What is the Investment Banking?, Investment banking can help the companies and Governments as well as governmental institutions in raising acquisition funds by way of managing editor and sales effect in the capital market. The Investment Bank is instrumental in giving advice-building advice to do the merger of merger and acquisition as well as a whole range of other financial transactions.
The Investment Bank also acts as business brokers in representing clients do transaction experts. But within a few years, a dividing line between the two types of steel structures has been blurred especially authenticity because commercial banks also offer the services of the investment bank.
In America, law Glass-Steagall Act was created at the beginning of a return of the capital markets appear from its collapse in 1929 which forbids banks to also be recipients of deposits as well as being the top underwriter of stocks and bonds; the legislation was finally canceled in 1999 by Law Act Gramm-Leach-Bliley.
The Investment Bank also must be distinguished from a stockbroker who does business activities in the sales transactions and purchase of stocks, bonds, mutual funds top. But some companies do business activities executed by becoming the brokerage and investment bank, was carried out by finance companies also include the famous big all over the world.
Most investment banks involved are very much in the provision of additional financial services to its customers, such as conducting those transactions experts over bonds, derivatives, foreign exchange, commodities, and stocks.
This characteristic is used in on investment banks to this day most are only from “side of seller’s” his only valid expert securities or stocks (e.g. facilitating transactions, creator of the market), or promoting stocks (eg. as an underwriter, analyst, etc.).
“side buy ” represented by pension funds, mutual funds, hedge funds and public investors who became users of their services in order to obtain the maximum benefit from their investment. But many companies also have both of these components.
What is the Investment Banking
The organizational structure of the investment bank
The main function of an investment bank is doing the buying and selling of products on behalf of clients, as well as on behalf of the bank itself. The Investment Bank took over risk through trade rights undertaken by the merchants who do not deal directly with customers.
An investment bank consists of several units are divided into front line (front office), midfield (middle office) and the line of the back (the back office), each of which has the following activities:
The front-line or front office is the traditional aspect of the investment bank whose job provide assistance to clients in raising funds through the capital markets as well as providing advice in the process of merger and acquisition. Investment Bank offered an idea brought to meetings with clients, with the hope that it produces in the form of his mandate from its customers to carry out transactions on behalf of the client. If the mandate is already retrieved then the investment bank responsible for setting up the whole material needs in such transactions where interested investors can involve buying securities issuance, conduct coordination with bidder or parties negotiating with the company that became the target of the merger.
Investment management is doing its job in order to obtain the yield of investments in accordance with the aims of the investors. They can be either corporate investors (pension funds, insurance companies) or private investors (all of which invest in the form of an investment contract or often through collective investment contracts e.g. mutual funds)
A financial market consists of sales, trading, analysis, and structuring.
Sales and trading is usually the part that generates the main income for the investment bank. In the process of creating the market, traders will be selling and buying financial products with the aim of generating an increase in the value of the trade. The seller is the term used for the investment bank’s sales team was tasked to contact financial institutions and investors to potentially offer trade ideas as well as taking orders from investors trade transactions and the orders table to continue trading (trading desk) to be carried out.
The analyst is a division that conducts an analysis of a company and provides a written report about his success, usually with buy or sell rating. This Division does not generate revenue where his work is used as input for the clients in carrying out a trade.
Structuring is a division associated with trading derivatives Division play with a high technical content with a number of employees in creating a complex structure that can provide greater yields than deposits.
The midfield or middle office
Risk management plays a role in analyzing the market and credit risk from trade customers who poured in daily trade balance the customer and determine the limits on the amount of capital that is required so that the client is allowed to perform the trade in order to prevent a default in such trade.
The line of the back or back office
Operational role in the trade data is checked to ensure that it has been in accordance with the provisions, ensure no error and implement the necessary transfer transactions.
Every major investment bank has the number of software created by the technology team is also responsible for the computer and telecommunication means. Technology has grown rapidly in which trade has now done electronically. By using a complex algorithm so the program can be used to implement hedging automatically.