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Chicago Fed Letter, No. 41, January 1991
Disintermediation Marches On

Historically, bank disintermediation has occurred whenever bank borrowers or savers could get a better deal from nonbank alternatives. Today, bank disintermediation is being driven by increasing deposit insurance premiums, the high cost of raising bank capital, and—in a few instances—an inability to raise capital. As a response to these pressures, banks are initiating disintermediation, shrinking both to control risk and to remain in compliance with regulatory requirements.

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