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Financial Institutions and Market - Financial Innovation - Essay Example
Author : collierletitia
Finance & Accounting
Pages 6 (1506 words)
Financial Institutions & Market – Financial Innovation [University] [Instructor Name] ABSTRACT Financial innovation has been a topic for debate recently and its pros and cons have been widely discussed. A number of financial experts and economists are of the view that financial innovation should be encouraged as it leads towards new avenues for investment and economic growth, while other experts believe that unmonitored financial innovation is the leading cause behind the financial crises…
Advantages include; the creation of new securities, creation of new markets and financial institutions and the economic growth. The creation of new securities provides the investors with new avenues to invest in and it injects fresh capital which in turn leads towards increased employment opportunities. The disadvantages include; use of financial innovation for deceptive purposes such as off balance sheet financing and the creation of special purpose vehicles. The paper discusses two cases related to off balance sheet that shed light over the detrimental impacts of financial innovation over the economy as a whole. Financial Institutions & Market – Financial Innovation There has been significant debate regarding the validity of financial innovation. It has been suggested that financial innovation plays a vital role in the economic growth and prosperity and that, resultantly, financial system regulators should resist over-regulation that might create hindrances in the way of innovation. ...