There's a blog post from two months ago newly making the rounds questioning the benefits of maturity transformation, in part arguing that 1) more and more savings are now in the form of retirement planning, and thus are longer-dated, 2) that a lot of borrowing is by companies for working capital — and, he doesn't make this observation, but more investment these days goes into software and electronics, i.e. 3-5 year duration capital, compared to giant factories, i.e. 40 year duration capital, than was the case a generation and two ago — and 3) some of the borrowers are starting to borrow on the short end for the same reason banks traditionally have.
Well, point 3 I would argue is largely a substitution effect in response to prices; he's not so much arguing that there is no mismatch as that the pricing difference it sustains will be a bit more slack. Points 1 and 2 suggest that there should, quantitatively, be less mismatch. This, too, should tend to show up in yield curves, and, while it's hard to separate the noise from the signal, it's not clear that this is true either. It's hard to see his story in the macro data, and it's hard for me to imagine there's anything worth doing about it whether it is or not. (Not that there's anything wrong with that; a lot of interesting ideas are worthwhile even if they don't have immediate practical impact.) Ultimately he concedes — that this is a concession, too, is not his observation — that
the most significant proportion of the difference between long-end and short-end rates comes from the interest rate differential which most banks hedge out to a large degree (ironically with pension funds and insurers).Which is to say, it is not ultimately so much banks that are doing the maturity transformation but "to a large degree" "with pension funds and insurers"; the long-term savers are finding the long-term borrowers, with banks as intermediaries.
It struck me, on reading this, that one obvious way in which savers, "who generally have a preference to be able to access their funds quickly," can lend long while maintaining this is negotiability of the loans, i.e. that a liquid market for corporate bonds essentially allows the corporate borrower to lock-in a rate while the lender, while not shielded from all risks, is at least able to sell the bonds for cash fairly quickly; as long as the need for cash is idiosyncratic, the lender is reasonably likely to get back about the amount lent (saved) with some accrued interest to boot. For a bank to lend instead of the ultimate saver amounts to the mediation of what might otherwise be a market transaction taken into a firm.
This brings us to Ronald Coase, who will be celebrating his 100th birthday next week. What determines whether activity is undertaken within a organized economic entity or between entities is a function of the relative costs of transactions versus management; if finding buyers for your bonds (or a bond issuer for your spare cash) is more expensive than managing a bank, then people can be expected to save at and borrow from the bank, while if it's relatively cheap to work through the bond market, that's what we should expect to happen. As it happens, much of the relevant "transaction cost" here is likely to be informational, related to credit risks — which is perhaps why that is one of the risks that is apparently, in practice, borne by the banks. It also seems like the bank-management cost is more likely to scale with the size of the borrower than is the case with a bond placement — a big borrower will be well-known, easier for lenders to appraise — and suggests that bank lending should predominate to small businesses and individuals, with more big companies borrowing more from decentralized financial markets — which, again, seems to be what we see.