Questions and Answers
Which of the following best describes financial intermediation?
The process of connecting investors and borrowers
What is the main role of financial intermediaries?
To act as a bridge between deficit units and surplus units
What is the difference between old and new financial environment?
The ownership of securities
What are the two types of financial institutions mentioned in the text?
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What are the subdivisions under depository and non-depository institutions?
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Study Notes
Financial Intermediation
- Financial intermediation refers to the process of facilitating the flow of funds between savers and borrowers by reducing transaction costs and providing liquidity.
Role of Financial Intermediaries
- The main role of financial intermediaries is to act as a bridge between savers and borrowers, facilitating the flow of funds between them.
Old and New Financial Environment
- The old financial environment was characterized by a segmented market with limited financial products and a lack of technology.
- The new financial environment is characterized by a globalized market with diverse financial products and advanced technology.
Types of Financial Institutions
- There are two main types of financial institutions: depository and non-depository institutions.
Subdivisions of Depository and Non-Depository Institutions
Depository Institutions
- Commercial banks
- Thrifts (savings associations and savings banks)
Non-Depository Institutions
- Insurance companies
- Pension funds
- Mutual funds
- Hedge funds
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