The Financial System
The financial system is central to the functioning of the economy and modern life. It channels millions of regular transactions - spending in the shops, paying bills, wages and savings - every day. Financial institutions, such as banks, manage vast amounts of money on behalf of individuals and businesses; financial markets facilitate trade across the world on a minute-by-minute basis - everything from company shares and commodities such as oil, to complex financial instruments and, of course, money itself; and large IT systems facilitate arrangements and payments between financial institutions, companies and individuals.
One of the fundamental purposes of the financial system is to channel savings into finance for investment. One person's savings are the finance for another person's investment - such as pension funds buying company shares or individuals buying a house with a mortgage. Financial institutions act as intermediaries, bringing together savers and investors and putting money to work. So for the financial system to function properly, people need to have confidence that it is safe and stable. The Bank of England's aim is to maintain financial stability in the UK as an essential ingredient for a healthy and successful economy.
More information on the Bank's Financial Stability Role
