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	Table of Contents
p. 5 of 58 BACK | NEXT Purpose and Structure of the Toolkit Part One: Introduction and Overview I. The Financial Sector: An Overview A. The Role of the Financial Sector B. Financial Sector Development C. Law, the Financial Sector, and Economic Growth II. International Financial Standards and Standard-Setting Organizations III. Implementation and Monitoring Part Two: Preconditions and Infrastructure for Financial Sector Development Part Three: Financial Regulation and Supervision Part Four: Regional Financial Integration Part Five: ADB's Intervention in the Financial Sector Bibliography Glossary and List of Abbreviations Acknowledgements

Financial Sector Legal and Regulatory Toolkit : Part One: Introduction and Overview : I. The Financial Sector: An Overview

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B. Financial Sector Development

The financial system should serve to allocate financial resources on the basis of pricing of risk. Efficient allocation of financial resources by means of pricing results in financial development, which serves to support economic growth, which in turn can reduce poverty.

Developing financial markets requires an expansion of both the supply of, and the demand for, finance. The primary policy concern is to encourage participation by domestic and foreign participants and enhance the functioning of financial markets.

A financial system can be basic, functioning, developed, or sophisticated.

1. A basic financial system typically comprises simple money, banking, and insurance activities.
2. A functioning financial system provides financial services beyond the basic level, namely money, banking, insurance, simple securities, and simple derivatives transactions. Such a system will also provide a basic level of risk management.
3. A developed financial system provides for effective allocation of resources via market pricing, as well as a variety of instruments and risk management functions.
4. A sophisticated financial system will provide a full range of products and services.

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