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impotance of financial_services

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CHARACTERISTICS OF FINANCIAL SERVICES: Like any other service, financial
services are characterized by the following:
FINANCIAL SERVICES-INTANGIBILITY: The basic characteristics of financial
services are that they are intangible in nature. For financial services to be successfully
created and marketed, the institutions providing them must have a good image and the
confidence of its clients. Quality and innovativeness of services are the focal points for
building credibility and gaining the trust of the clients.
FINANCIAL SERVICES- CUSTOMER ORIENTATION: The institutions providing
financial services study the needs of the customers in detail. Based On the results of the
study, they come out with innovative financial strategies that give due regard to costs,
liquidity, and maturity considerations for various financial products. This way, financial
services are customer - oriented.
FINANCIAL SERVICES-INSEPARABILITY: The functions of producing and
supplying financial services have to be carried out simultaneously. This cases for a
perfect understanding between the financial services firms and Their clients.
FINANCIAL SERVICES-PERISHABILITY: Financial services have to be created
and delivered to the target clients. They cannot be stored. They have to be supplied
according to the requirements of customers. Hence, it is imperative that the providers of
financial services ensure a match between demand and supply
FINANCIAL SERVICES-DYNAMISM: The financial services must be dynamic. They
have to be constantly redefined and refined. On the basis of socio-economic changes
occurring in the economy, such as disposable income, standard of living, level of
education, etc. Financial services institutions must be proactive in nature and evolve new
services by visualizing the expectations of the market
Present Scenario
The Indian economy is in the process of rapid transformation. Reforms ate taking
place in every field / part of economy. Hence financial services sector is also
witnessing changes. The present scenario can be explained in following terms
FINANCIAL SERVICES
Negotiations on financial services in the WTO are due to start in early April 1997, to
intensify in November and to end in December 1997. Participants hope to improve upon
the package of market-openingSee footnote 1 commitments agreed in July 1995, and to
apply these commitments equally, without discrimination, among all their trading
partners. This would continue the process of progressive liberalisation that is one of the
stated objectives of the General Agreement on Trade in Services (GATS).

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The present package, involving about 30 countries, already represents an improvement
over the commitments in financial services made in Marrakesh in 1994 at the end of the
Uruguay Round. The objectives of next year's talks are to make further progress, to bring
the United States into the improved package, and for all countries to make their
commitments non-discriminatory. At the same time, some technical issues such as
definitions of types of financial services have to be sorted out, although no deadline has
been set for completing work on these.
Background
Financial services _ banking, securities business, insurance, asset management, etc _ is
one of three service sectors whose market-opening negotiations were not completed
during the Uruguay Round. Like the other two (basic telecommunications and marine
transport), it is a large and important sector in its own right and it is essential for the
smooth and efficient functioning of all trade in goods and services.
The sector is estimated to involve $1.2 trillion per day in foreign exchange
transactions. International financing extended by banks around the world reporting to the
Bank for International Settlements is estimated at $6.4 trillion, including $4.6 trillion net
international lending. Total world banking assets are put at more than $20 trillion,
insurance premiums at $2 trillion, stock market capitalization at over $10 trillion and
market value of listed bonds at around $10 trillion.See footnote 2 In addition, practically
every international trade deal in goods or services requires credit, capital, foreign
exchange and insurance. For negotiators, financial services also have their own special
characteristics and requirements.
Participants in the negotiations want to see more competition in the sector both to
allow their companies greater opportunities abroad, and to encourage greater efficiency.
Developing countries need the capital and financial infrastructure for their development.
But governments also have to ensure that the system is sound and stable because of the
economic shocks that can be caused if exchange rates, interest rates or other market
conditions fluctuate excessively. They also have to avoid economic crisis caused by
banks' failures. Therefore government intervention in the interests of prudential
safeguards is an important condition underpinning financial market liberalisation.
During the Uruguay Round, the basic principles for negotiating and implementing
liberalisation were agreed. The GATS deals with principles applied to all service sectors.
A special GATS annex handles some of the issues arising from the special characteristics
of financial services. For example, governments, central banks or other authorities have
to implement effective monetary policy. They have to regulate the sector prudently in
order to protect investors and depositors and to avoid financial crises, and sometimes to
ensure confidentiality. The annex guarantees their rate to take prudential measures for
these purposes. Many countries included financial services in their tables (or "schedules")
of individual market-opening commitments in services, signed at the end of the round.

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CHARACTERISTICS OF FINANCIAL SERVICES: Like any other service, financial services are characterized by the following: FINANCIAL SERVICES-INTANGIBILITY: The basic characteristics of financial services are that they are intangible in nature. For financial services to be successfully created and marketed, the institutions providing them must have a good image and the confidence of its clients. Quality and innovativeness of services are the focal points for building credibility and gaining the trust of the clients. FINANCIAL SERVICES- CUSTOMER ORIENTATION: The institutions providing financial services study the needs of the customers in detail. Based On the results of the study, they come out with innovative financial strategies that give due regard to costs, liquidity, and maturity considerations for various financial products. This way, financial services are customer - oriented. FINANCIAL SERVICES-INSEPARABILITY: The functions of producing and supplying financial services have to be carried out simultaneously. This cases for a perfect understanding between the financial services firms and Their clients. FINANCIAL SERVICES-PERISHABILITY: Financial services have to be created and delivered to the target clients. They cannot be stored. They have to be supplied according to the requirements of customers. Hence, it is imperative that the providers of financial services ensure a match between demand and supply FINANCIAL SERVICES-DYNAMISM: The financial services must be dynam ...
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