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theory of banking
- Words:
- 4529
- Submitted:
- Mon Sep 12 2005

... 1. Introduction In this paper author review the traditional theory of banking and attempt to examine the theoretical reasons for why banks exist. As a financial intermediation, the natures of the banks are to provide financial services and conduct the intermediary functions in the whole financial system by accepting deposits and making loans. The question raised here are how they conduct these roles and why the borrowers and lenders do not come together without the banks for the saving of intermediation costs, why both of the two parties are ready to pay for their services and what's the value added by the banks? The paper proceeds as follows. Section 2 offers a traditional view of banks and describes the nature of them. By analyzing how the banks conduct their traditional function, there rises a question of why the borrowers and lenders do not choose direct deal with each other? Which leads to













