In essence, financial intermediation tends to raise the level of saving and investment as it reduces the costs associated with bringing lenders and borrowers together. As in the case with price stability, the central bank cannot accept sole responsibility for the development of banks and financial markets, but is well placed to shoulder a major portion of the burden.
The scope of the central bank’s role in developing the financial system is far too broad for an exhaustive discussion in one address and a few related comments will have to suffice. 4  BIS Review 45/2004  The first comment is an example of what a central bank can do in practice to help markets develop.