A bank is a financial institution that accepts deposits and uses them to make loans, acting as an intermediary between those who have surplus funds and those who need to borrow. Finance involves managing money and the institutions, markets, and instruments that facilitate transferring money among individuals, businesses, and governments. Financial intermediation matches funds from savers to deficits incurred by borrowers.

1. What is a Bank?
• A bank is a financial institution and a financial
intermediary that accepts deposits and channels
those deposits into lending activities, either
directly by loaning or indirectly through capital
markets.
• A bank is the connection between customers that
have capital deficits and customers with capital
surpluses.
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2. What is Finance?
• Finance can be defined as the art and science of
managing money.
• Finance is concerned with the process,
institutions, markets, and instruments involved
in the transfer of money among individuals,
businesses, and governments.
• Finance is the science of planning the
distribution of a business’ assets.
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3. Lender’s requirements
a) The minimisation of risk, the maximisation of
cost and liquidity.
b) The maximisation of risk, the minimisation of
cost and liquidity.
c) The minimisation of risk, the minimisation of
cost and liquidity.
d) The minimisation of risk, the minimisation of
cost and solidity.
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4. Borrowers’ requirements
1) At a particular specified date
2) For a specific period of time, preferably long
term
3) Lowest possible cost
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5. What is Financial Intermediation?
• The mechanism whereby surplus funds from
ultimate savers are matched to deficits incurred
by ultimate borrowers
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6. Formula of SAVING
a) Saving = Income + Consumption
b) Saving = Income – Consumption
c) Saving = Consumption – Income
d) Saving = Salary – Consumption
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7. The Economics of Financial
Intermediation
• In a world of perfect financial markets there
would be no need for financial intermediaries
(middlemen) in the process of lending and/or
borrowing
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