all or cost a little

M2 = M1 + Savings and Fixed Deposits

Very broad money supply (M3) means broad money supply (M2) plus promissory notes . of private equity firms

M3 = M2 + Promissory Note

Financial Market is a market that facilitates Transfer money from economic units with savings to the economic unit need savings (to invest) will be classified according to period of funds or financial instruments, etc.

Money market as a source of mobilization Short-term savings (not more than 1 year) and then allocated to loans to those who need funds. The financial instruments used in the money market are promissory notes , bills of exchange and treasury bills , etc. The money market can be divided into

The money market in the system is a financial institution established under the law such as commercial banks, finance and securities companies, etc.

An informal money market is a place where money is borrowed without legal support. Processing depends on the agreement and satisfaction of the lender and borrower, such as play-sharing, lending, consignment, etc.

The capital market as a source of mobilization Long-term savings (over 1 year) to be allocated to those who need long-term capital. The financial instruments used in the capital market include long-term borrowings, debentures, ordinary shares, bonds, both government and private , etc. The capital market may be divided into general credit markets, which consist of commercial banks and finance companies and stock exchanges. which is divided into primary market and secondary market

The first market (Primary Market) is the market in which newly issued securities are traded.

The secondary market is the market where old securities are bought. (who have traded and changed hands before)

Commercial Bank means any type of business. accept deposits payable on demand or at the end of a predetermined period; and utilize that money in one or more ways, such as lending, trading or collecting bills or other negotiable instruments. Buying or selling foreign currency, etc., whether or not they engage in other types of business that are traditionally performed by commercial banks.

Duties of commercial banks

Providing financial services both domestically and internationally, such as depositing money, transferring money, lending money, keeping valuables

Create and destroy deposits, which is a special duty of commercial banks. Other types of financial institutions do not have such powers and duties. This makes commercial banks different from other types of financial institutions.

The legal reserve ratio is a rate set by the central bank as a percentage of deposits. All commercial banks with deposits must maintain cash reserves by depositing them at the central bank at a minimum of not less than this stipulated rate. Legal Reserve or Reserve Requirement is the amount of cash a commercial bank must maintain compared to the amount of deposits. Currently, the Central Bank has set a cash reserve rate of 6%, meaning a loan of 100. baht. From the bank, we will get 94 baht. The other 6 baht will be collected at the central bank.

How much money supply will increase or decrease depends on

Deposit / Withdrawal

Deposit = additional money volume

Withdrawal = Reduced Money Volume

A central bank is a financial institution that has been authorized by the government to maintain a country’s financial and credit system at an appropriate level. to benefit the economy and society as a whole

Difference Between Central Bank and Commercial Bank

– The central bank acts mainly for the benefit of the country. Not for profit like commercial banks

– Central banks do not compete with commercial banks.

– The customers of central banks and commercial banks are different types.

Functions of the central bank

• issuing banknotes

Be a government banker

• Maintain government and state enterprise deposit accounts
• Giving loans to governments and state enterprises
• Be a government financial advisor
• Be the government’s financial representative for borrowing money from abroad loan payment international money transfer and within the country to the government

Be a banker of a commercial bank

• Maintain deposits of various commercial banks
• is the central office for clearing
• Giving loans to commercial banks
• Be the center of interbank money transfers

– as a keeper of international reserves

– Be the last source of lender

– is the one who controls money and credit

– Controlling a commercial bank

Monetary policy is the supervision of money supply and credit by the central bank. to achieve one or more economic goals

Type of monetary policy

• Restrictive Monetary Policy is the use of various financial instruments to reduce the money supply in the economy.
• Easy Monetary Policy is the use of various tools financial in order to increase the money supply in the economy

Monetary policy tools

Quantitative or general control (Quantitative or General Control). The devices used in quantitative control are:

• Securities Trading (Open-Market Operation
• Rediscount Rat
• Standard Interest Rate (Bank Rate)
• Reserve Requirements

Qualitative or Selective Credit Control is a type of credit control that is used in cases where banks need to limit certain types of credit only. The types of credit that central banks usually choose to control are:

• Securities purchase credit control
• Consumer Credit Control
• Credit control for home and land purchases

Persuading commercial banks to comply

Public Finance

government revenue will be obtained from taxation and non-tax income

Taxation is the income of the government that is compulsory from the people. for the benefit of the people of the country where the payer does not receive any compensation in proportion to the amount paid More than 80% of the Thai government’s income is tax revenue.

Government expenditure government spending is spending what the government has to do. for the benefit of the whole country, including maintaining peace within the country defense and investment in utilities

Public Debt Government debt arises from borrowings and loan guarantees by the government. It is called public debt. because these debts must be borne by taxes collected from the people of the whole country Government debt arising from government borrowing caused by the government having insufficient income to meet the expenditure

Country budget is a plan to supply Government revenues and expenditures over a period of one year , known as fiscal year , have different start dates for each country. for Thailand will begin on October 1 and end on September 30, for example, the 2011 budget will begin on October 1, 2010 and end on September 30, 2011, etc.

fiscal policy as a way to solve economic problems by using fiscal measures, including tax measures government spending and public debt There are two main types of fiscal policies:

• relaxed fiscal policy will be implemented with measures to increase government spending, reduce taxation
• Strict fiscal policy It will be implemented with measures to reduce government spending and increase taxation.

The foreign exchange rate refers to the price of one currency compared to another. The exchange rate in the floating exchange rate system is determined by demand. to foreign currency And the supply of foreign currency, for example, 30 baht = 1 dollar, change to 33 baht = 1 dollar means the baht weakens and 27 baht = 1 dollar means the baht appreciates.

balance of payments It records the amount of foreign currency a country receives and pays over a period of time. It consists of 3 large accounts:

• Current account It is an account that represents the country’s income and expenditure.
• Cash flow account It is an account that represents the amount of investments, loans and deposits, both short-term and long-term. of foreigners who come to invest in the country
• International reserve account It is an asset that can be used to pay off international debts.