(1) In the broad sense, the totality of spheres (components) of financial relations through which, within the framework of a socioeconomic structure, the creation and use of monetary funds are ensured.
(2) In the narrower sense, a financial system is the system of financial institutions in a country that mobilize monetary resources, distribute the resources in the process of financing and crediting, and exercise financial control. Bank credit is sometimes considered part of the financial system in socialist countries.
The financial systems of capitalist countries include the national budget, local budgets, insurance funds, and various types of independent accounts and extrabudgetary funds and accounts, as well as the finances of state-run enterprises. The financial systems of bourgeois states are characterized by the separation of individual components, the increasing financial dependence of local bodies on the central government, and the ever-expanding use of government funds by the monopolistic bourgeoisie. In the developing countries, the reorganization of financial systems is subordinate to the task of carrying out the economic and social transformations necessary to ensure the independence of the national economy.
In socialist countries, financial systems are based on democratic centralism and Leninist national policy. Such systems offer the optimal combination of centralized planned supervision with economic independence and initiative on the enterprise level; they also make it possible to carry out countrywide financial policies. The financial systems of socialist states include the state budget; the finances of socialist enterprises, organizations, and sectors of the economy; the budget for state social insurance and state property and personal insurance; and state credit.
Under developed socialism, financial systems play a greater role in ensuring a high and stable rate of extended socialist reproduction and in increasing the overall efficiency of the economy in order to maintain a steady rise in the people’s standard of living.
R. D. VINOKUR