Characteristics of inter-corporate deposits market:
It may be interest to note the following characteristics of the inter-corporate deposit market:
Lack of regulation:Â The lack of legal hassles and bureaucratic red tape makes and inter-corporate transaction very convenient. In a business environment otherwise characterized by a plethora of rules and regulations, the evolution of the inter-corporate market is an example of the ability of the corporate sector to organize itself in the reasonably orderly manner.
Secrecy:Â The inter-corporate deposit market is shrouded in secrecy. The brokers regard their lists of borrowers and lenders as guarded secrets. Tightlipped and circumspect, they are some what reluctant to talk about their business. Such disclosures, apprehend would result in unwelcome competition and undercutting of rates.
Importance of personal contracts: Brokers and lenders argue that they are guided by reasonably objective analysis of the financial situation of the borrowers. However the truth is that lending decisions in the inter-corporate deposits market are based on personal contacts and market information which may lack reliability.
6 Comments