Banks and their functions
To date, one of the most important functions of commercial banks is the mediation in the loan, which they carry out by redistributing money temporarily released during the circulation of enterprise funds and cash income of individuals. A feature of the intermediary function of commercial banks is that the main criterion for the redistribution of finances is the profitability of their use by the borrower. Redistribution of monetary resources is carried out horizontally from the lender to the borrower, through banks without intermediary links in the person of higher banking structures, on terms of pay and repayment. The fee for loans given and received is formed under the influence of demand and supply of borrowed funds. As a result, free movement of financial resources in the economy, corresponding to the market type of relations, is achieved.
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The importance of the intermediary function of commercial banks for the successful development of a country's market economy is that by their activities they reduce the degree of possible risk and uncertainty in the economic system. Cash can move from creditors to borrowers and without the intermediation of banks, but at the same time, the risks of losing money given on loans increase sharply and the overall cost of moving them increases because creditors and borrowers are not aware of each other's solvency, and the size and timing The supply of money does not coincide with the size and timing of the need for them.
Commercial banks attract financial assets that can be loaned, in accordance with the needs of borrowers and based on the wide diversification of their assets, reduce the aggregate risks of owners of money placed in the bank.
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