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

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.