BROWSE

Investment Banks

Definition

An investment bank is typically a private company that provides various finance-related and other services to individuals, corporations, and governments such as raising financial capital by underwriting or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services.

In the world today there are many differing types of investments that can be made. Consequently, investment banks have propped up everywhere to help consumers to make wise monetary choices and provide the services they need. But like consumers themselves, investment banks often times make investments of their own. This most commonly comes in the form of an underwriter syndicate.

Underwriter syndicates are, simply put, a temporary group of investment banks or broker-dealers who gather together as one force to offer a new set of equity or debt securities to investors on the market. These unified forces are led by a lead underwriter, and investment banks and broker-dealers usually come together to form such syndicates in the event when an issue is too large for a single firm to handle.

All parties involved in this syndicate are compensated for their services with the use of an "underwriting spread", which is the difference between the price paid to the issuer and the price received from investors or brokers.

This type of group between investment banks and brokers can also be referred upon their common aliases of an "underwriting group", a "banking syndicate", or an "investment banking syndicate".

In the markets of the modern day, current economic conditions throughout the world have resulted in increased risks for investors and brokers alike. With the inclusion of a variety of methods, underwriter syndicates are one of the most well known ways of reducing risks to a party when attempting to make a complex trade or systems of trades.

This decreased risk, which results in increased security, is achieved in an investment banking syndicate by mitigating the risk involved to every party that has come together to form the syndicate itself. All investment banks or brokers involved equally share the risks of the venture they are about to take. Consequently, this allows for the prevention of a full scale disaster in the case of failure in any market trade. As each party involved within the unified syndicate puts up a certain amount of their capital to eliminate (in the case of failure) a bad market venture, this results in each member also being able to retain most of their original investments also.

Although speculation may be a dangerous aspect to be involved in, the dangers are greatly mitigated through the increased security an underwriting syndicate can offer.

Even though each member of a syndicate shares the burden or success equally, the lead underwriter of the group is more equal than others. In the event of success or failure, the lead underwriter will take charge in leading the syndicate to conform to the situation at hand. Unsurprisingly, whoever takes this leading role will also find themselves accruing just a larger share of the profits from spread and fees.

Underwriting syndicates between investment banks and brokers are a common day occurrence in our modern day economic lives. With the security a syndicate brings, the economy is able to effectively function and make international trading decisions with decreased risk and more flexibility.


Further Reading


Beyond market failures: The market creating and shaping roles of state investment banks
www.tandfonline.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Reputation effect of investment banks: research from aspects of market share and service qualityReputation effect of investment banks: research from aspects of market share and service quality
en.cnki.com.cn [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

The role of investment banks in acquisitionsThe role of investment banks in acquisitions
academic.oup.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Costs of financial distress, delayed calls of convertible bonds, and the role of investment banksCosts of financial distress, delayed calls of convertible bonds, and the role of investment banks
www.nber.org [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Investment bank reputation, information production, and financial intermediationInvestment bank reputation, information production, and financial intermediation
onlinelibrary.wiley.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Do investment banks compete in IPOs?: The advent of the “7% plus contract”Do investment banks compete in IPOs?: The advent of the “7% plus contract”
www.sciencedirect.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Comparing the stock recommendation performance of investment banks and independent research firmsComparing the stock recommendation performance of investment banks and independent research firms
www.sciencedirect.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Do investment banks matter for M&A returns?Do investment banks matter for M&A returns?
academic.oup.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Network strategies and performance of Canadian investment banksNetwork strategies and performance of Canadian investment banks
journals.aom.org [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …

Professional influence: The effects of investment banks on clients' acquisition financing and performanceProfessional influence: The effects of investment banks on clients' acquisition financing and performance
onlinelibrary.wiley.com [PDF]
… Both cases can be shown to violate the first condition of the FFT of welfare economics: there are no … To address this issue, SIBs may increase public investment to provide short-term fiscal stimulus to keep the economy … It is also the key role performed by export–import banks …



FAQ


What is the list about?

The list catalogues the largest, most profitable and otherwise notable investment banks.

How many investment banks are there?

There are over 200 full-service global investment banks.

Are there any other types of investment banks?

Yes, there are also independent investment banks, private placement firms and notable acquired, merged or bankrupt investment banks.

What does full service mean?

Full service means that they provide both advisory and financing banking services as well as sales, market making and research on a broad array of financial products including equities, credit rates currency and commodities.

What is the difference between an independent bank and a bulge bracket bank?

Independent Investment Banks tend to be smaller than Bulge Bracket Banks which have more capital resources available to them for their business operations. Bulge Bracket Banks also tend to have larger trading floors with more employees in them than do Independent Investment Banks. A bulge bracket bank has greater access to capital markets than an independent bank because it has a larger balance sheet size which allows it to borrow money at lower interest rates from its depositors or other lenders than can an independent bank with less assets under management (AUM). This gives the bulge bracket bank greater flexibility in raising funds for its own use or for lending out to others through various debt instruments such as bonds or loans while still maintaining attractive net interest margins (NIMs) on its deposits compared with those of smaller deposit taking institutions like savings & loan associations (S&Ls), credit unions (CU), etc., which may not have ready access to capital markets due either to their small size or regulatory constraints placed upon them by government agencies such as the Federal Deposit Insurance Corporation (FDIC) in the United States or equivalent agencies elsewhere around the world. In addition, some

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