What is Investment Banking
It is a branch of banking that helps the company in obtaining the necessary funds. To add to the lending of new funds it also suggests the company in many other transactions that it might indulge in. Investment banking is different from commercial banks, the latter gives loans directly to companies and individuals. Were in the investment banks generate funds and then issue them. This is done in two ways, they can represent on the public funds through capital market by selling the shares in their own company. The other way is to seek venture capital for exchange of a stake in their company.
Investment banking as said earlier also gives suggestions to the company. They advice them at the time of acquisitions and mergers. They also help them by making a survey of the market as to when to make a public offer. So that it can manage its public assets carefully. In recent years the activities of investment banking has increased a lot; a few of its activities are as follows:
- It helps the organization in creating an IPO so that they can be given to investors like insurance companies.
- Something new which the investment banking has taken up is the raising of debt capital. It issues bonds in raising capital for a new business to be established.
- It also insures in initiating new products.
- Recently investment banking has also stepped into gold speculation or purchase gold bullion.
Today the difference between investment banking and other banks has slimmed down. Since the time the government has introduced deregulation, it allows banks to get into one or more sectors of banking activities. Many youngsters are now a day’s opting for a career in investment banking. Investment banking is offering high pay packages and a huge financial incentive for these personnel.
The importance of investment banking lies in what they actually do. Their importance lies in the kind of services they provide even to the economy and government. Without investment banks there is no other authority that can help in issue or to resell shares and bonds. The role of an investment bank depends on the kind of economy in which it exists. For example in the United Nations kind of economy the investment banks plays a very important role. The economy feels that it is this banking system that touches the entire individuals, who are not even actually interacting with them personally.
Investment banking has become an industry in itself. The everyday operations of an investment bank can affect the entire population of a country. A successful investment banking will always maintain cordial relationships all the clients. This helps them in getting new clients in the future as they would look forward to create new opportunities for existing clients.