Disintermediation occurs when investors take their money out of banks to buy assets that could provide a market rate of return.

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Disintermediation refers to the process where investors withdraw their money from intermediary financial institutions (like banks) to invest directly in securities or assets that offer potentially higher returns. This bypasses the traditional banking system, which acts as a middleman between savers and borrowers.

Disintermediation Occurs When Investors Take Their Money Out of Banks