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Gp1❤️ Chp3 : Internatinal Investment Banking (📌 INTRODUCTION (1• System…
Gp1❤️
Chp3 : Internatinal Investment Banking
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INTRODUCTION
1• System emerged
In the early 16th century
In the 18th century in USA
In the 19th and 20th century
prominent banking partnerships
dramatic expansion
2• Definition
Book by Hughes & MacDonald (2002)
Investment banking is banking activities whose functions involved provision of long-term equity and loan finance for industrial and other corporations, particularly new securities.
Investment banks are the financial institutions that speacialize in helping business and governments to sell their new security issues in the primary markets to finance capital expenditures.
Additional info
After securities are sold, they make secondary markets for the securities (as brokers and dealers)
Provide advisory service to corporate clients (esp securities and M&A activities)
Mainly deal with companies and other large institutions (dont deal with retail customers)
Dont take deposits
Eg Citigroup, J.P Morgan, AmInvestment Bank Berhad, Kenanga Investment Bank Berhad, Labuan Branch, Swift Investment Bank Ltd.
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OPERATIONAL SYSTEM
A. Front Office
-
B. Middle Office
-
C. Back Office
-
*DIVISION
Operations department
Information technology
*FACILITIES OFFERED
i. Underwriting new issues
ii. Trading Securities and Risk Arbitrage
iii. New product development
iv. Providing advice
v. Others
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FEATURES
i. Manage the buying and selling of other fnancial instruments
: eg stocks, bonds
: for their own portfolio and on behalf of clients
ii. Securitization
: Bundling of assets to sell in the secondary market
iii. Bringing initial public offering (IPO)
: IPO enables company to raise new funds
: IPO is the first sale of stock by a company to the public
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FIUNCTIONS
1) Revenue generating activities
involve primary market making, secondary market making, trading and many more.
assist with corporate reorganizations and advising on strategic matters
2) Support activities
involve clearing, internal finance and information services
serve as intermediaries between corporations or governments
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DIFFERENCES COMMERCIAL BANK & INVESTMENT BANK
Investment Bank
No deposits taking
Not loan provider
Have a few less customers
Provider of custom-made service
Not a transactional day-to-day service provider
A strategic advisor to companies
Commercial Bank
Deposits taking
Loan provider
May have millions of customers
Provider of a standardized service
A transactional day-to-day service provider
Not a strategic advisor to companies