Oditor, Vol. VI, No. 01/2020
COMPARATIVE FINANCIAL SYSTEMS: IMPLICATIONS FOR ECONOMIC GROWTH
Milka Grbić, Dejan Jovanović
Date recieved: 18.11.2019.
Date accepted: 20.03.2020.
JEL: G10, G21
The main goal of the research in this paper is to, starting from the role that financial system has in operating of every market economy, analyze the strengths and failures of a bank-based and market-based financial system when performing basic economic functions. In order to achieve the defined goal, a qualitative research was conducted. In this sense, an innovative interpretation of the relevant scientific literature was made using descriptive and comparative analysis methods. The paper examines four approaches that represent a critical analysis of the role and importance of banks and the securities market – bank-based, market-based, financial services and legal-based approach. Emphasizing the positive role of banks, the bank-based approach highlights the comparative failures of the securities market. On the other hand, the market-based view highlights the advantages of the securities market, while at the same time emphasizing the failures of banks in performing their basic functions. However, the focus of a financial services approach is not the debate over whether a better financial system is based on banks or the securities market, but the extent, quality and availability of financial services is important. Finally, the legal-based approach, which represents addition to the financial services approach, emphasizes compliance with the provisions of financial contracts and the protection of the rights of participants in financial transactions. Accordingly, the key research findings relate to identifying assumptions that contribute to the better functioning of the financial system and to pointing out that the functional compatibility of banks and securities markets contributes to their complementarity and more efficient transfer of funds from savings towards investment entities.
Keywords: financial system, bank-based, market-based, functionally-based, legally-based, approach.