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# Bank Financial Intermediation

## Definition

The role of banks in channeling funds from savers to borrowers, facilitating the efficient allocation of capital throughout the economy. This intermediation function is central to banking's contribution to economic development.

## Source Chapter

Book II, Chapter 2

## Context

Smith explains how banks serve as intermediaries between those with surplus capital and those who need it for productive purposes. He shows how this intermediation function increases the efficiency of capital allocation and promotes economic growth.

## Economic Domain

Accumulation

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