About: Re-intermediation

Re-intermediation in banking and finance can be defined as the movement of investment capital from non-bank investments, back into financial intermediaries. This is usually done in efforts to secure depository insurance on the capital, during times of high risk and volatility in market interest rates. Conceptually, reintermediation can be thought of as an answer to disintermediation, which is the movement of investment funds away from financial intermediaries into other investments. Disintermediation occurs naturally, as competition from different financial firms can allow for higher investment yield, which causes funds to flow away from depository institutions.