Banking terms to be in three categories
1. Retail Banking Services
2. Whole sale banking services
3. Private equity Banking services.
Investment Banking falls under the category of whole Banking services and even terms to be as Global Markets.Investment banks help companies and governments raise money by issuing and selling securities in the capital markets (both equity and bond), as well as providing advice on transactions such as mergers and acquisitions. A majority of investment banks offer strategic advisory services for mergers, acquisitions, divestiture or other financial services for clients, such as the trading of derivatives, fixed income, foreign exchange, commodity, and equity securities.
Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital markets activities such as mergers and acquisitions.
An investment bank is split into the so-called Front Office, Middle Office, and Back Office
Front office -
Investment banking is the traditional aspect of investment banks which involves helping customers raise funds in the Capital Markets and advising on mergers and acquisitions.The investment banking division (IBD) is generally divided into industry coverage and product coverage groups. Industry coverage groups focus on a specific industry such as healthcare, industrials, or technology, and maintain relationships with corporations within the industry to bring in business for a bank. Product coverage groups focus on financial products, such as mergers and acquisitions, leveraged finance, equity, and high-grade debt.
Investment management is the professional management of various securities (shares, bonds, etc.) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes eg. mutual funds). The investment management division of an investment bank is generally divided into separate groups, often known as Private Wealth Management ( High Networth Individuals)
Sales & trading In the process of market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade
Structuring has been a relatively recent division as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities
Merchant banking is a private equity activity of investment banks. Examples include Goldman Sachs Capital Partners and JPMorgan One Equity Partners.
Investment management is the professional management of various securities (shares, bonds, etc.) and other assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes eg. mutual funds). The investment management division of an investment bank is generally divided into separate groups, often known as Private Wealth Management ( High Networth Individuals)
Sales & trading In the process of market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade
Structuring has been a relatively recent division as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities
Merchant banking is a private equity activity of investment banks. Examples include Goldman Sachs Capital Partners and JPMorgan One Equity Partners.
Middle Office -
Risk management involves analyzing the market and credit risk that traders are taking onto the balance sheet in conducting their daily trades, and setting limits on the amount of capital that they are able to trade in order to prevent 'bad' trades having a detrimental effect to a desk overall. Another key Middle Office role is to ensure that the above mentioned economic risks are captured accurately..
Finance areas are responsible for an investment bank's capital management and risk monitoring. By tracking and analyzing the capital flows of the firm, the Finance division is the principal adviser to senior management on essential areas such as controlling the firm's global risk exposure and the profitability and structure of the firm's various businesses.
Compliance areas are responsible for an investment bank's daily operations' compliance with FSA or other government regulations and internal regulations. Often also considered a back-office division
Back office -
Operations involves data-checking trades that have been conducted, ensuring that they are not erroneous, and transacting the required transfers.Operations terms to be critical part of the bank and hence included in the Basel II approach.
Technology refers to the IT department. Every major investment bank has considerable amounts of in-house software, created by the Technology team, who are also responsible for Computer and Telecommunications-based support.
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Next Article we can see the various products being handled and soon a description of them.
2 comments:
We must now discuss about India as our regulators & finance minister are proud of our regulations.
They bluntly feel the norms & standards are adequate.
Even India has opened the gates for Globalisation,people in IT sector and BPO are working with large sums of pay due to the same.
Indian Banks are isolated with ref to the Mortgage crisis that inturn led to Financial crisis ( Credit Crunch)for Investment banks in the world.
Defently in some point time of future the Indian banking sector may go a hit , if the present US crisis goes as it substantially effects the IT and bPO sectors who terms to be major credit card , personal loans, Homeloans and car loan customers of the bank.
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