Investment Banking And Other Banking

Front 1

Describe Investment Banks

Back 1

Complex organisations; offer a wide range of financial services, Charging fees and commissions for advise given on mergers, raising equity capital and risk management

Front 2

Corporate Finance Bankers

Back 2

Loss leading activity's; strengthen relationships with banks to gain a big payoff in the future (merger). To maximise profits they need to coordinate activities in order to sell a variety of services to clients

Front 3

How well are employees of investment banks paid?

Back 3

Very well; around 50% of a banks income goes on remuneration

Front 4

Why do investment banks earn such large profits?

Back 4

Oligopolistic power: complexity and size of transactions for services.

Reputation: successful Investment Banks advice carries credence and authority.

Superior information.

Front 5

What are global investment banks?

Back 5

These are active in a number of countries

Front 6

What are bulge bracket investment banks?

Back 6

The term used for leaders such as Goldman Sachs

Front 7

What is a boutique investment bank?

Back 7

A smaller investment back which concentrates its services to particular areas such as mergers and acquisitions

Front 8

Do Investment banks charge for the services they offer regarding raising finances?

Back 8

Investment banks have great experience and knowledge and charge commission on all finance raising transaction

They aid with IPOS, rights issues, further share issues, bonds, project finance, sale and leaseback and overseas trade.

Underwrite security and new equity issues

They assist with issuance of bills of exchange and bankers acceptance.

Front 9

Mergers, acquisitions and corporate restructuring

Back 9

Large fees earned from advising; divestiture(selling off of a subsidiary); Restructure Debt; Strategic Review(usually meaning a firm wants to be taken over)

Front 10

Corporate Finance Banker?

Back 10

Relationship manager. Builds up a long term/ special relationship with a particular company/director.

Front 11

Explain Risk Management

Back 11

Advising firms on ways to reduce risk - interest rate and foreign currency movements.

Also advise those companies with surplus funds on where they believe the most appropriate place to invest their funds without exposing themselves to any undue risk

Front 12

Lending

Back 12

Investment banks can for a syndicate bank loan for companies requiring a large investment of funds

Front 13

Privatisation

Back 13

In the thatcher period 1970's investments banks aided the movement from public to private ownership

Front 14

Public - private partnership (PPP)

Back 14

Investment banks assist with setting up which allow private firms to build and operate a facility, such as a school, in return for an income flow

Front 15

Explain Brokerage

Back 15

They act as corporate brokers to companies, advising on regulations and all aspects of bond and equity issuance. They may offer services to retail and wholesale investor clients as well, advising on, and facilitating, the buying and selling of securities.

Front 16

Characteristics of Market makers (dealing)

Back 16

Market makers operate quote driven trading systems; bid-offer spread - fees; Clearing price: when supply = demand.

Front 17

Chinese Walls?

Back 17

Is the term used by investment banks to explain how they do not take advantage of inside knowledge because information is not passed from one part of the bank to another: pension fund management, issuance of shares IPO.

Front 18

Proprietary Trading

Back 18

Is using and investment banks capital to make trading profit (trading income)

Front 19

Fixed Income Currecies and Commodity's FICC

Back 19

Trading is carried out by investment banks on behalf of clients. It generates large amounts of income trading in a wide variety of bonds, credit and interest rate derivatives, money market instruments and bank loans. Currency and commodity trading is for both spot and derivative deals.

Front 20

Securitisation?

Back 20

Bundling assets together; rights to receive principal and interest; sold and traded; enabling originator to take on more debt. SPV entity containing the bundles assets

Front 21

Asset management?

Back 21

Carried out for charities; pension funds; companies and individuals

Front 22

What else do investment banks offer?

Back 22

Provide investment advice; private client representatives give advice to individual investors; institutional sales force gives advise to professional funds

Front 23

Wealth management and private banking

Back 23

Offered by investment banks: services and advice to improve the management of the financial affairs of high net-worth individuals, including their investments, current deposit accounts, obtaining of loans and tax issues.

Front 24

Prime brokerage services offered by Investment banks

Back 24

Services offered to hedge funds - acting as a broker buying and selling blocks of shares (trade execution), derivatives etc. for the fund, clearing and settlement of trades, risk management, back-office accounting services, cash management, custodial services and introductory services.

Front 25

International Banking?

Back 25

The banking business conducted across national borders and/or with foreign currencies

Front 26

What are the different types of international banking?

Back 26

For Nationals at home

For non Nationals at home

Eurocurrency banking (with money deliberately held outside the control of regulators and governments of the currency); Cross-border(own nationals in a foreign country; multiple currencies and countries; financial markets dealing for own account; locating functional operations around the globe)

Front 27

Correspondent Banking?

Back 27

A well established bank in a country is asked to undertake tasks for a client of the foreign bank

Front 28

Representative office

Back 28

Small, rudimentary affairs that assist the parent banks customers in that country. They might provide information on the country to clients and help them form banking and business relationships in the country. However, they cannot provide core overseas banking business to clients.

Front 29

Agency office

Back 29

Greater commitment than a representative office. They are usually prohibited from accepting deposits from host - country residents, but can be used to transfer other funds and make loans. They are not subject to the same full regulatory requirements as the host country bank.

Front 30

Branch

Back 30

A branch of the parent bank legally acts as a part of the overall bank to provide a full range of banking services as banking regulators in the host country allow. Branches do not maintain capital reserves in the host country.

Front 31

Subsidiary

Back 31

A subsidiary, set up as a separate legal entity in the host country, will be subject to the same regulations as the host country banks. It has its own capital reserves kept within the country and has to follow the same regulatory procedures as the host country banks.

Front 32

Mutual's

Back 32

Member owned rather than shareholders; members usually depositors; profits either distributed to members or they are ploughed back into the business. They are called by a number of different names, including mutual's, thrifts, building societies, cooperative banks, savings and loans, savings banks, people's bank, community banks and credit loans.

Front 33

Advantages mutual's have over cooperative banks

Back 33

Do not have to pay returns to shareholders (allows them to offer better rates to savers and borrowers); culture of cautious risk taking, thus they are better positioned to survive a financial crisis

Front 34

Factoring Companies

Back 34

Provide finance in the security of trade debts; sales ledger administration; credit issuance

Front 35

Invoice discounting

Back 35

Is the obtaining of money in the security of book debts; usually confidential and with recourse to the supplying firm. The supplying firm manages the sales ledger

Front 36

Hire Purchase

Back 36

Is an agreement to hire goods for a specified period, with an option or an automatic right to purchase the goods at the end for a nominal or zero final payment.

Front 37

Leasing

Back 37

The legal owner of an asset gives another person is firm (the lesser) the possession of use that asset in return for specified rental payments. Note that ownership is not transferred to the lessee.

Front 38

Operating lease

Back 38

Commits the lessee to inky a short term contract, less than the useful life of the asset

Front 39

Finance lease

Back 39

Commits the lessee to a contract for the substantial part of the useful life of the asset.

Front 40

Explain Islamic banking

Back 40

Under sharia law The Payment of riba is prohibited and the reliever of finance must not hear all the risk of failure. Investment in Alcohol, tobacco, pornography or gambling not allowed. Islam does encourage entrepreneurial activity and the sharing of risk through equity shares. This a bank can create profit- sharing products to offer customers.