In very plain and simple terms investment banking could be understood as the banking of investment and assets. An investment bank is a kind of financial institution that helps and assists all kinds of investors such as individuals and persons; several multinational and domestic corporations as well as the governments to raise financial capital and money by the issuance of securities (shares, debentures).
Thus all banks that are providing such kind of services (known as Investment Banking)are known as Investment banks. Apart from the above there some kinds of investment banks which also provide underwriting services in case the issue and the launch of new securities such as that of shares and debentures.
Investment banks also provide other kinds of complex financial services such as that of acting as an intermediary for any mergers or acquisition of corporations, also acting as an intermediary for the initial public offer (IPO) of financial securities, and acting as a representative or financial adviser for domestic and foreign institutional clients that are having a huge portfolio.
An investment bank also sometimes have external client whose entire responsibility of the funds is shouldered in these investment banks. Investment banks have certain institutional investors both national and international such as pension funds, life insurance funds, hedge funds and government funds.
The basic principle that is underlying for all the investment banks is that the more clients (both national and international) the more business transaction will it have, thereby increase the financial services fees to be charged and generating more revenues and avenues.
Some of the top listed and best investment banking institutions that have obtained a landmark position are given below:
- Bank of America Merrill Lynch
- Goldman Sachs
- Deutsche Bank
- JP Morgan
- Morgan Stanley
- United Bank of Scotland (UBS)
- Credit Suisse
All these are the top ranking investment banking names that have really carved a niche for themselves in the banking and capital markets industry. These banks charge a very high rate of commission for the financial and capital services that they provide.
The area and scope of activities begin right from the time of the planning and the scheduling of financial activities till the issue and the disbursement of the financial instruments and securities. These investment banking companies have to analyze and study all the financial pattern and history of several companies before making declaration in the financial statement of such securities issued.