As economies are more sophisticated, banks seem not so relevant...

Flow of Funds data (Tables I & Table II) released today by Bank of Japan has considerable significance as it seems to indicate that the disintermediation process of taking customers away from banking is on in full swing.  The data seems to indicate that as the economy becomes more sophisticated, assets share of banks come down and are replaced by other financial institutions and pension funds and insurance.

The data on financial liabilities owed by private nonfinancial corporations in Table III  shows that companies are moving away from bank loans to direct linkages to equity markets and to issuance of bonds.

Table I - Japan

Financial assets of financial intermediaries

Percentage Distribution

Area	Loans	Bonds	Currency & Deposits	Equity	Others
Japan -DC	23	14	11	2	9	59
Pension Funds Insurance	2	10	-	1	5	18
Other FIs	14	2	1	2	4	23
	39	26	12	5	18	***

Table II - USA

Area	Loans	Bonds	Invest. Trusts	Currency & Deposits	Equity	Others
USA -DC	12	5		3	-	6	26
Pension Funds Insurance	1	8	5		9	9	32
Other FIs	16	10	1	1	12	3	43
	29	23	6	4	21	18	***

Source: Bank of Japan 

There seems to be a marginal rounding off problem in the USA figures

DC = Depository Corporations

"Others" is the residual which is the remaining after deducting "Currency and deposits", "Deposits with the Fiscal Loan Fund"(Japan only),"Loans", "Bonds", "Investment trusts", "Shares and equities" and   from total financial assets

."Currency and deposits" held by depository corporations includes "Vault cash" and "Reserves at Federal Reserve".

Table III

Financial liabilities owed by private nonfinancial corporations

	USA	Japan	Europe
Loans	6.3	24.6	31.9
Bonds	13.2	4.9	4.2
Equity	58.1	48.8	50.9
Others	22.4	21.7	13

Source: Bank of Japan