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 for clearing and settling payments, function for provision of 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.