Question
In: Economics
why do we need financial intermediaries? Explain in detail. What is the goal of commercial bank...
why do we need financial intermediaries? Explain in detail. What is the goal of commercial bank management? What is the definition of reserve?
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Expert Solution
Financial intermediaries move funds from parties with excess capital to parties needing funds. The process creates efficient markets and lowers the cost of conducting business. Banks connect borrowers and lenders by providing capital from other financial institutions. Three roles of financial intermediaries are taking deposits from savers and lending the money to borrowers; pooling the savings of many and investing in a variety of stocks, bonds, and other financial assets; and making loans to small businesses and consumers.
The objectives of commercial banks are two-fold; to offer a wide variety of services to individual and business customers, and to collect payments including fees, charges and interest on the products and services provided to customers for the purpose of generating profits for shareholders.
Reserve refers to uninvested cash held to comply with legal requirements. something kept or stored for use or need. Every commercial bank maintains the reserve with central bank.
Rahul Sunny answered 11 months agoRelated Solutions
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