Bank Intermediaries

Kevin Dowd
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Kevin Dowd: Sheffield Hallam University

Chapter 7 in Competition and Finance, 1996, pp 140-194 from Palgrave Macmillan

Abstract: Abstract A bank is a financial intermediary that holds assets and issues liabilities, but issues at least two classes of liability — typically, forms of debt and equity — with differing claims to its assets in the event it defaults.’ A bank is like a mutual fund in so far as it is a financial intermediary that invests on its own account, and issues claims against itself to the ‘ultimate’ investors who provide the funds it invests. However, a bank is unlike a mutual fund and like most other large firms in capitalist economies and in so far as it has a capital structure consisting of two or more distinct classes of liability. Indeed, one can think of a bank simply as a debt-andequity-issuing firm that is engaged in the business of financial intermediation, in a manner analogous to the way in which, say, a typical steel-producing company is a debt-and-equity-issuing company engaged in the business of making steel.

Keywords: Interest Rate; Mutual Fund; Bank Credit; Marketable Asset; Bank Failure (search for similar items in EconPapers)
Date: 1996
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DOI: 10.1007/978-1-349-24856-8_7

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