Introduction to Investment Banking
Meaning and Concept of Investment Banking
What do you mean by the Term “Investment Banking”? Depending on who you ask (including i-bankers themselves), you will get somewhat different answers. Because this term does not have the precise definition. But, is generally applied to financial houses which, starting from trading as merchants, expanded their role to financing the trading and commercial activities of others, especially in the international market place.
Broadly speaking, investment banks provide a range of financial and advisory services to corporations, institutions (both private and public) and even individuals (usually high-net-worth ones…very high).
Investment banking or I- Banking is a field of banking that aids companies in acquiring funds. In addition to the acquisition of new funds, investment banking also offers advice for a wide range of transactions a company might engage in.
Investment banks help companies and governments and their agencies to raise money by issuing and selling securities in the primary market. They assist public and private corporations in raising funds in the capital markets (both equity and debt), as well as in providing strategic advisory services for mergers, acquisitions and other types of financial transactions.
Traditionally, banks either engaged in commercial banking or investment banking. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals.
But, An investment bank is different from traditional bank down the street in the sense that it does not keep any deposits with itself to pay an interest nor does it guarantees the "safekeeping" of money. An investment bank is more specialized organization that takes in your money and after analyzing the possible risks and economic conditions gives you advice to convert it into more money.
Through investment banking, an institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company.
The line between investment banking and other forms of banking has blurred in recent year, especially as commercial banks have offered more investment banking services to becoming a one stop service provider.
In the US, the Glass-Steagall Act initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities; Glass-Steagall was repealed by the Gramm-Leach-Bliley Act in 1999.
Investment banks may also differ from brokerages, which in general assist in the purchase and sale of stocks, bonds, and mutual funds in the secondary market.
However some firms operate as both brokerages and investment banks; this includes some of the best known financial services firms in the world.
In the strictest definition, investment banking is the raising of funds; both in debt and equity, and the division handling this in an investment bank is often called the "Investment Banking Division" (IBD). However, only a few small firms provide only this service. Almost all investment banks are heavily involved in providing additional financial services for clients, such as the trading of derivatives, fixed income, foreign exchange, commodity, and equity securities.
Investment banking is the process of analysing and comparing multiple paths of execution for security debt or equity on behalf of borrowers and sellers.
The final product of this pusuit should be an optimally structured transactions in which Investment bankers advise clients that -
1. Where they should finance?
2. With whom they should finance?
3. What structure they should use?
Meaning and Concept of Investment Banking
What do you mean by the Term “Investment Banking”? Depending on who you ask (including i-bankers themselves), you will get somewhat different answers. Because this term does not have the precise definition. But, is generally applied to financial houses which, starting from trading as merchants, expanded their role to financing the trading and commercial activities of others, especially in the international market place.
Broadly speaking, investment banks provide a range of financial and advisory services to corporations, institutions (both private and public) and even individuals (usually high-net-worth ones…very high).
Investment banking or I- Banking is a field of banking that aids companies in acquiring funds. In addition to the acquisition of new funds, investment banking also offers advice for a wide range of transactions a company might engage in.
Investment banks help companies and governments and their agencies to raise money by issuing and selling securities in the primary market. They assist public and private corporations in raising funds in the capital markets (both equity and debt), as well as in providing strategic advisory services for mergers, acquisitions and other types of financial transactions.
Traditionally, banks either engaged in commercial banking or investment banking. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals.
But, An investment bank is different from traditional bank down the street in the sense that it does not keep any deposits with itself to pay an interest nor does it guarantees the "safekeeping" of money. An investment bank is more specialized organization that takes in your money and after analyzing the possible risks and economic conditions gives you advice to convert it into more money.
Through investment banking, an institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company.
The line between investment banking and other forms of banking has blurred in recent year, especially as commercial banks have offered more investment banking services to becoming a one stop service provider.
In the US, the Glass-Steagall Act initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities; Glass-Steagall was repealed by the Gramm-Leach-Bliley Act in 1999.
Investment banks may also differ from brokerages, which in general assist in the purchase and sale of stocks, bonds, and mutual funds in the secondary market.
However some firms operate as both brokerages and investment banks; this includes some of the best known financial services firms in the world.
In the strictest definition, investment banking is the raising of funds; both in debt and equity, and the division handling this in an investment bank is often called the "Investment Banking Division" (IBD). However, only a few small firms provide only this service. Almost all investment banks are heavily involved in providing additional financial services for clients, such as the trading of derivatives, fixed income, foreign exchange, commodity, and equity securities.
Investment banking is the process of analysing and comparing multiple paths of execution for security debt or equity on behalf of borrowers and sellers.
The final product of this pusuit should be an optimally structured transactions in which Investment bankers advise clients that -
1. Where they should finance?
2. With whom they should finance?
3. What structure they should use?