| The development of financial sector is always accompanied by the development of financial intermediary theories. Risk, uncertainty, information cost and transaction cost are the objective requirements of financial intermediary's evolution, while institution, law and technique are its realistic conditions. Financial intermediary plays an important role in financial activities. It promotes the smooth processing of social financing and the development of various sectors of the economy. Along with the deepening of financial activities, the functions of financial intermediary have been able to be expanded - from facilitating settlement (basic function) extended to asset conversion (core function), and gradually extended to the production of information, supervision and incentive, risk management (security functions). Financial intermediary could promote the development of market economy but the key lies in that the operation of financial intermediary can give full play to financial functions. The functions of financial intermediaries are more important than the organizational structure of financial institutions. Only constant innovation and competition could promote financial intermediaries to attain more powerful features and greater efficiency.Therefore, the paper attempts to elaborate the development and reform of financial intermediaries, from a financial functional perspective, as well as institutional analysis method. It explores the inherent law of financial intermediaries and raises strategic policy suggestions against the functional defects of Chinese financial intermediaries. Finally, it makes forward-looking on the development of financial intermediaries in the era of globalization.Along this line, the main content of each chapter is arranged as follows:In Chapter 1 "Introduction", the paper introduces the background, theoretical and practical significance of this topic and the object of study. On this basis, it further clears its study perspective and writing ideas. Finally it points out its innovation and inadequate points.In Chapter 2 "On the Functional Perspective of Financial Intermediary: A Theoretical Review", the paper summarizes the existing financial intermediary theories from a functional perspective, and focuses on the functional branches of modern financial intermediary theory. It also introduces the domestic theoretical studies on financial intermediary and gives an overall evaluation. Finally, it predicts the future development of this theoretical branch.In Chapter 3 "Financial Intermediary Function Paradigm: Analytical Framework", the paper makes an overall study on the basic issues of financial intermediary's functions, including the core function of financial intermediary and its characteristics, the main types of financial institutions, the inherent logic of its evolution, as well as its function effects. Finally, the chapter discusses the interactive development of financial intermediaries and financial markets.In Chapter 4 "Functional Evolution of China's Financial Intermediaries: History and Current Situation", the paper firstly introduces current development of western financial intermediaries. As a transition economy, China's financial intermediary system has experienced the five-stage evolution period, from the functional integration to the functional separation, and gradually formed a bank-dominated financial system. In explaining the development and basic characteristics of China's financial intermediary system, this chapter probes the functional defects of China's financial intermediaries and then analyzes the evolution mechanism, path and performance of China's financial intermediaries.In Chapter 5 " Function Transition of China's Financial Intermediaries: Assets Conversion", the paper advocates to the functional transition and structural adjustment of financial intermediaries: a) transferring from financial intermediary to service intermediary, b) improving the governance structure of financial intermediaries, c) as for market conditions, building up diverse financing channels, strengthening financial infrastructure, and encouraging competition of financial system.In Chapter 6 " Function Improvement of China's Financial Intermediaries: Supervision and Incentive", the paper proposes to optimize the supervision and incentive functions of financial intermediaries: a) achieving financial intermediaries' own effective corporate governance; b) constructing the target mode for financial intermediaries to participate in outside corporate governance; c) strengthening supporting reforms to establish dynamic information disclosure mechanism and information network.In Chapter 7 "Function Deepening of China's Financial Intermediaries: Risk Conversion and Management", the paper raises suggestions on risk management: a) realizing the functional transition of financial intermediaries, from taking risks to risk conversion and management; b) improving financial innovation mechanism, to encourage the innovation on risk conversion and management; c) optimizing the financial system, improving the risk tolerance capability of financial intermediaries, and steadily promoting financial liberalization.In Chapter 8 "Security Mechanism of China's Financial Intermediary Function Improvement", the paper starts from the vulnerability of financial intermediaries and negative externalities, and discusses the security mechanisms, including functional financial supervision, functional deposit insurance system and functional currency stabilization system.In Chapter 9 "The Development Tendency of China's Financial Intermediaries in the Era of Globalization", the paper firstly gives the overview of latest developments and trends of financial intermediaries in major countries. Then it discusses some issues of China's financial intermediaries in future's reform: a) the premise of financial conglomerates - financial deepening and financial functions improvement, b) unique role of the policy-oriented finance, c) restruction of rural fiancial system from financial function perspective. Finally, it summarizes the study in this paper and raises the strategic suggestions on .China's financial intermediaries' function improvement.The main conclusions of this paper are: on the conditions of diverse market players, functional improvement of financial intermediary is an important tool to enhance the efficiency of financial intermediation.Firstly, we must further strengthen the assets conversion (financing) function. The asset conversion function of financial intermediaries is to lend the savings from the suppliers to the demanders, through various financial tools and service, in order to maximize the value-added functions of financial resources. Financial intermediaries, especially commercial banks should gradually expand the source of funding channels, and expand the scope of funds-using, to develop the asset structure towards diversification, securitization and efficient direction. The goal that improving the efficiency of converting savings into investment and deploying financial resources to the most efficient projects or industries, could only be achieved upon clearly defined property rights.Secondly, information asymmetry should be improved, so that supervision & incentive function could be strengthened. Capital providers need a mechanism to monitor, if necessary, even intervene on the utilization of funds, because the asymmetric information of financial transactions always leads to delegate cost. If investors overlooked the financial resources of supervision, in the separation of ownership and the right to use under the conditions of scarce resources, they will not be able to guarantee the most efficient utilization, thereby leading to the imbalance of the whole society on resources allocation. Financial intermediaries use their own strengths to collect timely, complete and real information, and accordingly choose suitable borrowers and investment projects to avoid adverse selection and moral hazard, as well as reducing the cost of processing information. At the same time, adequate information disclosure system is required to solve the information asymmetry and delegation problems for financial intermediaries.Finally, the risk management function should be further strengthened. The rapid development of technological innovation is bound to speed up the adjustment of economic structure. It means that there are constant rise and decline of industries and enterprises, while the risks in the economy are largely growing. Therefore, financial intermediaries should not only act as financing intermediaries, but also act as risk conversion and management agents. The key is to create diverse financial instruments and financial service. Financial intermediary could decentralize, diversify, control and reduce a variety of risks in financial, economic and social activities, through various business, technology and management and let people with different risk preference to bear those different risks.In conclusion, despite the core function of financial intermediaries is to serve as a bridge between savers and investors, to allocate capitals in the dimension of time and region, i.e. financing function, but the realization of financing function requires risk management, information processing, supervision and incentive and other support functions as accessories. Only if the core function closely cooperates with the other supporting functions with effective financing and investment through an efficient transmission mechanism, the resource allocation in the entire society can be activated and finally forming a virtuous cycle.
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