Final answer:
The first bank to which an item is transferred for collection is termed a depositary bank. These banks are financial intermediaries, pooling funds from deposits and lending to borrowers, playing a crucial role in the flow of capital in the financial market.
Step-by-step explanation:
The first bank to which an item is transferred for collection is called a depositary bank. This term applies to banks that operate as financial intermediaries, accepting deposits from savers and then using those funds to make loans to borrowers. Banks function by pooling the deposited funds and then lending them out, trying to allocate financial capital to businesses and individuals who have good prospects for repaying the loans. This process benefits both the savers, who receive interest on their deposits, and the borrowers who get access to the funds they need.
It's important to note that while banks are the primary financial intermediaries mentioned here, other institutions like insurance companies and pension funds also act as intermediaries in the financial market, though they are not depository institutions in the same way banks are.