A 1989 study titled Globalization and Canadas Financial Markets, a research report prepared for the Economic Council of Canada, stated the following: An important feature of the increasing significance of some aspects of financial activity is the greater use of financial markets and instruments that intermediate funds directly- a process called market intermediation, which involves the issuance of, and trading in, securities such as bonds or stocks- as opposed to financial intermediation, in which the financial institution raises funds by issuing a claim on itself and provides funds in the form of loans.

a. Commercial banks are financial institutions that raise funds by issuing claims against themselves and then use the funds to provide loans. What do you think are the implications of the shift from financial intermediation to market intermediation for commercial banks?

b. What do you think some of the obstacles are in market intermediation?