Intermediation Services Of A Financial Institution
In either a global or national economy there is an foundation borrowers and lenders
. Depending on one's financial needs one can be either a borrower or lender whether it is a household, a large business firm, a corporation or even a government.
Without the act lending and borrowing business as we know it would come to a standstill and best forex trading could not take place. Whether it is money for a car repair or a corporation financing groundbreaking research loans are needed. Likewise mutual funds and pensions are wholly dependent on the returns received from investments realized from acting on forex trading tips. In theory this is a sound financial system but in reality it can be prone to abuse.
A financial intermediary is vital to the process of acting in lending. Whether it is providing the terms that lenders seek or qualifying loan applicants a financial intermediary takes on a lot of overhead that would otherwise have to be incurred by both the lender and the borrower. By acting as the go-between a financial intermediary plays a vital role in the financial system. The most important service that a financial intermediary can provide is liquidity. For most consumers the timing of revenues and expenses rarely coincides. Because of this, most economic units per for behold some assets that have low transaction costs associated with converting them to money. Many of the financial commodities produced by intermediaries are highly liquid. For example a checking account permits consumers to purchase an asset or repay a debt with a minimal transaction cost.
This is something that a direct lender cannot provide nor would he want to as it's nothing but expense to him. For a financial intermediary this is a good way to attract lenders and borrowers alike. Intermediaries provide a value added service that facilitates the transfer of purchasing power from one party to another while providing the most optimal terms that each party desires. These are the services of intermediation.