Banks are playing an important role in job creation, economic
growth, and managing financial and economic stability of a
country.
Traditional theories of financial
intermediation are based on transaction costs and
asymmetric information.
They are made to account for institutions which take deposits
or issue insurance policies and channel funds to firms.
Current financial intermediation theory builds on the fact that
intermediaries serve to reduce transaction costs and informational
asymmetries.
As developments in information technology, deregulation,
deepening of financial markets, etc. tend to reduce transaction
costs and informational asymmetries, financial intermediation
theory shall come to a conclusion that intermediation becomes
useless.