Subject The article investigates prospects for the modern banking system development that are largely associated with the transformation of intermediation functions. Financial intermediaries are extremely important, as they perform such key functions in the economy as transformation of capital, terms and risks. Objectives The purpose is to describe modern characteristics of the banking system transformation, taking into account the function performed by financial intermediaries in reproduction processes. Methods Using the structural and functional analysis, I review new trends in banking intermediation with regard to changes in liabilities structure, profitability of the banking sector, number of credit institutions and their branches, fulfillment of capital adequacy requirements, and asset size. Results Analytical and theoretical results of the study show that the structure of the national banking sector will be governed by processes of increasing the level of capitalization of banks through mergers and acquisitions against the backdrop of small local players exiting the market. The findings may help develop new technological requirements to the structure of banking activities on changes in domestic reproduction. Conclusions Priorities of modern transformation of the banking sector in the national economy in the context of changes in intermediation functions will be determined by new organizational, managerial and financial technologies, rather than by profitability criteria.
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