MAF101 Lecture Notes - Lecture 8: Fitch Ratings, Tax Deduction, Information Asymmetry
Document Summary
A financial system consists of financial institutions, markets and instrument that together provide financial services for the economy. Financial systems have a history of financial crisis: Triggered by a loss of confidence in the system and a reluctance to supply finds. Crisis can have a very expensive consequences and so financial systems should be designed to reduce the risk of future cases. In the first half of the 20th century financial regulations were introduced, motivated in part to reduce the risk of crises. Many of the regulations were found to have unintended consequences and to be impediments to efficiency. The global financial crisis triggered a re- evaluation of the need for regulations. The removal of regulations (known as deregulation) in the (cid:1005)(cid:1013)(cid:1012)(cid:1004)(cid:859)s e(cid:374)a(cid:271)led (cid:373)a(cid:374)(cid:455) financial innovations that increased the efficiency of financial services by lowering their cost, and improving their range and convenience.