BSM205 - Ch.1 An Introductory Lecture About Finanacial Innovation

Duration: 120 min ABI-EBM Grade: 2 BSM205
Benha National University,

Faculty of Economics and Business Administration
Academic Year: 2023-2024
Chapter (1)
Why Financial Innovations Matter
Dr. Bosy A. Fathy

Assistant Professor of Economics
Faculty of Business, Benha University
M.Sc. and PhD in Economics, FEPS, Cairo University
Email: bosy.gamaleldin@fcom.bu.edu.eg.
NOTE: The lecture notes must be used in conjunction with the textbook and tutorials 2
Table of Contents _______________________
01 Financial Innovation
04 Financial Crisis
02 Structure of the
Financial system
03 Banks and Other

Financial Institutions
3
An Introduction about Financial Innovation _________________
❑ Financial Innovation: the development of new financial products and
services or the process of creating new financial or investment product
and services.
❑ For Example, holding debit cards instead of cash, using internet
banking to transfer money(e-finance)).
❑ The term ‘financial innovation’ means the inclusion of new financial
instruments in financial intuitions and markets through new
technologies. It includes process, product and institutional innovation.
A) Process Innovation
New ways of operating business and implementing information technology, such as the Automated
Teller Machine (ATM), mobile banking, online banking, etc.
B) Product Innovation
Includes new financial products such as securitized assets, derivatives, weather derivatives, foreign currency
mortgages, hedge funds, exchange-traded funds, private equity and retail structured products
C) Institutional Innovation
The process of introducing new types of financial firms such as discount broking firms, internet banking,
specialist credit card firms, etc..
4
An introduction of Financial System _____________________
Financial System: is a set of Financial Markets, Financial institutions,

and Regulatory and supervisory bodies.
Regulatory and
Financial Markets Financial Institutions
supervisory bodies
1.1 Definition. Financial intermediaries fall The government regulates
1.2 Function of Financial into three categories: financial markets for two main
Market. reasons:
1.3 Structure of Financial 2.1 Depository Institutions 3.1. To increase the information
Markets. (Banks). available to investors.
A) Debt vs. Equity markets. 2.2 Contractual Savings
B) Primary vs Secondary Markets. Institutions. 3.2. To ensure the soundness of
C) Exchange vs. Over-the-counter the financial system.
2.3 Investment Intermediaries.
Markets.
D) Money and Capital Market
1.4 Instruments of Financial
Markets
5
Why Study Financial Markets? (1) __________________________________
Financial markets (FM):

• Markets in which funds are
transferred from people and Firms
who have an excess of available
funds to people and Firms who have
a need of funds (shortage).
❑ Financial markets such as bond and stock markets are essential to promoting
greater economic efficiency by channeling funds from people who do not have a
productive use for them to those who do.
❑ Well, functioning financial markets are key factor in producing high economic
growth, directly affect personal wealth and the behavior of firms and consumers.
The performance of FM is POSITIVELY related to
ECONOMIC GROWTH
6
3. Why Study Financial Institutions and Banking? (1) _______
Banks and other financial institutions are what
make financial markets work.
❑ Financial Intermediaries: institutions that borrow funds from people

who have saved and make loans to other people or corporations:
A. Banks: Accept deposits and make loans.
B. Other: Insurance companies, finance companies, pension funds, mutual funds and
investment companies.
7
3. Why Study Financial Institutions and Banking? (2) _______
❑ Financial crises: are major disturbances in financial markets that
are characterized by sharp declines in asset prices and failures of
many financial and nonfinancial firms. As a result of this failure,
economic activity contracts sharply.
EXAMPLE ❑ The most recent financial crises in the USA

started in August of 2007, which is the worst
financial disruption since the Great Depression.
➢ when defaults in subprime residential
mortgages led to major losses in financial
institutions.
➢ Producing a numerous bank failures.
8
Assignment (1) ______________________
❑ In 500 words, write down the difference between Financial
innovation and Financial development in Egypt.
❑ Assignment will be delivered via email:

bosy.gamaleldin@fcom.bu.edu.e.g.
❑ Student must write in subject: BSM205 (you Name) Assignment
no.1
❑ DEADLLINE is Wednesday Feb. 21.2024 at 9 o'clock.
❑ Submitting through WhatsApp is NOT ACCEPTABLE.
9
Timeline for Studying Financial and Digital Innovations in International
Business
CRYPTOCURRENCIES
INTRODUCTORY FINANCIAL , BLOCKCHAIN AND
LECTURE INNOVATION REGULATION
1 3 5
2 4 6
AN OVERVIEW
OF THE FINANCIAL
FINANCIAL CRISIS
QUIZ
SYSTEM
MIDTERM (1) MIDTERM (2) FINAL EXAM

At week no.7 on Ch.1 and 2 At week no.12 on Ch.3 At week no.15 on 4 and 5
10
Faculty of Economics and Business Administration
Academic Year: 2023-2024
ABI-EBM Program
Level (2) – 2nd Semester
11

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Duration: 120 min ABI-EBM Grade: 2 BSM205

Benha National University,

Dr. Bosy A. Fathy

03 Banks and Other

Financial System: is a set of Financial Markets, Financial institutions,

Financial markets (FM):

❑ Financial Intermediaries: institutions that borrow funds from people

EXAMPLE ❑ The most recent financial crises in the USA

❑ Assignment will be delivered via email:

MIDTERM (1) MIDTERM (2) FINAL EXAM

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