(TIỂU LUẬN) FINANCIAL MARKET – BAFI 3182 assessment task 3 research paper topic chosen DISINTERMEDIATION

FINANCIAL MARKET – BAFI 3182 Assessment Task 3- Research Paper Topic chosen: DISINTERMEDIATION Topic question: How does disintermediation of banks impact financial market? Lecturer’s name: HUY PNA Tran Nguyen Gia Bao S3751302 I declare that in submitting all work for this assessment I have read, understood and agree to the content and expectations of the ‘Assessment declaration’ Conts Abstract .2 Introduction Literature review 3.1 Brief description of the role of financial intermediaries 3.2 Rise of disintermediation .4  What is disintermediation?  The reasons for disintermediation .4 3.3 Impacts on financial markets .6 a Firms investors and borrowers .6 b Deterioration of traditional bank roles c Structural change in banks d Rise of shadow banking .9 e Decentralised autonomous organisations (DAOs) 10 Conclusion and Limitations 11 References 12 1 Abstract This paper examines the trend in disintermediation of banks and its impacts upon financial markets The main focus is on the review of existing literature by investigating the views and studies by other authors regarding the disintermediation topic My findings comprise of some theories about the drivers of disintermediation, including the technological progress and the lack of trust people have on financial intermediaries There are many implications disintermediation has on financial markets Some findings include the fall in traditional bank roles, the structural change in the existing banking institutions, the rise of ‘shadow banking’ and other decentralised autonomous organisations (DAOs) that are expected to replace banks in the future Other findings include the cost saving that investors and borrowers enjoy for not paying bank fees This paper is purely conceptual since it mainly discussed the literature review of existing studies done by other authors about this topic Introduction Nowadays, with the advancement in technology, the roles played by financial intermediaries seem to be subdued Around the world, we have witnessed a reduction in the number of banks In the US alone, physical banks are slowly replaced with digital platforms where people can borrow and lend funds in an efficient and cost-effective way Such a process, disintermediation, has started to infiltrate the financial markets In fact, the popularity of disintermediation has sparked concerns about the permanent replacement of conventional bank, which threatens the job prospects of many individuals and diminishes the fundamental functions of the financial institutions However, will the financial sectors be solely negatively affected by such a trend? In this paper, I will explore different aspects of disintermediation in order to answer one of the most probably asked questions, ‘How does disintermediation of banks impact financial market?’ In the first part of the paper, I will briefly describe the role of financial intermediaries by analysing some theories proposed by different authors regarding the functions of banks and financial institutions (Part 3.1) Next, I will define the term ‘disintermediation’ and provide reasons for the rising trend of disintermediation in recent years (Part 3.2) This is followed by a range of literature review regarding the developments that drive disintermediation Then, I will explain the impacts of such a trend on the financial market (Part 3.3) This is the most crucial part of the paper since numerous studies and theories will be discussed and evaluated in order to analyse the change disintermediation has created upon the financial market Finally, I will conclude the paper and suggest some limitations that may influence my research findings (Part 4) Literature review 3.1 Brief description of the role of financial intermediaries To understand the impacts of disintermediation upon financial markets, it is necessary to first examine the roles of financial intermediaries in the market According to a theory proposed by Freixas and Rochet (2008), four main functions of intermediaries are ‘asset transformation, liquidity and payment services, monitoring and information processing, and risk management’ One aspect of asset transformation is ‘maturity transformation’ Early research done by Marty (1961) showed that banks can transform ‘illiquid liabilities’ issued by firms into highly ‘liquid instruments’ held by customers This is supported by recent studies conducted by Caprio (1995) and Mahdi (2008) who emphasised the role of banks in matching maturity preferences between lenders and borrowers These authors pointed out that borrowers, including firms, prefer less liquidity than the lenders, who are mainly savers and investors Banks can offer long-term loans to borrowers while ensuring their short-term liabilities to the lenders Although Caprio (1995) comprehensively explained the maturity matching function of the intermediaries, his study was mainly conducted in transitional economies where the financial institutions and the process of lending-and-borrowing were primitive Therefore, the function of intermediaries was still limited In contrast, research done by Marty (1961) and Mahdi (2008) are extended to include all developed economies, hence, the role of intermediaries could be seen easily, rendering their findings more reliable Another role of intermediaries is risk reduction Geithner (2008) found that by diversifying the loans given out, banks can create a well-diversified portfolio, which minimise unsystematic risks Regarding the theory of diversification, Allen & Santomero (1997) believed that this strategy effectively reduces the percentage of bad debts across a huge loan portfolio, which mitigates the risks incurred to lenders In another paper, Scholtens & Wensveen (2000) extensively explained how the intermediaries minimise the default risks with the use of their expertise knowledge and available information regarding the borrowers This is consistent with the findings in Leland & Pyle (1977) and Chan (1983) These studies are valid in the sense that they all elaborate the role of intermediaries in nullifying the credit risks, which proves to be beneficial to the lenders With the vital functions of financial intermediaries mentioned above, the trend in disintermediation will strongly disrupt the bank roles Such disruption has many implications upon the market which I will explain in the subsequent sections 3.2 Rise of disintermediation  What is disintermediation? According to Alinska & Czepirska (2016), disintermediation refers to the reduction in roles or total eradication of the middle parties in supply chain of goods and services In finance, this term refers to the development that removes banks or any institutions and allow lenders to place their savings/funds directly to the borrowers Marszałek (2016) extended the definition to include that disintermediation is also the withdrawal of funds from existing intermediaries in order to invest them directly  The reasons for disintermediation In recent years, we have witnessed an increasing trend in disintermediation Fang et al (2015) found the main reason for this phenomenon is that investors increasingly desire lower transaction fees and other additional costs, which promises higher returns In fact, banks are driven by self-interest, hence they tend to charge high fee for the borrowers and keep the return low for the lender (Anderson & Makhija 1999) This is supported by the findings in Bos & Kool (2006) who argued that banks seek profits from the spread in their price quotes Although the contexts for the studies are different (the former was in Japan while the latter was in Netherlands), both authors well-presented the consequences of the spread on the returns for the lenders and costs for the borrowers In fact, low bid-rate and high ask-rate respectively indicate low return for lenders, who wish to sell cash, and high cost for borrowers, who wish to buy cash Schmidt et al (1999) conducted research on banks in another context which is Europe and found similar results Most lenders attained lower profit due to the high transaction fees paid to the banks and their low return rate Similarly, borrowers suffered high borrowing cost and additional fees, which lower their overall returns as well Therefore, firms are discouraged from investing in or borrowing from financial intermediaries, resulting in the rise of disintermediation Another reason is due to the lack of trust in banks Marszałek (2016) found that since the collapse of banks during the financial crisis 2009, the customers’ confidence in banks has dropped significantly Lauteschlager (2015) attributed such a fall in confidence to several factors including numerous scandals in the banking sectors and the economic uncertainty This led many people to switch to other forms of lending-and-borrowing, resulting in the rise of bank disintermediation In the mentioned studies, both authors acknowledged that disintermediation did happen even before the crisis, however, it was further exacerbated in the post-crisis period There are other studies attributing the rise of disintermediation to the technological progress Zamani & Giaglis (2018) argued that the development of blockchain technology has led to the emergence of digital currencies such as Bitcoin, Ether and Litecoin The authors find that these cryptocurrencies serve similar functions as fiat currency However, they are more convenient in the sense that they are not controlled by a centralised banks or governments, which renders them easily used This is supported by Cheah & Fry (2015) who believe that Bitcoin can be used in daily transactions Their research provided empirical evidence for the widespread use of Bitcoin in business deals and online purchases In another paper, Manning et al (2016) described the benefits of blockchain technology in cryptocurrencies that render such digital currencies a popular choice by businesses and individuals These authors emphasise the use of algorithm and codes in blockchain technology that helps such a system secure its data Therefore, from the abovementioned studies, it can be argued that the rise of cryptocurrencies has discouraged the need for physical banks With blockchain technology, suppliers of capital are connected directly to customers in a digital way which is more efficient than intermediaries This inevitably speeds up disintermediation process 3.3 Impacts on financial markets The financial markets include the roles of lenders and borrowers as well as the intermediaries such as banks The focus of this paper is analysing how the three abovementioned parties are influenced by the trend in disintermediation These parties are interrelated, hence the impacts upon one may influence the others a Firms investors and borrowers Numerous studies have shown that with the removal of banks, investors are able to gain higher returns because they are not required to pay fee and carry Moreover, they will not be vulnerable to the bank spread Early research was done by Benston & Smith (1976) who collected data upon the returns that savers could get if they invested in banks They would then compare with the control group which consisted of those who invested directly without intermediaries The authors realised that the control group could get higher returns Additional evidence can be found in Carruthers & Kim (2011) and Moenninghoff & Wieandt (2013) who investigated the benefits of direct investment These authors suggested that disintermediation allows investors to save upon the transactional fees and other administrative costs, which eventually yields higher returns This is further supported by Fang et al (2015) While Benston & Smith (1976) focused mainly on short-term investors, Carruthers & Kim (2011) and Moenninghoff & Wieandt (2013) provided a more-balanced approach by examining both short-term and long-term cases This enhances the reliability of their studies and strengthens their results However, a drawback of direct investment is that investors may lack the skills in portfolio management Fang et al (2015) found that intermediaries are proven to be better than direct investors in terms of transaction-related activities and monitoring capabilities Therefore, direct investors may underperform, resulting in the fall in returns In fact, an early study by Rubinton (2011) pointed out that investors may not be well equipped with skills and knowledge in handling capital Investors also face difficulty in hedging themselves against the potential default risks from the borrowers (Moenninghoff & Wieandt 2013) Therefore, many investors end up investing in low-credit rating assets about which they have little knowledge This results in potentially low returns earned With disintermediation, borrowers are also able to enjoy lower cost because the transactional fees are eliminated Fang et al (2015) argued that when the deficit units borrow money directly from the surplus units, the huge amount of cost is saved as borrowers not need to pay the fees for intermediaries This is supported by Xu (2015) and Ertan et al (2018) who found that the cost saving has spurred many firms to directly obtain loans from the investors instead of banks This signals a change in the flow of funds in the financial market Initially, with intermediaries, funds flow from surplus units to financial institutions such as banks, followed by the deficit units In recent years, the borrowers choose to obtain loans directly from the investors Such change in the flow of funds may render the roles of banks obsolete This will be explained in the next part b Deterioration of traditional bank roles The functions of banks have reduced Marszałek (2016) argued that the opportunities for banks to earn profits dropped since the demand for banking services decreased and the number of customers fell This may have further consequences As discussed above (Section 3.1), financial intermediaries play a huge role in matching maturity preference and reducing credit risks thanks to diversifying portfolio and specialised knowledge (Freixas & Rochet 2008) Therefore, with disintermediation, these functions will be overlooked In other words, banks may fail to conduct such functions, resulting in the disruption to the entire financial system In fact, with lower deposits received, the process of giving out loans is hindered Khan et al (2019) found that in developing countries, banks are no longer be able to match maturity preference between borrowers and investors since their capital is limited due to low deposits Similarly, Buch & Golder (2000) argued that in Germany, credit availability from banks fell due to the trend towards disintermediation and the rise of foreign competition This early research greatly implies the impacts of disintermediation upon the banks functioning in giving out loans Although there are still limited studies about the credit crunch, Buch & Golder (2000) and Khan et al (2019) research create a clear overall picture of how disintermediation leads to the fall in credit availability However, it should be noted that the credit crunch here refers largely to the fall in physical issuance of loans by banks Nowadays, credits can be obtained from many sources and not banks alone, one of which is decentralised autonomous organisations (DAOs) (see Part e below) c Structural change in banks As a result of disintermediation which largely reduces banks’ profit, existing banks have to change structures and behaviours so as to reduce risks and obtain higher profits (Khan et al 2019) According to Berger et al (2001), large banks become unwilling to lend funds to small firms because such companies are considered ‘informationally opaque’ and risky This reduces credit expansion in the economy and these borrowers find it hard to obtain loans from the banks In addition, Berger et al (2001) also found that most banks modify their portfolio structure by purchasing and selling existing loans instead of providing new loans to less well-known borrowers These banks would gain the advantage of lower risks and higher profits Another finding in Khan et al (2019) revealed that banks even take part in ‘credit risk’ trading using credit derivatives By doing so, banks can pass on the credit risks to the rd party while still retaining the legal title to the assets Since 2000, the market of credit derivatives has grown tremendously as most banks are obsessed with low risks and high profits (Morrision 2005) Such a growth deepened further after the financial crisis and the trend towards disintermediation seemed to support such a market It is reasonably so because traditionally, banks reduce credit risks by diversifying portfolios (as explained in Section 3.1) Nowadays, with disintermediation which causes many customers to turn away from banks, these financial institutions face difficulty creating a well-diversified portfolio to enjoy low risks (Minton et al 2006) Therefore, banks have to utilise credit risk trading based on their current limited and risky loans This contributes to the rise of credit derivatives market With this, however, Morrison (2005) found that banks become willing to take more risks, which is contradicted to their initial purposes It seems ironical that banks take advantage of credit derivatives to hedge themselves against risks and yet, the use of such instruments entice banks to take more risks This is supported by Instefjord (2005) who found substantial empirical evidence regarding the downsides of credit derivatives The author pointed out that such derivatives make the acquisition of further risks more attractive to banks, which may destabilise the banking system When banks are taking more risks, there is a growing concern regarding how much risks can be diverted away and how much still retains with the banks Therefore, it is obvious that the behaviour of banks is influenced by the rise of credit derivatives market Another structural change happening is that banks also raise their capital requirements to reduce risks Martynova (2015) found that disintermediation generates low profitability which has put many banks in crisis and threats of insolvency Small number of depositors indicates that the amount of capital available in banks is low Therefore, to prevent the potential bankruptcy, banks must increase minimum capital requirements To so, credit supply and demand must be reduced by raising lending rate This would further worsen the economy, as explained in Khan et al (2019) that high capital requirements translate to higher lending rate, which increases the borrowing cost for the firms and reduces their demand for investment Baker & Wurgler (2015) emphasise that such a change in capital requirement further accelerates disintermediation because banks are actually chasing borrowers away Potential customers now seek alternative ways of funding instead of banks d Rise of shadow banking According to Marszałek (2016), the disintermediation in banking has created the growth in competition from the non-banking institutions and the popularity of shadow banks These entities function in a similar way to the banks but without the stringent legislation from the governments In another paper, Schwarcz (2011) succinctly put, “shadow banking system” comprises of all forms of financing that are not bank intermediated The popularity of shadow banking has encouraged risky investment and greater uncertainty since such a system is not enforced and regulated by authorities, as explained in Marszalek (2016) and Pozsar et al (2012) These authors questioned the roles of shadow banking since such a system allows investors to enjoy lower bank fees while bearing high risks in their investments Another research conducted by Tobias & Hyun (2010) in the US banking system also revealed that the behaviour of the investors has changed due to the presence of shadow banking A prominent trend observed was that more and more people were attracted to risky investments This may lead to the potential bubble of such assets which may eventually create another future financial crisis Boghean (2015) fully explained in her paper how shadow banks created imbalances and triggered global financial crisis 2009 Similarly, Lysandrou & Nesvetailova (2014) pointed out different entities exhibiting shadow banking and their contribution to financial crisis The authors also predicted the possibility of another crisis in the future due to the rise of shadow banking in recent years Their research strongly supports the findings outlined in earlier studies by Tobias & Hyun (2010) and Pozsar et al (2012) where the trend in risky investments may spark another crisis In the abovementioned studies, all authors chose to adopt a neutral stand towards shadow banking In my opinion, the potential risks incurred by the shadow banking strongly outweighs the benefits it confers e Decentralised autonomous organisations (DAOs) With the trend towards disintermediation, many DAOS are formed According to Hsieh et al (2018), DAOs refers to ‘non-hierarchical organizations that perform and record routine tasks on a peer-to-peer, cryptographically secure, public network’ The rise of DAOs has heightened competition with traditional banks because both the parties are able to perform similar functions in transaction and other bank-related services However, Hsieh et al (2018) found that DAOs utilise advanced blockchain technology which completely removes the intermediaries, hence facilitating the ease of transaction process Such DAOs divert customers away from banks Riki (2018) outlined in his paper the future of banking in which DAOs fully replace banks and saving institutions The author also pointed out how virtual currencies are used in place of fiat currencies and virtual banking will become a norm In another study conducted by Riyanto et al (2018) in Indonesia, it is found that the rise of tech-centric banks and DAOs has reduced the number of conventional banks in the country Both Riki (2018) and Riyanto et al (2018) agree upon the benefits brought about by DAOs which perform 24/7 services for the customers The fact that these platforms make use of modern technology in banking and transaction strongly attracts customers due to high security and efficiency This would lead to the demise of traditional banks in the future if banks fail to update themselves with state-of-the-art technology However, both authors raise concerns about the fact that these DAOs are not strictly regulated by the government, 10 hence all types of transactions and services can be done without authorised monitoring This may give rise to illegal activities Therefore, the rise of DAOs can be a double-edged sword Conclusion and Limitations In conclusion, there are several impacts that disintermediation has on the financial market The most obvious effect is the demise of traditional bank functions as an intermediary Besides, banks also undergo structural change, including the raising of capital requirement to minimise risks and the popularity of credit derivative trading With disintermediation, it is found that there is the rise of shadow banks as well as DAOs which are gradually replacing the traditional banks Regarding the investors, they are able to obtain higher returns due to the removal of transactional fees Besides, the rise of shadow banking stimulates investors to invest in risky assets in the hope of achieving higher returns However, such risky investment may create bubbles which potentially spark another crisis There are some limitations in my research Firstly, most of the studies used in this paper are conducted in developed nations such as the US and Europe where the financial market is complex and well developed There is a lack of available evidence and research conducted in developing countries regarding disintermediation, hence it is difficult to obtain enough information from developing nations to ensure the widespread coverage of this research paper Secondly, the impact upon the borrowers is still limited Majority of research recently focus on the impacts of disintermediation upon banks and investors, with little attention paid to the borrowers This may diminish the scope covered in my research paper Moreover, the focus of this paper is about banks disintermediation, hence, other intermediaries such as private equity or insurance are not covered However, by understanding the banking sectors, we can relate to other sectors as well since these intermediaries may have similar functions 11 References Alinska, A and Czepirska, I 2016, ‘The development of payment services as an example of disintermediation in the financial system’, e-Finanse, 2016, Vol.12(2), pp.60-73, viewed 23 August 2019, Allen, F and Santomero, A M 1997, ‘The theory of financial intermediation’, Journal of Banking & Finance, Volume 21, Issues 11–12, December 1997, Pages 1461-1485, viewed 18 August 2019, Anderson, C W and Makhija, A K 1999, ‘Deregulation, disintermediation, and agency costs of debt: evidence from Japan’, Journal of Financial Economics, Volume 51, Issue 2, February 1999, Pages 309-339, viewed 19 August 2019, Baker, M and Wurgler, J 2015, ‘Do Strict Capital Requirements Raise the Cost of Capital? Bank Regulation, Capital Structure, and the Low-Risk Anomaly’, The American Economic Review, Vol 105, No 5, pg 315-320, viewed 31 August 2019, Benston, G.J and Smith, C.W Jr 1976, ‘A Transactions Cost Approach to the Theory of Financial Intermediation’, The Journal of Finance, Vol 31, No 2, December 28-30, pp 215231, viewed 19 August 2019, Berger, A.N., Klapper, L.F and Udell, G.F 2001, ‘The ability of banks to lend to informationally opaque small businesses’, Journal of Banking & Finance , Volume 25, Issue 12, December 2001, Pages 2127-2167, viewed 24 August 2019, 12 Boghean, C 2015, ‘THE SHADOW BANKING SYSTEM AND ITS ROLE IN TRIGGERING THE GLOBAL CRISIS’, SEA: Practical Application of Science 2015; Vol III, pg.103-108, January, viewed 24 August 2019, Bos, J.W.B and Kool, C.J.M 2006, ‘Bank efficiency: The role of bank strategy and local market conditions’, Journal of Banking & Finance, Volume 30, Issue 7, July 2006, Pages 1953-1974, viewed 19 August 2019, Buch, Claudia M and Golder, Stefan M 2000, ‘Foreign competition and disintermediation: No threat to the German banking system?’ Banca Nazionale del Lavoro Quarterly Review; Rome, Vol 53, Iss 213, viewed 24 August 2019, Caprio, G Jr 1995, ‘The role of financial intermediaries in transitional economies’, ScienceDirect, Volume 42, June 1995, Pages 257-302, viewed 18 August 2019, Carruthers, B G and Kim, J C 2011, ‘The Sociology of Finance’, Annual Review of Sociology, Vol 37 (2011), pp 239-259, viewed 19 August 2019, Chan, Y 1983, ‘On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information, The Journal of Finance, Vol 38, No (Dec., 1983), pp 1543-1568, viewed 19 August 2019, Cheah, E and Fry, J 2015, ‘Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin’, Economics Letters, Vol 130, pg 32-36, viewed 31 August 2019, 13 Ertan, A., Kleymenova, A and Tuijn, M 2018, ‘The Real Effects of Financial Disintermediation: Evidence from the ECB Corporate Sector Purchase Program’, viewed September 2019, Fang, L., Ivashina, V and Lerner, J 2015, ‘The disintermediation of financial markets: Direct investing in private equity’, Journal of Financial Economics, Volume 116, Issue 1, April 2015, Pages 160-178, viewed 19 August 2019, Freixas, X and Rochet, J.C 2008, Microeconomics of Banking , The MIT Press, Cambridge, Mass, vol 2nd ed, pg.2-10, viewed 19 August 2019, Geithner, T 2008, ‘Reducing risk in the financial system’, Financial Times , June, viewed 18 August 2019, Hsieh, Y., Vergne, J.P., Anderson, P., Lakhani, K and Reitzig, M 2018, ‘Bitcoin and the rise of decentralized autonomous organizations’, Journal of Organization Design, volume 7, 30 November, viewed 31 August 2019, Instefjord, N 2005, ‘Risk and hedging: Do credit derivatives increase bank risk?’, Journal of Banking and Finance, Volume 29, Issue 2, Pages 333-345, viewed September 2019, Khan, T M., Rizvi, S.K.A, and Sadiq, R 2019, ‘Disintermediation of banks in a developing economy: Profitability and depositor protection in adverse economic conditions’, Managerial Finance, 11 February 2019, Vol.45(2), pp.222-243, viewed 24 August 2019, 14 Lauteschlager, S 2015, ‘Reintegrating the banking sector into society: Earning and reestablishing trust’, Speech given at the 7th International Banking Conference “Tomorrow’s bank business model – how far are we from the new equilibrium”, Bocconi University, Milan, September 2015, viewed 23 August 2019, Leland, H E and Pyle, D H 1977, ‘Informational Asymmetries, Financial Structure, and Financial Intermediation’, The Journal of Finance, Vol 32, No 2, September 16-18, pp 371387, viewed 19 August 2019, Lysandrou, P and Nesvetailova, A 2014, ‘The role of shadow banking entities in the financial crisis: a disaggregated view’, Journal Review of International Political Economy, Volume 22, 2015 - Issue 2, Pages 257-279, viewed 24 August 2019, Mahdi, S 2008, ‘The Role of Financial Intermediaries in Capital Market’, Zagreb International Review of Economics & Business, Vol 11, Iss 1, May 2008, pg 97-109, viewed 18 August 2019, Manning, M., Sutton, M and Zhu, J 2016, ‘DISTRIBUTED LEDGER TECHNOLOGY: in securities clearing and settlement: Some issues’, JASSA, Issue 3, pg 30-36, viewed 31 August 2019, Marty, A L 1961, ‘Gurley and Shaw on Money in a Theory of Finance’, Journal of Political Economy, Vol 69, No (Feb., 1961), pp 56-62, viewed 18 August 2019, Martynova, N 2015, ‘Effect of bank capital requirements on economic growth: a survey’, IDEAS Working Paper Series from RePEc; St Louis, viewed 24 August 2019, 15 Marszałek, P 2016, ‘DISINTERMEDIATION OF BANKS - CAUSES AND CONSEQUENCES’, Research Papers of the Wroclaw University of Economics, 2016, Issue 451, p256-267, viewed 23 August 2019, Minton, A B., Stulz, R and Williamson, R 2006, ‘How much banks use credit derivatives to reduce risk?’, NBER Working Paper Series, viewed September 2019, Moenninghoff, S and Wieandt, A 2013, ‘The Future of Peer-to-Peer Finance’, ZfbF, (65), 466487, viewed 19 August 2019, Morrison, A D 2005, ‘Credit Derivatives, Disintermediation, and Investment Decisions’, The Journal of Business, Vol 78, No (March 2005), pp 621-648, viewed September 2019, Pozsar, Z., Adrian, T., Ashcraft, A., and Boesky, H 2012, ‘Shadow Banking’, Revue d'économie financière, March, Issue 105, pp.157-184, viewed 23 August 2019, Qian, J and Strahan, P.E 2007, ‘How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans’, The Journal of Finance, Vol 62, No 6, pp 2803-2834, viewed 24 August 2019, Riki, F.R 2018, ‘FinTech developments in banking, insurance and FMIs’, Reserve Bank of New Zealand Bulletin, Wellington Vol 81, Iss 12, Nov 2018, pg 3-40, viewed 31 August 2019, 16 Riyanto, A., Primiana, I., Yunizar and Azis, Y 2018, ‘Disruptive Technology: The Phenomenon of FinTech towards Conventional Banking in Indonesia’, IOP Conference Series: Materials Science and Engineering, vol 407, no 1, 2018, p 012104., viewed 31 August 2019, Rubinton, B 2011, ‘Crowdfunding: disintermediated investment banking’, MPRA, 11 April, viewed September 2019, Schmidt, R.H., Hackethal, A and Tyrell, M 1999, ‘Disintermediation and the Role of Banks in Europe: An International Comparison’, Journal of Financial Intermediation, Volume 8, Issues 1–2, January 1999, Pages 36-67, viewed 19 August 2019, Scholtens, B and Wensveen, D V 2000, ‘A critique on the theory of financial intermediation’, Journal of Banking & Finance, Volume 24, Issue 8, August 2000, Pages 1243-1251, viewed 18 August 2019, Schwarcz, S L 2011, ‘SHADOW BANKING, FINANCIAL MARKETS, AND THE REAL ESTATE SECTOR’, Trustees Of Boston University, viewed 23 August 2019, < https://www.bu.edu/rbfl/files/2013/09/Shadow-Banking-Financial-Markets-and-the-RealEstate-Sector.pdf> Tobias, A and Hyun, S.S 2010, ‘The Changing Nature of Financial Intermediation and the Financial Crisis of 2007–2009’, Annual Review of Economics, Vol 2, pg.603-618, viewed 23 August 2019, 17 Xu, T 2015, ‘ Financial Disintermediation and Entrepreneurial Learning: Evidence from the Crowdfunding Market’, University of British Columbia, viewed September 2019, Zamani, E.D and Giaglis, G.M 2018, ‘With a little help from the miners: distributed ledger technology and market disintermediation’, Industrial Management & Data Systems, Vol.118(3), pp.637-652, April, viewed 31 August 2019, 18 ... issues’, JASSA, Issue 3, pg 30 -36 , viewed 31 August 2019, Marty, A L 1961,... up disintermediation process 3. 3 Impacts on financial markets The financial markets include the roles of lenders and borrowers as well as the intermediaries such as banks The focus of this paper. .. viewed 23 August 2019,