concept of financial_research

May 28th, 2015
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Payment services: the efficiency with which depository institutions provide payment services such as check clearing directly benefits the economy. Denomination intermediation: FIs, such as mutual funds, allow small investors to overcome constraints to buying assets imposed by large minimum denomination size

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Areas of FIs specialness in providing services Information costs: the aggregation of funds in an FIprovides greater incentive to collect information aboutcustomers (such as corporations) and to monitor theiractions. The relatively large size of of the FI allows thiscollection of information too be accomplished at a loweraverage cost (so-called economies of scale) than would bethe case for individuals. Liquidity and price risk: FIs provide financial claims tohousehold savers with superior liquidity attributes andwith lower price risk. Transaction cost services: similar to economies of scalein information production costs, an FIs size can result ineconomies of scale in transaction costs.Areas of FIs specialness in providing services Maturity intermediation: FIs can better bear the risk ofmismatching the maturities of their assets and liabilities. Transmission of monetary supply: depository institutionsare the conduit through which monetary policy actions bythe countrys central bank (such as the Federal Reserve)impact the rest of the financial system and the economy. Credit allocation: FIs are often viewed as the major, andsometimes only, source of financing for a particular sectorof the economy, such as farming, small business, andresidential real estate. Intergenerational wealth transfers: FIs, especially lifeinsurance companies and pension funds, provide saverswith the ability to transfer wealth from one generation

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