While banks may be more central to the payment system, nonbanks are also involved. Moreover, banks and nonbanks are interconnected in many ways – for example, through derivatives, lines of credit, and other services provided by banks to nonbanks – and many markets depend on banks that act as dealers or that provide other services.
In addition, many nonbanks are owned by bank holding companies, which may provide capital and liquidity guarantees to nonbank subsidiaries. Not surprisingly, the growth of the nonbank sector has tended to increase the complexity of the financial system. When banks provide loans directly to households and businesses, the chain of intermediation is relatively short and simple.