Last updated on March 19th, 2024 at 09:51 am
Investment banks are mammoth financial institutions that arrange for capital financing and trading to domestic and global businesses, thereby pumping liquidity into the market. Investment banks also improve the economy by matching sellers and investors and brokering deals for large corporations.
Investment banks are totally different from commercial banks in terms of their functions. While commercial banks offer loans to individuals, investment banks arrange funds for large corporations. A few commercial banks are clients of investment banks, who guide them regarding proper avenues of investment. Many reputed institutions offer courses for investment banking certification courses for aspiring professionals.
Functions of Investment Bank
Bulge bracket and boutique investment banks are the main two types of investment banks. The former is a large organisation and performs all functions of an investment bank, while the latter is a much smaller entity and performs a limited few.
In India, we will mostly find boutique investment banks. They generally function the back-end functions of the bulge bracket Investment banks in limited capacities.
The functions of an investment bank are as follows –
Underwriting functions
Investment banks help to create Initial Public Offer (IPO) for an organisation, which intends to go public. When an organisation goes public, people buy its shares and thus it attracts investment, driving the economy of the country.
Advisory Functions
Investment banks help an organisation in the process of its acquisition, merger or sale through the process of financial modelling and prediction analysis. Acquisition, merger or sale are processes where business opportunities are renewed, making growth to the country’s economy.
Investment Management
Investment banks help their clients in buying securities, bonds, mutual funds, etc. and make crucial decisions regarding when to buy, hold and sell these financial products. On the selling side, they support raising capital, making meaningful transactions and closing profitable deals favouring their clients. Both on the buying and selling side, liquidity is maintained in the economy.
Lending Functions
Investment banks also lend their own money to their clients. This proves to be a loan to the clients and an investment for the banks. This function strengthens their mutual relationship and business trust.
International Transactions
Investment banks also help their institutional clients in several complex international financial transactions, thereby enhancing international trade and commerce.
The prevalent global trading mode is foreign exchange or forex. Forex reserve is the quantum of the US Dollar a country possesses. The relation between Euro and US Dollar termed a repo rate, is the instrument through which RBI deals with commercial banks to maintain its Forex reserve. For international transactions, Investment banks take charge of the foreign exchange deal, thereby making the deal optimum and cost-effective for its clients.
Money Market Functions
Investment banks also operate in the field of money market which is essentially a trade between banks or corporations and banks. Trade occurs in the form of short-term debt investment of financial assets only. Investment Bankers help organisations with the instruments of the money market. All these transactions revive the economy of a country.
How do Investment Banks Help in Controlling Money Laundering?
Money laundering is the unscrupulous methodology of making dirty money look legal by mostly rotating them through different financial houses like banks, investment brokers, insurance firms, real estate etc. Criminals may make the best use of this
money in financing various organised crimes.
Anti-money laundering methods help in preventing these crimes that can happen due to money laundering. Banks have strict compliance rules of KYC (Know Your Customer) as the first measure. Nowadays banks have roped in Artificial Intelligence-based solutions as an anti-money laundering method. They also have strict audit compliance in place.
Investment Bankers
There are two types of Investment Bankers who help the economy to grow. The first type is the Front-End Bankers and the second type is known as the Back-End Bankers. Front-End Bankers are those who are the brand ambassadors of the investment bank. They are the real face of the organisation since they meet the clients in person and demonstrate the offerings of their organisation.
The role of back-end bankers comes after the firm receives a contract. All raw data collection, technical analysis, spreadsheet preparation and accumulation of data etc. are done at the back end. In India, most Bankers perform back-end activities.
Investment Banking as a Career
In order to pursue a career as an Investment Banker, one must learn investment banking through any of the reputed institutions offering banking certification courses. In order to learn investment banking, it is desired that an aspirant should have studied a couple of subjects out of mathematics, statistics, economics, computer science, accountancy or commerce at the 10+2 level. An MBA in FinTech or an investment banking certification course should be the right step.
However, in order to crack the interview, a prospective candidate should network with a community of Investment Bankers over social sites like Facebook and professional sites like LinkedIn. Pursuing the right internship is another shot in the arm. Such opportunities may be availed through job portals or consultants.
First-round interviews will be intense with technical, behavioural and problem-solving queries. There will be heavy elimination. The second-round interview is fierce with more in-depth queries on the candidate’s analytical reasoning coupled with behavioural competence and presentation skills.
Conclusion
In today’s world, investment banking is an extremely lucrative career option. Every organisation wishes to have a second line of income besides the revenue it generates from the core operational activities. Investment banks provide such opportunities to the organisation. This also gives a push to the domestic economy in specific and the global economy at large by encouraging trade.
The career of an Investment Banker is highly rewarding since they may steer the future for both the bank they work for and its client. The Certified Investment Banking Operations Professional course at Imarticus will guide the prospective candidate in the right direction. Both online and offline modes of training are available.
Enrol in the course today to boost your career towards a successful future. Contact us through the chat support system, or visit one of our training centers in Mumbai, Thane, Pune, Chennai, Bengaluru, Delhi, Gurgaon, or cochin.
