The process in financial intermediation in the banking sector

International banking intermediates world financial imbalances and maturity preferences. Clearly, the global banking system is a network of interconnected nodes each depicting a specific location.

The process in financial intermediation in the banking sector

The objective of the study are to determine the impact of credit to private sector on the development of Nigerian economy and to ascertain the impact of demand deposit on economic growth of Nigeria. The study therefore recommends that monetary authorities should properly control and regulate the activities of the financial intermediations in order to achieve a sound financial system in the country.

Also the government needs to ensure the existence of vibrant and efficient financial system that promotes financial intermediation in economy. Their intermediation role can be said to be a catalyst for economic growth and development.

The efficient and effective performance of the banking industry over time is an index of financial stability in any nation. Financial Intermediation, as a process involves the transformation of mobilized deposits liabilities by financial intermediaries such as banks into bank assets or credits such as loans and overdraft.

Financial Intermediary

The attainment of a steady, viable and speedy economic development in any nation is essentially a function of the availability of monetary assets in the economy. Although not a sufficient condition, resource availability is certainly a necessary condition for output and employment growth.

Indeed, there is ample evidence to show that countries that have enjoyed or are enjoying economic prosperity have been linked with an efficient mechanism for mobilizing financial resources and allocating same for productive investment. This no doubt explains why special attention is being focused on financial intermediation by economic players in recent times.

An efficient financial system is one of the foundations for building sustained economic growth and an open, vibrant economic system. In the early neoclassical growth literature, financial services played a passive role of merely channeling The process in financial intermediation in the banking sector savings to investors.

What is a 'Financial Intermediary'

The success of the financial system throughout the world has been predicted on the initiation of financial sector policy and reforms such as the introduction of market-based procedures for monetary control, the promotion of competition in the financial sector, and the relaxation of restrictions on capital flows.

Financial Intermediation is a process whereby a financial intermediary such as bank mobilizes bank deposits are transform deposit money into bank credits, usually loans and overdraft. It is simply the process of taking in money from depositors and then lending same out to borrowers for investment and other economic development purposes.

The process allows financial institutions acting as intermediaries channel funds from surplus eco-nomic units individuals and firms having surplus savings to deficit economic units firms and businesses in need of funds to carry out desired business activities.

Relatively, it involves the conversion of bank largest liabilities deposit liabilities to bank largest interest earning assets bank credits which includes majorly loans and overdrafts. Financial intermediaries are agents, or groups of agents, who are delegated by authority to invest in order to buy other securities.

A first step in understanding intermediaries is to describe the features of the financial markets where they play an important role and highlight what allows them to provide beneficial services. It is important to understand the financial contracts written by intermediaries, how the contracts differ from those that do not involve an intermediary, and why these are optimal financial contracts.

Debt contracts are central to the understanding of intermediaries. The cost of monitoring and enforcing debt contracts issued directly to investors widely held debt is a reason that raising funds through an intermediary can be superior. Debt contracts include contracts issued to intermediaries by the borrowers that they find these are bank loans and the contracts issued by intermediaries when they borrow from investors these are bank deposits.

To explain the sorts of services that intermediaries offer, it is useful to categorize them in terms of a simplified balanced sheet.

BREAKING DOWN 'Financial Intermediary'

Asset services are those provided to the issuers of the assets held by an intermediary, e. An intermediary that provides asset services is distinguished by its typical asset portfolio.

Relative to an intermediary that provides no asset services, it will concentrate its portfolio in assets that it has a comparative advantage in holding. The model presented below provides a foundation for understanding this aspect of intermediation, showing that reduced monitoring costs are a source of this comparative advantage.

This is in line with Fama that banks issue large certificates of deposit which pay market rates of interest for their risk but are also subject to reserve requirements, implying that the reserve requirements are passed along to borrowers.

This is also evidence in favor of the idea that banks provide asset services, There are other important aspects of intermediation that we can equally discuss here: Liability services are those provided to the holder of intermediary liabilities in addition to the services provided by most other securities.

Examples include the ability to use bank demand deposits as a means of payment and the personalization of contingent contracts available from life insurance companies. Some liability services, such as check clearing, are well understood, while others relate to difficult issues in microeconomic theory regarding the role of money.

They are to redirect funds from the surplus sectors of the economy. The financial intermediaries are supposed to provide the funds used as capital inputs by producers in other sectors of the economy as well as the final consumers. The impact of delivery of these financial services in these financial services in the form of capital to the producers and individuals is felt both in the short run and in the long run, therefore, the financial sector, especially the banking sector is very important in effective functioning of the real sector of the economy.

The real sector of the economy forms the main driving force of the economy. It is the engine of economic growth and development. Largely, the real sector depends on the banking sector for the provision of the required funds for investment purposes.

Based on the assumption that banking sector plays an important role in financing the real sector, successive government in Nigeria have carried out reforms and institutional innovations in the banking sector with the aim of ensuring financial stability of the sector so as to influence the growth of the economy and also to ensure that banks plays the critical roles of financial intermediation in Nigeria.

Another problem is that of high concentration of loans to few sectors of the Nigeria economy to the detriment of other sectors. Therefore, the problem remains that the real sector is yet to be effectively linked to the financial intermediaries in the country.

Financial Intermediary

Other specific objectives include the following. To ascertain the impact of demand deposit on economic growth of Nigeria. To determine the impact of credit to private sector on the development of the Nigeria economy.c. Banking Sector and Financial Intermediation ID the Russian Transformation Process Ralf Wiegert 1.

Systemic Transformation, Growth Requirements and Financial Stability The actual financial cnsls in Russia is probably the most visible sign for a. Financial Intermediation: Framing the Analysis rutadeltambor.comuction process of financial intermediation.

Indeed, we argue that banks have shown a remarkable capacity to adapt to the The Evolution of Banks and Financial Intermediation: Framing the Analysis.

The process in financial intermediation in the banking sector

The study titled the impact of financial intermediation on growth and development in Nigeria: an over view of the banking sector' is designed to find out whether banks through their financial intermediation activities cause economic growth and. The book analyses the role financial intermediation plays in the economic growth of Nigeria.

Globally, activities of banks reflect their unique role as the engine of financial growth which can ultimately lead to real economic growth. 1 I.

Introduction Financial intermediation is a pervasive feature of all of the world’s economies. But, as Franklin Allen () observed in his AFA Presidential Address, there is a widespread view that financial. for investment, growth and development, makes financial intermediation a veritable process, and hence the need for periodic regulation of the financial sector.

The ability of .

Financial intermediary - Wikipedia