- 20 Marks
MFS – OCT 2022 – L2 – Q2 – Benefits of Financial Intermediation and Central Bank Lending
Outline benefits of financial intermediation and assess a scenario on central bank lending practices.
Question
a) Outline the main benefits of financial intermediation. (15 Marks)
b) Assuming you are a member of a panel set up to discuss a press release of the Central Bank. In the release, it was stated that the Monetary Policy Rate was maintained at 25% and Treasury bill rate was 13%. One panel member alluded to rumours circulating that the Central Bank wanted to avoid the criticism of over-lending to the Government, so it lent to Universal Banks and Government in turn, borrowed from the Universal Banks. How do you assess this information? (5 Marks)
[Total: 20 Marks]
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