Critically examine the future of banks as financial intermediaries Essay

Critically examine the future of banks as financial intermediaries - Essay Example 1244-1247). The foregoing is different in money markets where lending or borrowing is on a short-term basis (Scholtens and van Wensveen, 2000, Pp. 1244-1247). Capital markets represent where equity securities and or debt is traded (Osano and Tachibanaki, 2001, P. 4), with money markets representing where short term debt securities as represented by commercial paper, repossessions, treasury bills, banker’s acceptances and negotiable certificates of deposit that have maturities of from 30 days to one year (Lapavitsas, 2003, P. 13). An important distinction that exists in capital markets is that the borrowers tend to represent entities seeking to spend in excess of their present income as represented by those individuals or companies where their present income is in excess of expenditures (Allen and Santomero, 1996, P. 4). Within the capital markets the borrowing and lending functions include the issuance as well as sale of bonds and shares, which is termed as direct financing, a nd intermediated financing which represents dealing using financial intermediaries which represents the bulk of all transactions made (Matthews and Thompson, 2008, Pr. 35-36). The subject matter of this study has broad scale ramifications as evidenced by the most recent financial crisis that has griped the international community. The free wheeling lending of mortgages to high credit risk home owners started a global meltdown that has run for over two years and created unemployment levels as last seen in the Great Depression. This examination will look into the facets of financial intermediation to expose its weak points and recommend international action that is not a new view, it is one that already has be proposed through the Basel II Accords that are mandatory in Europe. Financial intermediation represents a process entailing surplus units, as represented by individuals and or companies whose current income exceeds present expenditures, to what are termed as