Are banks indispensable?

Corporate finance has been disintermediated to a large degree in the United States and is becoming disintermediated in the euro zone. This raises the question as to what role banks play. In theory, banks exist for three reasons: They provide savers with liquidity (banks have liquid liabilities and illiquid assets). Structurally, this generates the risk of a banking liquidity crisis, which is why there are banking regulation s and deposit insurance. Market-based finance does not provide liquidity; They hold high-quality information on borrowers, thanks to their long-term relationships with borrowers . T he information available in the financial markets concerns large companies, not small or medium enterprises; They diversify risks, which allows them to have risk-free liabilities (deposits) and risky assets (loans). In market-based finance, the risk is borne by retail savers. It is of course more difficult to diversify macroeconomic risk than microeconomic risk, leading to the need for banks to hold a capital buffer and for there to be deposit insurance. So banks could be circumvented and the financing of the economy could be completely disintermediated if: Retail savers accepted illiquid and risky savings; Information on small enterprises became just as available for savers, for example on platforms where small enterprises submit their credit applications.