Finances play an important role in the life and formation of the state. Each country has its own characteristics regarding the regulation of the internal movement of financial flows. However, in general, all of these converge into a single whole and form a global system. In the article we will try to figure out what is a system of international finance and what is its structure.
The concept of international finance
International finance is a combination of financial resources around the world and their activity. They very clearly reflect the current state and the development process of the global monetary system.
The system of international finance (NFM) is a historically established form of organization of relations of an economic nature, fixed by interstate agreements and directly related to the movement of world capital. It also serves various types of economic relations between the powers, including foreign trade relations, money export, investments, foreign loans and subsidies, tourism, the exchange of scientific and technical developments, transfers, etc.
With regard to global financial transactions, they are currently the force that has a special impact on the monetary system of almost every country. When interacting with the economy in the broadest sense, it is a powerful tool for the positive integration of financial and economic markets of both entire states and specific regions. However, the international finance system also has negative characteristics. Among them is the promotion of the crisis spreading quickly and everywhere. In this case, countries are trying to cope with the crisis by their own methods.
SMF structure
Since each system must be streamlined, the system of international finance has a clear structure, which includes:
- Financial assistance. This includes loans and guarantees from international organizations and states.
- International capital markets. These are spot currency markets, derivatives markets, credit, equity and debt securities, as well as insurance services.
- Gold and foreign exchange reserves. They are of two types - private and official.
Functions of the international financial system
World finance is a kind of financial reporting, which is carried out through a variety of vectors of international financial activity. The most important direction is considered to be investment, which is direct and portfolio. If the direct involves investing in the authorized capital of the company and participating in its management, then portfolio - this is just an investment in securities.
The international financial reporting system performs two main functions: control and distribution. Let us consider each of them in more detail.
Control function
The first function involves monitoring the movement of social production in monetary terms. What does this mean? This makes it possible to analyze and record the movement of a given product at any time and at any stage.
In real life, the control function is implemented as follows:
- developing a strategy and current global financial policy;
- subsequent decisions are made regarding the global financial system.
The performance of this function depends on several factors:
- the nature of the country's development in the economic sphere;
- the ability of a state to implement international politics in the financial field;
- technical base that allows the process of collecting and processing data.
Distribution function
In addition to control, international financial accounting systems perform a distribution function. What does it mean? The world product is distributed in terms of money using international finance.
There are several patterns that characterize this distribution:
- Capital goes where the highest rate of return is shown.
- The risks associated with making a profit necessarily accompany the movement of world capital.
- The movement of international capital reflects and confirms the law according to which proportional development takes place.
- In the international system of financial relations, there is always a policy of individual entities. As for the last regularity, here it is worthwhile to understand what such relations are and what their essence is.
International Relations and Markets
The system of international financial relations refers to a special area of market economy. It includes the functioning of the currency, various forms of lending, all types of securities, operations with precious metals and other financial activities, which also serve the mutual exchange of the results of national economies.
Thus, international financial relations (MFIs) are all types of relations that take shape in the arena of the international financial market. The development process of MFIs is inextricably linked with the formation of a global economic system. What were the prerequisites for this fact? The establishment of a global market system, the growth of labor productivity , the international division of labor and the formation of economic ties at the global level.
International organizations
The international finance system shows all the changes in the balance of payments of the largest countries, the state of financial markets and corporations, as well as the activities of international financial institutions and investment companies. The main participants in the global financial system are banks, multinational corporations, international investors, borrowers and other organizations.
To solve some problems in the development of the global economy, international financial organizations are created by combining the monetary resources of the participating countries. The system of international financial organizations is based on interstate agreements and is closely connected with the world economy and foreign economic relations.
Each financial institution, regardless of its status, must maintain financial statements. This necessarily applies to international organizations.
Financial statements
The system of international accounting standards for financial statements includes a set of certain documents and interpretations that govern the rules for the implementation of financial statements. It is necessary for external managers in order to be able to make the right and cost-effective decision regarding the enterprise.
What was the purpose of creating financial reporting standards? In order to improve the quality of the information provided, unify the interpretation and make uniform standards. They allow you to evaluate and conduct a comparative analysis of the performance of various multinational companies, and most importantly, do it as efficiently as possible.
RF and international finance
Financiers distinguish three main forms of international financial activity: investments, loans in the world market and financial assistance. Over the past two decades, the leadership of the Russian Federation often notes the need to attract foreign investment in the country's economy.
Russia plays one of the leading roles in the international finance system, as it is a major world power and has a huge domestic market. Advantages such as low-cost labor, many mineral deposits, scientific potential should attract a lot of foreign investment. The latter, in turn, can become a channel through which innovations and developments of a scientific and technical nature and the best managerial experience will come to the country. To date, the largest percentage of foreign investment in the Russian economy is made up of credit and other investments.