What is Global Finance?
Global finance refers to the financial system consisting of regulators and various financial institutions that conduct their business on an international level. As a result of this definition, global finance does not constitute any financial businesses or regulators that act on a national or regional level.
The primary components of global finance are the enormous international institutions, such as the bank for International Settlements or the International monetary Fund, as well as various national agencies and government departments, such as various central banks, finance ministries, and those private companies who act on a global scale.
Prominent International Institutions aligned with Global Finance:
The International Monetary Fund is a financial institution that is responsible for maintaining the international balance of payments accounts of its member states. The International Monetary Fund may also act as a lender (typically in last resort situations) for state members who are in financial distress due to currency crises or struggles that revolve around meeting the balance of payment when debt default is present.
Membership in the International Monetary Fund is based on quota or the amount of funding a member state (country) provides to the fund. The evaluation of funding is based on a relative investigation of the member state’s role in the international trading system and global finance in general.
Another prominent member of global finance is the World Bank, which is an institution who aims to offer funding for development projects that, for the most part, reside in developing nations. The World Bank assumes the credit risk of these developing nations; the World Bank will provide financing to projects that otherwise would not be able to access such funding.
The World Trade Organization is another principle player aligned with global finance. The World Trade Organization is responsible for settling disputes and negotiating international trade agreements with various international companies, institutions or government agencies.
Types of Private Participants in Global Finance:
To be considered a participant in global finance a company or organization must possess international clients or conduct business transactions overseas. The following types of institutions also play a prominent role within global finance:
o Commercial Banks
o Insurance Companies
o Sovereign Wealth Funds
o Mutual Funds
o Pension Funds
o Private Equity Firms and Hedge Funds