Financial systems in developing and developed economies have undergone financial sector liberalisation. Basically, a true liberalised financial system is the one in which enough deposits are efficiently mobilised and sufficient loans and advances granted to credit worthy customers couple with the independence of the financial system from government interference. This is plagued with issues of collaterised regime in developing countries like Ghana. Generally, loans or credit constitutes the largest single income-earning asset in the portfolio of most banks. Banks usually perform financial intermediation activity which have some implication for economic development of nation. Besides, there are several factors that influence intermediation process thereby preventing the financial system from operating at its optimal level. Banks can make profit from their intermediation roles. Additionally, finance literature provides support of the view that countries with efficient financial systems grow faster, while inefficient financial systems stand the perils of bank failures and lags behind in economic growth and development. Banks in Ghana have performed their financial intermediation function and its implication for profitability have been established. Interestingly, however, banks that made the most loans and advances were not necessarily those that made most profits. It is recommended that to remain profitable in the banking business in Ghana, management must not only put strategies in place to mobilize deposits and make out loans and advances but also institute procedures to efficiently manage cost. Furthermore, government must also put policies in place to motivate banks to mobilise more deposits and make out more loans to deepen the financial system. Required: a) Explain the following concepts: i. financial intermediation. ( 3 marks) ii. Collateral. ( 3 marks) Page 3 of 6 iii. Financial deepening. (3 marks) b) Why are financial intermediaries important to the financial system? ( 4 marks) c) Explain what is meant by the phrase efficient financial system. ( 4 marks) d) Describe four (4) ways financial intermediation can increase the efficiency of the financial systems?