Explain four functions performed by financial intermediaries in the financial system

Expert Solution

They are intermediaries, because they make a connective links between those savers and those investors. These intermediaries are banks, non-banking financial institutions, etc.

Functions:

No.1) Investments: Since they are making connective links, savings turn into investments. People used to save for their future uncertainties; banks make those savings more fruitful, since they offer interests; and at the same time banks use those savings for providing loans to others, which turns into investments.

No.2) Cash: intermediaries are sources of cash. People used to go to bank if they require cash. Various types of cash facilities are provided by intermediaries – like working capital facility, overdraft facility, current account facility, etc.

No.3) Loans: intermediaries provide loans to public after fulfilling certain formalities. Types of loans are mortgage loan, business loan, loan against inventory, etc. People take loan in exchange of interest payment, which becomes interest income of those intermediaries.

No.4) Guidance: clients are being guided by intermediaries how to use their funds or money – suppose a client has been advised not to keep his money into the savings account but should invest in mutual funds. Intermediaries usually do so for an increasing client’s income.

jeff jeffy answered 1 year ago

• Clearly identify and briefly explain the major functions performed by the financial system and the...

• Clearly identify and briefly explain the major functions performed by the financial system and the banks’ role in facilitating these functions;

outline the role of financial intermediaries and their functions in financial markets. what benefits of the...

outline the role of financial intermediaries and their functions in financial markets. what benefits of the financial system do financial intermediaries provide?

Identify and discuss any five (5) major functions performed by the financial system.

1) In the spirit of financial intermediaries, compare and contrast the basic functions and clients of...

1) In the spirit of financial intermediaries, compare and contrast the basic functions and clients of a classic investment bank (e.g., Goldman Sachs) with a classic commercial bank (e.g., Bank of Bethesda). Again, as financial intermediaries, how do commercial banks and investment banks generally differ, if at all, from insurance companies, venture capital funds, or public pension funds?

Identify and explain the FOUR (4) key functions performed by South African Reserve Bank in pursuit...

Identify and explain the FOUR (4) key functions performed by South African Reserve Bank in pursuit of its mandate and purpose.

A bank is an example of a financial intermediary. Explain the role of financial intermediaries and...

A bank is an example of a financial intermediary. Explain the role of financial intermediaries and their usefulness to the private investor ( At least 500 words)

what are the four elements of financial intermediaries . the definition of each and provide examples...

what are the four elements of financial intermediaries . the definition of each and provide examples of each

Describe the role that financial intermediaries play in the financial markets and explain why there are...

Describe the role that financial intermediaries play in the financial markets and explain why there are so many different types of intermediaries.

1.The government heavily regulates the financial system by A. encouraging financial intermediaries to implement new financial...

1.The government heavily regulates the financial system by A. encouraging financial intermediaries to implement new financial tools without supervision. B. decreasing information available to investors. C. insuring the soundness of the financial system. D. allowing the financial intermediaries to determine the amount and type of assets they want to hold. 2. Prior to 1986, Regulation Q gave the Federal Reserve the power to A. limit competition between banks by restricting interstate branching. B. increase competition among banks by expanding entry...

What are the economic functions that financial intermediaries perform that benefit society? In your answer, discuss...

What are the economic functions that financial intermediaries perform that benefit society? In your answer, discuss the relationship of financial intermediaries and financial markets to the savings-investment process within an economy and to each other. As part of your discussion provide an analysis of the differences in preferences among economic agents as an explanation for the wide variety of primary and secondary securities found in financial markets. Be sure to explain how depository intermediaries, like banks and thrifts, differ from...

Question