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Role of Investment Banking in Financial Market ?

What does an invesment bank do ?
  • Raise capital for clients
  • Advise corporations, states or entities on capital structure, strategy, business combinations.
  • Create and sell securities to institutional and retail clients.
  • Manage money for institutional and retail clients.
  • Trade on proprietary basis.

Importance of investment banking
  • Helps the corporations in raising capital. It facilitates the trading in securities thereby increasing the liquidity of the securities.
  • It provides investment opportunities to the individual or entities.
  • Most of the corporations get advisory services from the investment bank regarding the mergers, acquisitions and divestiture.

Structure of investment banking
Investment banks are organized into 3 categories.

Front office

  • Helping customers raise funds in the capital market and advise on mergers and acquisitions.
  • professional management of various securities and other assets.
  • Buying and selling financial products with a goal of making money on each trade.
  • Creating and marketing financial products.
  • researching industries, companies and products.

Middle office

  • analyzing credit and market risk for banks.
  • Making sure operations are complying with regulations.
  • Responsible for capital management and risk monitoring.

Back office

  • Making sure the bank runs smoothly by submitting trades, maintaining database and transacting required money transfer.
  • The information technology department.