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Finical

Several types of financial intermediaries such as Banks, Insurance companies, building societies, pension funds, credit unions etc functions in an economy. The function of a financial intermediary is of prime importance in economic growth as it brings in contact two parties i.e. one having a surplus of funds who is looking for a venture to invest in so to earn a return on the money, and the second type which is looking to borrow funds. Since in the real world, it is rare that the demand of lender and borrower reconcile and thus a financial intermediary comes into play. A financial intermediary, such as banks, acquires funds from the lenders and subsequently lends them to the borrowers according to their desire rates. In this particular exercise the financial intermediary takes into consideration various needs of the lender and borrower such as maturity (which means the duration or term for which the lender wants to lend and the borrower wants to acquire) and rate of return/cost of debt (the lender wants to maximize the return, whereas the borrower wants to minimize the cost). The financial intermediary also aligns the information available, between lenders and borrowers, without which the parties would not be able to achieve their desired outcome. [2] Since a financial intermediary enjoys economies of scale and has greater expertise in managing the risk and rewards, it offers considerable cost savings to the lender and borrowers over direct lending and borrowing. In addition, the financial

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Summary

Banks and financial institutions have played a significant role in integrating the different economics of the world. A brief analysis of the global economic scenario can highlight the fact that the banking industry has always been that sector which has either strengthen or uplifted the economic outlook of a particular region, or has caused turmoil .Nevertheless, for a progressive and thriving economy, it is imperative for the banks to equip themselves with the awareness regarding the various risks and benefits that prevails in the market…
Author : faypfannerstill
Finical essay example
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