Investment banks are aimed at facilitating flow of funds as well as allocation of capital. In all actuality, these financial intermediaries serve as the main connection between users and those engaged in the provision of capital. Those in need of money are brought together with those having sufficient money for investing, thereby, making the market aimed at allocation of capital and for regulating prices in such financial transactions. So what is an investment bank and what is investment banking? Let us find out!
What is an investment bank?
A financial institution that helps people, corporations and governments increase capital by either underwriting and/or act as the client’s agent when it comes to issuing securities are known as investment banks. They also help firms as far as mergers and acquisitions are concerned and offer ancillary services like trading of derivatives and equity services, and market making.
What is investment banking?
A particular section of banking that involves having to create capital for other companies is known as investment banking. Investment banks are responsible for underwriting new debt and equity security for different kinds of corporations. Investment banks offer guidance to issuers with respect to the issue, not to mention, placement of stock.
More about what is investment banking
Apart from the services aforementioned, investment banks also offer assistance in the sale of securities in some instances. Investment banks offer ample assistance when it comes to facilitating mergers and acquisitions, reorganizations and broker trades for private investors as well as institutions. Securities can be traded for their own accounts.
Quite obviously, the field of investment banking is most dynamic. What makes this filed distinct is transformation and flux. Financial instruments are becoming more complex mainly because financial intermediaries are becoming increasingly competitive. Financial markets have been almost swept away due to the innumerable innovative instruments being brought out. There are no clear boundaries among different financial institutions. The walls that exist between international financial markets have gradually tumbled down. To make things even more complicated, firms, financial markets, techniques and products are getting merged and melded.
In a volatile environment like this, investment banks of different sizes have a difficult time coping with change. Earlier investment banking involved only domestic underwriting as well as market making of debt securities, not to mention, corporate equity. However, dramatic expansions in the field have taken place over the past couple of decades. New techniques, new products and new international exchanges have evolved as a result.
What is investment banking will have become clear to you by now. Quite obviously, we cannot undermine the importance of investment banking in the current global financial scenario!