Why are financial intermeditaries important?

Maxine:

1. Financial intermediaries are needed to aggregate buyers and/or
sellers.   Without intermediaries buyers or sellers would otherwise
incure great inefficiences from dealing with fragmented and numberous
sellers and/or buyers.
2. Financial intermediaries can offer specialization within a subset
of the market.
3. They can also offer personalized services to buyers or sellers,
which would not be fincially available otherwise.

I hope this is what you were looking for,

claudietta

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Clarification of Answer by claudietta-ga on 11 Jul 2002 15:39 PDT

Restatement
3. They can also offer personalized services to buyers or sellers,
which would not be economically feasible for them to offer each other
otherwise.

Addition:
4. Because financial transactions in the money markets take place
quickly, and without the use of lawyers to assure each and every
transaction, intermediaries are able to provide trust to the buyer of
services.  This trust is gained over time.

In order to understand the function of these in the financial markets,
read books on investments that are appropriate for you.

You can also read the following association websites to get more
perspective:
Association for Investment Management and Research -
http://www.aimr.com/
National Association of Securities Dealers -
http://www.nasdr.com/investors.asp


I hope this helps,
claudietta

Hi,

I'm posting this as a comment, since it's only a partial answer and
I'm rather at sea with economics. If another researcher wants to make
more sense of this they're more than welcome.

Here's a good working definition:

"The fundamental role of financial intermediaries is to move resources
between households and business firms."

taken from

Aberystwyth University
http://www.aber.ac.uk/visitors/conferences/issei/225.html

In the simplest terms, financial intermediaries use capital from
savings accounts to fund business development through loans.

There is a very thorough definition and explanation of the role of
financial intermediaries here:

Financial Intermediation
http://papers.nber.org/papers/W8928

It will, however, cost you $5 to read it!


These articles and sites should also be helpful to you:

Financial Intermediation Research Society
http://www.finirs.org/firs.html

Viewpoint: The Fiduciary Duty of Financial Intermediaries
http://www.info.gov.hk/hkma/eng/viewpt/20020228e.htm

Journal of Financial Intermediation
http://www.academicpress.com/jfi
(again, you will have to pay for this!)

grimace