Abstract
What is a bank, exactly? All observers agree that a bank is unambiguously one among several types of financial intermediary . Such an intermediary is an institution that acts as a middleman in channeling funds from savers to entrepreneurs or other businesspeople who make capital investments or to individuals or families who purchase durable goods or tangible assets such as houses or condominiums. Savers who lend funds to financial intermediaries such as banks otherwise could have chosen to engage in direct finance by lending their funds to businesses or households without utilizing the intermediaries’ services. Instead, customers of banks opt to engage in indirect finance by lending their funds to banks and other financial intermediaries in exchange for promised flows of returns on those funds. Banks and other intermediaries aim to profit from revenues derived from lending net of costs they incur by engaging in financial intermediation.
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