Banking is an integral part of the modern financial system and plays an important role in an economy. It basically involves the so-called intermediation (e.g., credit intermediation) and transformation (credit transformation, term transformation, size transformation, asset transformation, etc).

This mainly helps organize the flows of money between savers (surplus units) and borrowers (deficit units), including households, businesses, and the government.

This section provides a wide array of terms and concepts, among others, all relating to the area of banking and the role assumed by banks and similar financial institutions as part of the broader financial system, locally and globally.

Intermediation provides a number of advantages, specifically: (1) the spreading of the risk of a default on a loan over a large proportion of savers (depositors); (2) the pooling of the funds of so many savers in a single loan or investment; (3) economies (cost savings) in the credit evaluation of borrowers; and (4) liquidity transformation