Role of banks as liquidity providers As global money markets have grown in size and importance and as financial instruments that decouple debt funding from credit risk have become increasingly sophisticated, it is tempting to think of traditional banks that make a business of taking deposits and making loans as anachronisms, and, indeed, much as been written about the "disintermediation" of banks.
For all the discussion of disintermediation, however, recent events suggest that depository institutions still play a crucial role in the global economy, particularly during times of turbulence. Economists identify two related but distinct basic functions of banks in the economy. First, banks help direct capital to productive investments by identifying and monitoring suitable borrowers. Second, banks provide liquidity to both borrowers and depositors.