Investment banks are non-bank financial institutions mainly engaged in securities issuance, underwriting, trading, corporate restructuring, mergers and acquisitions, investment analysis, venture capital, project financing and other businesses. They are the main financial intermediaries in the capital market. .

Investment banking is the product of the development of the securities and joint-stock company systems to a specific stage. It is an important subject of the developed securities market and mature financial system. It plays a role in communicating the supply and demand of funds, structuring the securities market, and It plays an important role in promoting corporate mergers and acquisitions, promoting industrial concentration and the formation of economies of scale, and optimizing resource allocation.

Due to the rapid development of the investment banking industry, it is also very difficult to define an investment bank. Investment banks are called in the United States and continental Europe, merchant banks are called merchant banks in the United Kingdom, and securities companies are referred to in Japan. There are four main international definitions of investment banks:

The first: Any financial institution that operates Wall Street financial business can be called an investment bank.

Second type: Only financial institutions that operate part or all of the capital market business are investment banks.

Third type: Financial institutions engaged in securities underwriting and corporate mergers and acquisitions are called investment banks.

The fourth type: only financial institutions that underwrite securities in the primary market and trade securities in the secondary market are called investment banks.

Investment banking is a concept corresponding to commercial banks. It is an emerging industry formed by the modern financial industry to adapt to the development of modern economy. The salient features that distinguish it from other related industries are that, firstly, it belongs to the financial services industry, which is a sign that distinguishes it from general consulting and intermediary service industries; secondly, it mainly serves the capital market, which is a sign that distinguishes commercial banks. ; Thirdly, it is an intelligence-intensive industry, which is what distinguishes it from other professional financial service institutions.

Edit this paragraph The origin and development of investment banks

In the United States, investment banks often come from two sources: First, they are decomposed from commercial banks. Typical examples include Morgan Stanley. profit; the second is developed from securities brokers, a typical example is Merrill Lynch. The separation of investment banks and commercial banks in the United States occurred after the great stock market crash of 1929. At that time, the federal government believed that investment banking business had higher risks and prohibited commercial banks from using depositors' funds to participate in investment banking business. As a result, a large number of comprehensive banks were forced to break up It is a commercial bank and an investment bank, the most typical example of which is the decomposition of Morgan Bank into Morgan Stanley, which is engaged in investment banking business, and JP Morgan Chase, which is engaged in commercial banking business. However, in Europe, governments have not promulgated such restrictions. Investment banking business is generally completed by commercial banks, so many so-called "universal banks" or merchant banks have been formed, such as Deutsche Bank. Bank, ABN AMRO, UBS, Credit Suisse and many more. Facts have proven that commercial banks and investment banks are completed by the same financial institution. Not only did it not cause a financial crisis in Europe, it actually enhanced financing efficiency to a certain extent and reduced risks in the financial system.

The profits of investment banking are very high. Taking the most common stock issuance business as an example, investment banks generally charge a commission of 5%-10%. In other words, if a client issues stocks worth US$10 billion, the investment bank will take US$500 million-1 billion. The bond issuance business is relatively less profitable but also less risky. In addition, mergers, reorganizations and bankruptcy liquidations have been the main profit growth points for investment banks in recent years. Large-scale mergers that have occurred in Europe and the United States in recent years are often fueled by investment banks.

After the 1990s, the structure of the world investment banks gradually changed. On the one hand, the wave of mergers and acquisitions has swept across the U.S. financial world, with the emergence of large financial groups such as Citigroup, JPMorgan Chase (JP Morgan), and Bank of America. They all hope to enter the lucrative investment banking field; on the other hand, Wall Street's investment banks Being too close to the securities analysis business, many investors and media believe that analysts employed by investment banks cannot guarantee their independence, thus casting doubt on the business ethics of investment banks. However, if the investment banking and securities analysis businesses are completely separated, the investment banking business will become a source of water, and the securities analysis business will lose its generous profit commissions, making it difficult for both to survive. In contrast, commercial banks have inherent advantages in operating investment banking business. They can use their deposit and loan relationships with major enterprises to win many customers, and they do not need to rely on securities analysis and consulting to attract customers like traditional investment banks. Commercial banks have more sufficient funds and better reputation. What they mainly lack is business experience in the investment banking field.

Edit this paragraph Types of investment banks

There are four main types of investment banks in the current world:

⑴ Independent professional investment banks. This form of investment bank is widespread around the world, including Goldman Sachs, Merrill Lynch, Lehman Brothers, Morgan Stanley, First Boston Corporation in the United States, Nomura Securities, Daiwa Securities, and Nikko Securities in Japan. Securities, Shanyi Securities, British Huabao Company, Baoyuan Company, etc. all belong to this type, and they all have their own professional directions.

⑵ Investment banks owned by commercial banks (merchant banks).