2. Capital Markets vis-a-vis Commercial Banks

Intermediation between lenders (or savers) and borrowers (or users of funds) is a fundamental function of the financial system in an economy and is performed primarily by commercial banks and primary capital markets. The key distinction is that capital markets provide direct funding from saver to user via the issuance of securities, while bank intermediation involves indirect funding with banks as the go-between connecting the saver and user.