International finance, unlike state and finance of individual business entities, is a multi-subject category (represented by a large number of entities). The foregoing means that the international fund of funds is absent as such, is not concentrated in a specific place and is not the property of a particular subject of the world economy.
International finance is cash flows that are in a relationship with each other in the global economy. The study of this concept helps to improve the management of any kind of cash, success in the work of world business and provides the opportunity to make optimal decisions that significantly affect the economic policy of any country.
The role of finance in the development of international cooperation is expressed in the essence of the wording of the economic category, which is represented by funds of financial resources. These funds were formed on the basis of the development of international market relations and can be used to ensure sufficient profitability and continuity of production of a social product.
From an institutional point of view, international finance can be represented by a combination of banking systems, various types of exchanges (stock or currency), international financial and credit institutions, associations, due to which there is a movement of financial flows on a global scale.
World financial resources form an appropriate market, which can be considered from the perspective of its functions and the terms of circulation of assets. On a functional basis, it is subdivided into the foreign exchange market, insurance services, loans and stocks, and also the derivatives market can be included here. In these markets, in turn, essentially different segments are distinguished. For example, segments of bank loans and debt securities were allocated on the credit market, reinsurance, etc. on the insurance market.
International finance refers to the implementation tools of global financial organizations with their inherent functions. These include:
- The Bank for International Settlements, which was established in 1930 and is the first international bank operating on the basis of an agreement between England, Belgium, Germany, Italy, France and Japan. The purpose of the creation of this banking institution is to promote fruitful relationships and cooperation of banks of the member states, as well as to ensure settlements between them;
- The International Monetary Fund was created in March 1947 as a specialized UN body. Its capital was formed thanks to contributions from participants, and its main functions are: creating financial support in the development of international trade, supporting foreign exchange cooperation and removing restrictions on foreign exchange transactions, as well as providing credit funds to any participating country to form a balance of payments.
- The International Bank for Reconstruction and Development began its existence in 1946 as a special body independent of the UN. Its functions include investment activities in developing countries, analytical and advisory activities in the economic sphere, intermediary services in the redistribution of resources between different segments of the population.
Returning to the original wording, international finance is based on three analytical "elephants": achieving the optimization of the use of funds in a certain period of time; valuation of assets such as industrial associations or natural resources; timely identification and management of risk, including loss of financial resources.