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1. A financial intermediary is a party bringing together providers and users of finance, either as “broker” or as “principal”.
Can you explain how it works if it acts as a:
i) Broker
ii) Principal2. In inter-company market, company lends funds to another company directly. Is financial intermediary in the market?
The role of a financial intermediary is to act between two parties to make it easier, and/or cheaper and/or less risky than for the two parties to deal directly with each other.
For example, the banks act as financial intermediaries in that they lend money to companies that has been deposited with them by other companies.
That is all that is relevant for Paper F9 (brokers and principals are not relevant at all).
if a company lends money to another company directly then there is no intermediary, by definition. (There is nobody ‘in between’ them, which is what the definition of intermediary implies – an intermediary is someone between the two parties to the transaction)
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