Investment Banking 101 Basics Test Already Solved 100%

US, UK, and EU Traditions in IB (history) - Answer US - banks offer underwriting services ('investment banks') UK - banks offer equity training services ('merchant banks') EU - banks offer universal services ('banks') Definition of Investment Banks - Answer A system of financial services produced by financial intermediaries - focus on big corporations, other financial intermediaries, other public authorities/administrations Essentially a system of different businesses Approach is based on advisory/consulting Has a strong interaction with customers' financial structure Medium/big tickets Usually involves international perspective Investment Banks v Commercial Banks - should the two be integrated? - Answer IB dedicated to big clients, Commercial banks to retail clients Pros of integration: universal offerings all from same place, economies of scale Cons of integration: higher levels of risk, potential conflict of interests After 1993 in US and 1999 in EU, now banks can be integrated (no law prohibiting it) Commercial bank activities - Answer Take deposits, give loans, make money off interest, use funds to make investments Main businesses of IB - Answer Capital Market Services Corporate Finance Services Private Equity Services Structured Finance Services Risk Management Services Asset Management Services Lending Capital Market definition - Answer A financial service offered to the financial instruments issued by clients - big companies, public administrations, other intermediaries Deal with debt and equity instruments Both primary market services (IPO, SEO), and secondary market services (dealings, brokerage) Origination (Cap Markets) - Answer IB Capital Markets - Primary Market Service The IB studies markets to advise client on how to allocate and utilize debt or equity to raise capital (which is best for that specific client?) - they work with markets daily so they can perform the analysis IB helps to originate the transaction Advisory and Arranging (Cap Markets) - Answer IB Capital Markets - Primary Market Service After origination, the IB can assist client in fiscal, legal, and financial areas