By this I refer to the intermediation between the supply of sources of savings and demand for investment financing and consumption, between the supply of credit and the demand for credit. This framework can be divided into three main groups: the banking system, the nonbank financial institutions system, and the alternative financing market, which we refer to as the gray market.
Traditionally, financial intermediation between savers and borrowers takes place in the banking system through the provision of loans that are financed through deposits from savers. Even now, despite the development of additional sources of credit, the banking system is the dominant system in Israel among the various financial institutions for everything to do with financial intermediation activity.