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What is the role
of the financial
sector in
the economy?
The banks’ core business consists in inter-
mediating between those who have financial
means at their disposal, and those who are in
need of funds.
The first category of people lends money to
the bank, which in its turn will use it for the
funding of the second category.
How?
Customers (private persons/households, com-
panies) can give their money to the bank ‘as
a deposit’. In this way, they are lending their
money to the bank so to speak, and in return,
they receive interest. There are several types of
deposit, such as call deposits, savings deposits,
term deposits and certificates of deposit.
Banks will then transform these deposits into
credit for the funding of the needs of private
persons and households, companies and the
public authorities.
Anyone who borrows money from a bank,
will have to pay interest , because the bank of-
fers a service by putting at his disposal a cer-
tain amount of money during a certain period
of time.
This kind of banking business allows for an
optimal use of all funds, since the offer will
meet the demand, and so it adds to the effi-
FINANCIAL SECTOR
stable
2.
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PROSPERITY