Characteristics and Features of Financial Intermediaries - Jose Miguel Artiles Ceballos

Financial Intermediaries are usually engaged in bringing together the big borrowers and big lenders. Their main objective is to convert savings into investments and charge a certain amount of fee for providing their services, which is called Intermediation Cost. 

Similar to the Intermediation cost, Financial Intermediaries have many different characteristics and features, based on their type. Jose Miguel Artiles Ceballos, the director of Bandenia Formula Capital LTD, is an expert in financial intermediaries and identifies them with the following characteristics. 

Risk Reduction :

When compared to individuals, financial intermediaries have greater resources to bear and spread the risk among different individuals. Moreover, since financial intermediaries are experts in managing diversified portfolios, it reduces the risk through diversification. 

Apart from this, financial intermediaries carefully screen and examine the borrowers, which greatly reduces the risk of default. They even provide security measures in accessing money and spread the risk by lending to several people.

Scale Economies:

Financial Intermediaries are basically commercial banks, mutual funds, credit unions, stock exchanges, insurance companies, and other financial institutions that support the growth process of the economy. They take deposits from a large number of clients and lend funds to multiple borrowers. This way, financial intermediaries maintain and scale economies. 

Financial Intermediary highly discourages stockpiling by people and if they don’t exist, many operational costs may have to be incurred by the investors. They even help in investments and provide financial advice to their clients. 

Regulation :

Regulation is very important when it comes to financial intermediaries, because of the various complexities of the financial system. If the regulation is weak, financial crises may happen more often, putting the entire economy at risk. 

Therefore, it is the responsibility of the monetary authorities to control dishonest financial intermediaries and make sure that there is balance in the system to avoid damaging the economy. 

Provide Loans :

Financial Intermediaries play a crucial role in bringing those individuals who have surplus funds and those who wish to obtain loan facilities. They provide financial liquidity to the market by providing shares to shareholders and capital to companies. 

Providing short-term and long-term loans is one of the core businesses of financial intermediaries. They grant loans to borrowers at an interest rate, a part of which is given to the depositor whose surplus funds have been used. The remaining part of the interest is retained as the profit. 

Asset Storage :

Financial Intermediaries also provide their clients with safe storage for both cash and precious items such as gold, silver, or anything else of value. Clients who make deposits at financial intermediaries receive proof of deposit and all records of withdrawals. There are deposit cards and checks issued so that the depositors can access their funds. 

Conclusion :

Jose Miguel Artiles Ceballos is a financial intermediary professional and the director of the Bandenia Formula Capital LTD. The characteristics mentioned in this article are commonly used by Jose Miguel Artiles Ceballos to identify the potential of the financial intermediary and its functional type.