Define financial intermediaries What functions the financial-00152

Financial intermediary is naturally an foundations that make easy the control of funds between lenders and borrowers not directly that acts as the middle man between investors and firms raising fund is called financial intermediary.

Financial intermediary will reduce transaction cost because they are specializing in the issuance of standardized securities

Maturity transformation

Converting short-term liabilities to long term assets just like banks deal with large number of lenders and borrowers, and settle their conflicting needs

Risk transformation

Converting risky investments into relatively risk-free ones For example ending to multiple borrowers to spread the risk

Convenience

Matching small deposits with large loans and large deposits with small loans