disintermediation

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Disintermediation

Withdrawal of funds from a financial_institution in order to invest them directly.

Disintermediation

The act of making a withdrawal from a bank or other financial institution in order to use the funds for investment purposes. For example, one may withdraw $10,000 from his savings account in order to buy a stock without the bank's intermediation. This has become less common with deregulation of banking because more banks can offer investment services, reducing the incentive to withdraw.

disintermediation

The withdrawal of funds from financial intermediaries such as banks, thrifts, and life insurance companies in order to invest directly with ultimate users. Disintermediation was more of a problem when financial intermediaries were limited in the returns they could pay to savers. Deregulation of financial intermediaries was intended to dampen the periodic swings toward disintermediation. Compare intermediation.

disintermediation

a 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.

disintermediation

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.

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References in periodicals archive ?
The advent of the Internet, the rise of cybermediaries, and the reintermediation of supply chains, all leave in question the future of traditional intermediaries.
Kauffman, "Reintermediation Strategies in Business-to-Business Electronic Commerce," International Journal of Electronic Commerce 4, No.
When Internet-based sales first started to take off, there was much talk about the issue of "disintermediation" and "reintermediation." In constructing new supply chain solutions, buyers and sellers need to ensure that they provide for all the intermediary (channel) functions required to transact business.
Today, we are seeing "reintermediation," or the reintroduction of people to online interaction to link sources and services.
Companies that use a "reintermediation" online model--one that supports existing sales channels such as agents--to distribute financial-services products are more likely to achieve near-term success than companies that approach distribution by "disintermediating" their existing sales channels--that is, bypassing existing sales channels with an online sales effort--or by Web-enabling traditional bricks-and-mortar institutions, according to a report from investment bankers Stephens Inc., Little Rock, Ark.
E-commerce is built on both disintermediation and reintermediation. The disintermediation part is more intuitive: online marketplaces can cut out middlemen like distributors and bring buyers and sellers together directly.
There is at the same time pervasive disintermediation of conventional functions and practices within the property markets, and the reintermediation of new functions.
* Reintermediation: Previously "ousted" distributors or new players take on a new, customer-relevant role, capturing profit and value in the process.
commercial banks in 1998: Growth in bank assets was boosted by the financial reintermediation process that characterized much of the second half of last year, with holdings of both loans and securities posting sizable gains.
The "reintermediation" opportunities are greater than the disintermediation perils.
According to Grimes, the reason for departing from monetarist orthodoxy was that reintermediation following financial deregulation cased large changes in the monetary aggregates.
The PBC expected that the reintermediation of funds would ease the shortage of working capital and increase the excess reserves held by the specialized banks.