Question

suppose you need a loan for $200,000. rather than going to a bank, you seek out 200 people who are each willing to loan you $1000. when this fails, you realize that banks play an important role in lending. what is this role?

Answer 1

Due to the fact that banks play an important role in lending, the role which is bank is playing is known as financial intermediary.

What is known as financial intermediary?

In finance industry, a financial intermediaries refers to the entity that serve as middlemen for financial transactions generally between banks or funds. These intermediaries help to create an efficient markets and lower the cost of doing business. They also provide leasing or factoring services but do not accept deposits from the public.

In a broader view, a typical financial intermediary means the entity that acts as the middleman between two parties in a financial transaction, such as a commercial bank, investment bank, mutual fund, or pension fund. They can offer number of benefits to the average consumer such as safety, liquidity and economies of scale involved in banking and asset management. In conclusion, the financial intermediaries provide a middle ground service between two parties in any financial transaction

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