By then households held less than 40 percent, nonbank intermediaries, primarily pension funds and mutual funds, held over 40 percent. This change illustrates why it is no longer possible to consider the role of financial markets and financial institutions separately. Rather than intermediating directly between households and firms, financial institutions have increasingly come to intermediate between households and markets, on the one hand, and between firms and markets, on the other. This makes it necessary to consider the financial system as an irreducible whole. The notion that a financial system transfers resources between households and firms is, of course, a simplification.
Governments usually play a significant role in the financial system.
They are major borrowers, particularly during times of war, recession, or when large infrastructure projects are being undertaken. They sometimes also have significant amounts of funds. In addition to their roles as borrowers or savers, governments usually play a number of other important roles. Central banks typically issue fiat money and are extensively involved in the payments system. The desire to eliminate these crises led many governments to intervene in a significant way in the financial system.