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12 March, 2022

Why Financial Intermediary is necessary, or Importance of Financial Intermediary

 Financial intermediaries appear to have a key role in the restructuring and liquidation of firms in distress. In particular, there is rich evidence that financial

intermediaries  play  an  active  role  in  the  reallocation  of  displaced  capital.

Financial intermediaries can perform this role by aggregating the information on firms  collected  in  the  credit  market.  The  function  of  intermediaries  as

matchmakers between savers and firms in the credit market can support their

function as internal markets for assets.

Moreover, the financial intermediaries also assume importance in today's world as  function foclearing and  settling payments, function foprovisioof  a mechanism for pooling of funds and subdivision of shares, it allows provision of ways to transfer economic resources, it allows provision of ways to manage uncertainty and control risk, provides price information, and so on.