Can we live without banks?

The essay explores the role of banks as financial intermediaries in imperfect capital markets, emphasizing their necessity due to transaction costs and asymmetric information. It details the banks' function of reallocating resources from surplus to deficit economic units, requiring a banking license. The discussion includes three key transformations: maturity, risk, and size, highlighting how banks manage deposits and loans. Additionally, it notes that retail banks primarily serve the mass market, focusing on individuals and small businesses while offering essential payment services.