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Nonbank Financial Intermediaries Brian Piotrowski There has been an increased level of competition among financial intermediaries since the late 1990s and it will continue into the new millennium The large players in this increased competition are the nonbank financial intermediaries Our text explains that nonbanks are other intermediaries and nonfinancial companies that have taken an increasing share of intermediation Burton Lombra 311 The text continues that these banks face much less regulation than traditional banks which translates to significantly lower costs This factor is allowing nonbank intermediaries to create a stronghold on the market which is at its highest profit rates in history 312 What exactly are these intermediaries doing to banking Nonbanks play an important dual role in the financial system They complement the role of commercial banks by filling gaps in their range of services But they also compete with commercial banks and force them to be more efficient and responsive to the needs of their customers Most nonbanks are also actively involved in the securities markets and in the mobilization and allocation of long-term financial resources Pension funds and other institutional investors that move large long-term financial resources act as intense opposition to the once dominant commercial banks Nonbank financial intermediaries include various institutions such as leasing factoring and venture capital companies to various types of contractual savings and institutional investors pension funds insurance companies and mutual funds The common characteristic of these institutions is that they mobilize savings and facilitate the financing of different activities but they do not accept deposits from the public The lack of public deposit capabilities is beginning to change however with the institution of on-line banking Since on-line banking is the most prominent of the nonbank financial intermediaries it will be our main focus Many on-line banking customers today wonder why people would still be members of a traditional bank where there are lines and ignorant customer service representatives By
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