Banks as financial intermediaries

Banks are financial institutions that accept money deposits and make loans. Included under the term “banks” are firms such as commercial banks, saving and loan associations, mutual savings banks, and credit unions.
Banks are important for several reasons:
1. They provide a channel for linking people who want to save with those who want to invest.
2. They play an important role in determining the money supply.
3. They are a source of the financial innovation that is expanding the ways in which we can invest our savings.