Explain commercial banks' brokerage and intermediation functions.

Clearly detail how

these functions help overcome the information costs, liquidity risk and price risk arising from

financial investments.

In these transactions, the commercial bank acts as a financial intermediary. Financial brokerage is

the process of offering these services that are designed to provide clients with some support in the form of

safety, scale economy, and liquidity action. One of the services provided by the bank is stock investment,

but with strict regulations that prevent significant sums of money from being invested in the stock.

Commercial banks also provide loans while also providing guidance on how to make the loans profitable.

Commercial bank brokerage aids in diversification and provides unrestricted access to financial services.

As a result, both dealers and consumers are able to obtain a fair rate that will not give them additional

stress when it comes time to repay.

These functions are critical in ensuring that information costs are minimized by doing searches on

other organizations' data, resulting in more reliable data. Commercial banks do so on their own initiative,

easing the load on consumers. Information is gathered by an information brokerage and shared with a

third party, the consumers, so that they can make an informed decision about investing in funds such as

mutual funds. Commercial banks have a tendency to operate internally, resulting in severe cash flow

controls. It is easier to control liquidity in such activities where the cash flow is managed, and the

consumers are exposed to limited liquidity hazards. The bank can also restrict the cash flow limits by

following the FICCs or GFC guidelines. The commercial bank can more easily create an atmosphere

where investors can purchase buy options to limit the risk of a downwards move, therefore securing price

risk occurrences, using these services.

 References

Baidikova, A. P., & Skriptsov, M. A. (2020). BANK INVESTMENT STRATEGY. In АКТУАЛЬНЫЕ

ВОПРОСЫ ТЕОРИИ И ПРАКТИКИ РАЗВИТИЯ НАУЧНЫХ ИССЛЕДОВАНИЙ (pp. 181-

183).

Rahman, M. (2019). A Study on Loan and Advances of a Commercial Bank. Financial Engineering

eJournal, 12(25).