Got a tricky question? Receive an answer from students like you! Try us!

Financial Intermediaries - Essay Example

Only on StudentShare
Pages 2 (502 words)


Financial intermediaries as the term suggests, are people or organizations which help in the regulation of money in return for a share for themselves. For example, if a person wants a loan, he will go to a commercial bank to take it. But from where did the bank get the money to provide this loan to the customer Obviously from another customer who deposited this money earlier at some point due to any reason…

Extract of sample
Financial Intermediaries

The most important one is security. As banks and other financial institutions playing this role have the proper expertise to handle the flow of cash and make sure that it is returned on a fixed time and date, they avoid any miscommunications and make sure that potential clients don't turn out to become criminals by not returning the loan. Therefore, by putting a saver's eggs in a safe basket, they ensure that they are not stolen. Secondly, as these financial intermediaries are properly qualified to do this particular task, they are also better able to judge to whom it is safer to lend a saver's money to. They keep an updated record of the types of customers who borrow from them and of their repayment schedules. This helps in making predictions about which type of customer is a better choice to do business of lending money.
The US Government's role is twofold in the economy. It has to look after the local and international intermediaries and as well as act as an intermediary itself. This is done by two separate governmental departments. The first is the SEC (Securities and Exchange Commission) and the second is the FDIC (Federal Deposit Insurance Corporation). ...
Download paper
Not exactly what you need?

Related Essays

European financial market
In business parlance, pooling is the grouping credit transactions like bank loans( Brigham, 1985). An example is when loans and other long term liabilities with the same characteristics are pooled successfully into a new stock. Other examples of pooling applying for cash loans(Weston, 1993) with property, plant and equipment are used as collateral loan received is used to invest in several stocks and bonds. The company can also enter into a bond agreement where the bank intermediaries will give a $200,000 loan where the house and lot and another factory equipment will be pooled together to be…
7 pages (1757 words)
Financial Management College Essay
market. [2]…
5 pages (1255 words)
The Concepts of Financial Intermediation
A lot of these imperfections lead to particular types of transaction costs. These asymmetries can produce unfavourable selection, they can be temporary, generate moral exposure, and they can result a costly verification and enforcement. Based on studies, financial intermediaries emerge to at least partially overcome these costs. Leland and Pyle (32) interpreted financial intermediation as a coalition of sharing information. And intermediary coalitions according to Diamond (51) can achieve economies of scale. He also envisioned that financial intermediaries act on behalf of ultimate savers by…
10 pages (2510 words)