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.
On This PageJanuary 1991, No. 41
The process of transferring saving and borrowing activities from banks to nonbanks is known as disintermediation.
Disintermediation Marches On
Last Updated: 01/31/91