Global Scenario for Financial Services
In continental Europe (excluding UK), the concept of a ‘Universal Bank’ had been the undercurrent since the late nineteenth century, when most of these banks were set up. The term ‘Universal Banking’ meant the co-existence of commercial banking (lending activity) along with investment banking (investment and distribution activity).
Their universality was in the sense of harnessing the vast retail customer base that these banks enjoyed to market security issuances by their investment banking arms. These issues were mostly in the local markets designated in the local currencies.
The United Kingdom, which is considered as Europe’s largest investment banking market, had its own structure evolved from history. The oldest merchant bank in London was Barings Brothers which had played a prominent role in the nineteenth century. Securities distribution was the function of stock-brokers, secondary market trading was held by jobbers and advisory services were provided by merchant banks.
The term ‘merchant bank’ was evolved so as to distinguish between commercial banks and those that provided capital market advice. However, the breaking down of such barriers in 1986 by allowing banks to own broking outfits led to a consolidation and most of the broking firms got absorbed by larger diversified entities.
Around the same time, the US too was witnessing the disappearance of distinction between pure broking entities restricted to secondary markets and investment banking entities involved with the primary markets. The US investment banks with their integrated global business model entered UK and Europe and later into Japan.
The introduction of the Euro currency in 1999, helped the US invasion further by neutralizing the local currency advantages enjoyed by European universal banks. By 2001, the US bulge group garnered 29.7% of the investment banking fee generated in Europe as compared to 16.3% by the European universal banks.
Post-1986, the merchant banks and commercial banks in UK could not match up to the US onslaught which ultimately led to sale of SG Warburg, the leading merchant bank to Swiss Bank Corporation (which was acquired by UBS later) in 1995. In 1997, Natwest Bank and Barclays Bank exited investment banking business. Morgan Grenfell, a merchant bank was sold to Deutsche Bank in 1990. UBS Warburg was born out of merger of UBS and Swiss Bank Corporation which had earlier acquired SG Warburg. Deutsche Bank acquired Bankers Trust.
The investment banking industry on a global scale is a oligopolistic in nature ranging from the global leaders to ‘Pure’ investment banks and ‘Boutique’ investment banks. The global leaders consists of 8 investment banks has a global presence and these firms dominate the league tables in key business segments.
In continental Europe (excluding UK), the concept of a ‘Universal Bank’ had been the undercurrent since the late nineteenth century, when most of these banks were set up. The term ‘Universal Banking’ meant the co-existence of commercial banking (lending activity) along with investment banking (investment and distribution activity).
Their universality was in the sense of harnessing the vast retail customer base that these banks enjoyed to market security issuances by their investment banking arms. These issues were mostly in the local markets designated in the local currencies.
The United Kingdom, which is considered as Europe’s largest investment banking market, had its own structure evolved from history. The oldest merchant bank in London was Barings Brothers which had played a prominent role in the nineteenth century. Securities distribution was the function of stock-brokers, secondary market trading was held by jobbers and advisory services were provided by merchant banks.
The term ‘merchant bank’ was evolved so as to distinguish between commercial banks and those that provided capital market advice. However, the breaking down of such barriers in 1986 by allowing banks to own broking outfits led to a consolidation and most of the broking firms got absorbed by larger diversified entities.
Around the same time, the US too was witnessing the disappearance of distinction between pure broking entities restricted to secondary markets and investment banking entities involved with the primary markets. The US investment banks with their integrated global business model entered UK and Europe and later into Japan.
The introduction of the Euro currency in 1999, helped the US invasion further by neutralizing the local currency advantages enjoyed by European universal banks. By 2001, the US bulge group garnered 29.7% of the investment banking fee generated in Europe as compared to 16.3% by the European universal banks.
Post-1986, the merchant banks and commercial banks in UK could not match up to the US onslaught which ultimately led to sale of SG Warburg, the leading merchant bank to Swiss Bank Corporation (which was acquired by UBS later) in 1995. In 1997, Natwest Bank and Barclays Bank exited investment banking business. Morgan Grenfell, a merchant bank was sold to Deutsche Bank in 1990. UBS Warburg was born out of merger of UBS and Swiss Bank Corporation which had earlier acquired SG Warburg. Deutsche Bank acquired Bankers Trust.
The investment banking industry on a global scale is a oligopolistic in nature ranging from the global leaders to ‘Pure’ investment banks and ‘Boutique’ investment banks. The global leaders consists of 8 investment banks has a global presence and these firms dominate the league tables in key business segments.
