What is Investment Banking?

Investment banking is a type of banking that is done by investment banking firms for corporations. The banking is generally done in exchange for commissions and fees. The bank may perform public offerings. It may also act as a broker and carry through on any number of acquisitions and mergers.  

Investment banking is a type of banking that is done by investment banking firms for corporations. The banking is generally done in exchange for commissions and fees. The bank may perform public offerings. It may also act as a broker and carry through on any number of acquisitions and mergers.  

To think of it in its most basic terms, investment banking is a field of banking that assists companies in acquiring the funds they require for their businesses. Those who work in investment banking also offer advice to companies in regards to any number of financial transactions they may need help with.

Traditionally speaking, banks got involved with either commercial banking or investment banking but not both. Commercial banking is when the bank collects deposits from the clients it has and then provides direct loans to individuals as well as businesses. It was considered illegal for a bank to be involved with both forms of banking. This changed in 1999 when it became legal with the creation of the Gramm-Leach-Bliley Act.

A financial institution is able to generate funds in two different ways when it offers investment banking services. The one way they can do it is to draw on public funds through the capital market. It can do this by selling stock in their company. The second way is to look for private equity or venture capital that can be exchanged for a stake in the corporation or company.

A firm that specializes in investment banking is likely to do a fair amount of consulting work. They are there to provide advice on financial matters. They are also capable of tracking the market in order to be able to offer advice to a company about when they should make public offerings as well as to know the most suitable way to manage the public assets of the business that they are working with. Some of the consulting work an investment banking firm does will overlap with the work performed by a private brokerage. This is because buy-and-sell suggestions and advice is often something they offer to the corporations and businesses they represent.

Many people choose a career in the investment banking industry because the potential for high earnings is great. Investment bankers are one of the most sought after jobs to be found in the world of money markets. A career in this field is exciting, competitive and time intensive. You will travel a lot, work round the clock on a more or less regular basis and some say being cutting edge and even a little cutthroat is required. Needless to say, many people are drawn to this type of occupation. 

Investment banking serves its share of functions. Those who work as investment bankers help both private and public corporations to issue securities in the primary markets. This work is guaranteed by best efforts selling and foreign exchange management or standby underwriting. Investment bankers may also trade for their clients by acting as intermediaries.

Dealing in securities is the main thrust of an investment banker’s job responsibilities. Investors are given the financial advice they need and then are assisted in the buying of securities. Investment banking firms also trade securities and manage financial assets of their clients.

Small sized firms that offer the services of investment banking are referred to as boutiques. Their main specialty is bond trading, providing program trading or technical analysis and giving much-needed advice on acquisitions and mergers.