disintermediation(redirected from Cutting out the middleman)
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disintermediationa situation where a FINANCIAL INTERMEDIARY such as a BUILDING SOCIETY is forced to reduce its lending operations because of the withdrawal of deposits from it and because it is unable to attract new funds. Disintermediation usually occurs (and then only temporarily) when an intermediary (see INTERMEDIATION) fails to adjust its borrowing rates on deposits promptly when interest rates rise, so its rates are insufficiently competitive vis-à-vis other deposit-taking institutions.
The situation that exists when depositors withdraw their savings from financial institutions and invest the money directly in the marketplace,usually because they can obtain a higher yield even though also running a higher risk of losing their money.