Firm Investment is defined as an asset that has the potential to return a higher profit to its owner in the future. The majority of firms are usually private or limited in nature and are invested in low-risk government bonds, commercial real estate and equities among other assets. The majority of firms invest in several types of firm investments. Some of the most common of these types of firm investments are in bonds, preferred stocks, treasury bills and mortgage backed securities (also called mortgage grants). There are also some firms that invest in emerging markets and derivatives.
In order to understand the importance of firm investment, it is necessary to understand how the market works. The process of centralised supervision of the financial system by the Federal Reserve involves three stages. The first stage is the raising of the authority of the Federal Reserve, which mainly consists of five banks with voting powers, from the Board of Governors. The second stage is the implementation of supervisory activities, and the third and final stage consists of regulation of financial activities.
The creation of a supervisory body is one of the main decisions taken by the US Federal Reserve after taking into account the need for more effective supervisory and regulatory tools and the impact of the global credit crunch on the US economy. In all, this creates a framework for bank supervision in the United States. There are four steps included in the development of the working paper for firm investment. These include the analysis of the activities of the banking industry, public policies, and reforms needed to improve the efficiency of bank supervision.
Analysis of bank supervision is a very complex procedure and the European banking union has made some improvements in this area. First, the European Union (EU) introduced a supervisory architecture, including European Supervisory System for Financial Supervision (ESFS), European Union (EU) Regulation concerning credit risk and prudential requirements for bank instruments, European Union (EU) Study programme on money laundering and fraud and measures to combat asset deterioration and fraud. The last step in the development of the working paper was the creation of a European Working Paper on firm investment. This is the final result of the analysis of the activities of the banking industry and the identification of shortcomings or inconsistencies that might need to be corrected.
The creation of the working paper created by the banking union was accompanied by the introduction of a number of important additions and modifications to the regulatory architecture of European Union. Among these amendments were the introduction of a European Supervisory Authority (also known as the supervisory body or the regulator). This body will be a permanent part of the Union’s competence regime. The Working Paper also brought into being the role of an EU coordinator, whose responsibility is to oversee and coordinate all supervisory activities carried out by the EU’s regulators, including the creation and maintenance of a register of supervisory companies and the establishment of European standards for such companies.
The creation of the working paper did not affect the existing arrangements between domestic banks and their domestic customers, with regard to mutual assistance and credit facilities. In fact, the introduction of the Working Paper created a new framework of competition and cooperation between the different members of the Union, including some third countries. On the one hand, the opening of the market provided a considerable boost to investment decisions, leading to increased levels of firm investment and credit risk, which in turn, increased market volatility. On the other hand, by making it easier for firms to raise funds and mitigate market risks, the introduction of the Working Paper could facilitate realization of economic recovery objectives by reducing financial risks for the wider economy.
