The essence of financial intermediation
Financial intermediaries - is part of the financial system, which serves borrowers and promotes financial requirements for lenders, assumes the financial risk.
That distinguishes the double exchange of financial intermediaries from other entities of the financial market, such as dealers and brokers who only assist in moving funds from lenders to borrowers, but not to market their own debt, and financial intermediaries increase the size of funds, issue their own debt obligations, and to receive the proceeds or debt obligation securities issued by other market participants.
Functions of financial intermediaries
• Bringing the assets and liabilities (liabilities) to the needs of customers;
• Reduced risk through diversification. The essence of this is to purchase a large number of financial intermediaries of various issuers of financial assets;
• reduction of distribution costs (transaction costs). This is achieved by specializing the financial intermediaries in the implementation of certain activities in the financial market and offset the additional costs by increasing the volume of transactions for clients.
Thus, financial intermediaries are essential actors of the financial market, their work contributes to the effectiveness of the various segments of the market. At the same time, the professional activities of financial intermediaries is usually a highly profitable business that requires high financial qualifications.