Why Banks

Topics: Bank, Financial services, Finance Pages: 2 (501 words) Published: February 27, 2013
Why do banks and other financial intermediaries exist in modern society,according to the theory of finance? There are multiple approaches to answering this question. The traditional view of banks as financial intermediaries sees them as simultaneously fulfilling the financial-service needs of savers (surplusspending units) and borrowers (deficit-spending units), providing both a supply of credit and a supply of liquid assets. A newer view sees banks as delegated monitors who assess and evaluate borrowers on behalf of their depositors and earn fees for supplying monitoring services. Banks also have been viewed in recent theory as suppliers of liquidity and transactions services that reduce costs for their customers and, through diversification, reduce risk. Banks are also critical in the payment system for goods and services and have played an increasingly important role as a guarantor and a risk management role for customers.

How have banking and the financial services market changed in recent years? The banking and financial services industries have been undergoing rapid change in recent years. These changes include the consolidation and increased geographic scope of the banking industry, a blurring of the distinctions between various financial institutions, deregulation, and the implementation of financial strategies made possible by improvements in computer technology and advances in finance theory. With the advent of technical advancements, the banking industry has changed vastly. Some of the new features available for banking customers are: 1. Core Banking 2. Internet Banking 3. Mobile Banking

4. ATM Machines 5. Etc.

What powerful forces are shaping financial markets and institutions today? Which of these forces do you think will continue into the future? Banking is becoming a more unstable industry due, in part, to deregulation which has opened up individual banks to the full force of the financial marketplace. At the same time the number and...
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