Investment banks are what? Types and functions of investment banks

Quite often today one can come across such a thing as "investment banks". What is that? What is their purpose and purpose? What are they created for? What rules are guided? These, as well as a number of other questions will be answered within the framework of the article.

general information

So, first let's find out what the investment banks are. These are special financial institutions that help attract capital to governments and large companies in world markets. They also provide advisory services during the sale and purchase of a business. An investment commercial bank can also help in the trading of bonds and shares, offering brokerage services. And at last - it helps to cope with financial instruments, commodities, currencies and prepares analytical reports on the markets where it operates.

If we talk about specific definitions, then there is no common opinion, and many countries give their interpretation of meaning. We take as the reference point the following: investment banks are enterprises that deal with the trade of corporate and government securities, primarily by operating with large packages; They also engage in corporate financing in the form of raising capital for issued shares and bonds or by issuing a long-term investment loan.

Main characteristics

Commercial investment banks have their own unique features. But we can distinguish their main characteristics:

1. Thus, an investment bank is a universal large commercial organization that combines and provides a large number of permitted types of activity in the securities markets and some other financial sites.
2. The main thing is to carry out activities to attract financial resources with the help of securities.
3. Being a large organization, the investment bank works almost always on wholesale principles.
4. Priority is given to medium- and long-term investments.
5. The basis for the portfolio of assets are securities, and the most interesting is the non-profit part of the market.

Example of activity

Let's take BCS as the subject under consideration. The investment bank is engaged in attracting financing. But investing in something is not his only activity. It is a fairly universal institution in which other types of activities are also developed by which credit institutions are engaged. What does BCS do for this? The investment bank, in the first place, is characterized by well-developed and organized work in various directions. This creates a basis for dealing with investments. Investments are both the most prestigious and the most profitable tools of work. Therefore, as a rule, all more or less large companies work with them.

Functions

So, we know that the investment banks of Russia, as well as other states, are special credit institutions that are profiled on investments in various companies and enterprises. And they have the following functions:

1. They are engaged in the implementation of passive operations. These include those that help in the formation of the bank's own resources.
2. They are engaged in active operations. This means certain actions by which credit institutions allocate resources. These include bank investments, loans for securities and others. All these operations are called stock.

Investment banks form resources through their own and attracted funds. The greatest attention is paid to the issue and placement of securities.

What is abroad?

In many countries, investment banks / funds have long existed, so you can refer to them in order to better understand the features of the existing mechanisms. Thus, in developed capitalist countries , it is popular to provide direct long-term industrial credit to large enterprises on the security of their factories, factories and equipment. This approach is often accompanied by the fact that banks become participants in the entity of economic activity. In other words, there is a process of merging industrial and banking capital. How can this happen? One option is bank investment. In such cases, buy securities. Then they become the property of the bank itself.

In general, there are many options for interaction. But directly participation of the credit organization itself in different countries can have its own specifics. When an international investment bank stops placing securities, it begins to form a secondary market for them later. To do this, he acts as a dealer and broker. In addition, it is not uncommon for credit institutions to act as guarantors or founders of new organizations that conduct an initial public offering of shares. They can also create consortia that will include investment and commercial banks, as well as dealerships for greater efficiency.

And how in the Russian Federation?

We have quite a good look at how the foreign investment bank operates. Now let's pay attention to the state of affairs in the Russian Federation. So, in the country they are engaged in the following:

1. Perform functions of dealers, brokers and depositaries.
2. Form emissive portfolios, as well as individual sets of securities for specific investors.
3. Organize settlements in accordance with the conducted operations with securities.
4. Provide advisory services in matters of investment.
5. They are looking for people who are ready to invest their money in various subjects, as well as places where you can get the highest profits.

As an example, let's look at the First Investment Bank. This is a fairly powerful financial institution that specializes in a wide range of investments. So, in addition to the usual investments in securities, it also provides the opportunity to purchase collection coins, precious metals, operate with assets remotely through a secure cryptosystem and an electronic digital signature. But the First Investment Bank is focused primarily on legal entities. And to use the services of such institutions can be quite problematic in practice for ordinary citizens.

Is everything so bad?

By no means. Many credit institutions are universal. As an example, consider the "Investment Trade Bank", also known as "Investtradebank". This credit institution is engaged in the mobilization of long-term loan capital and its provision to borrowers through the issuance and placement of loan commitments. "Investment Trade Bank" is a structure that is primarily aimed at enterprises and organizations of various forms. But apart from this, there are a number of services for an ordinary citizen. However, it is quickly possible to get anything that is a standard set of services like loans and deposits. Investments, although available, still require signing a certain number of additional pieces of paper. Therefore, when going to such institutions it is necessary to tune up, that you will have to get acquainted with the content of a rather large number of documents.

In general, investment banks are structures that can be attributed to one of two types:

1. They operate in the sphere of placement and trading in securities.
2. Carry out long-term loans.

Investment banks of the first type

The first such institutions were formed as partnerships with limited liability in the first quarter of the nineteenth century. In the twentieth century, there has been a tendency for private bankers, small and medium-sized organizations to withdraw from business in favor of large formations. The legalized division into investment and commercial was first carried out in the United States in 1933 by the Glas-Stigoll Act. The subjects of economic activity that we are interested in have concentrated on raising funds for large companies and enterprises. Over time, they began to actively participate in the creation of new economic actors, as well as their reorganizations, mergers and other changes in the organizational structure.

And what else do they do?

Initially, it should be noted that such institutions do not accept deposits. They concentrated on the issue of securities and guarantors. Income from them is formed by commission commissions or payments of predetermined amounts that do not depend on the performance of the activity. Also, banks work as agents who acquire a part of securities in cases when they believe that the company will act successfully and they will be able to earn money on it. When the placement takes place, the terms, terms, size and responsibilities are stipulated. For more effective activity, they are organized into bank syndicates.

Now often this situation develops, that without acting in this way, companies develop relatively slowly, so investment financial institutions do not work without work. Also, this combination is used when the heads of banks are simultaneously members of the board of directors of enterprises and corporate structures for which they issue shares. It should be noted that in the field of investment banking it is believed that the main influence here belongs to half a dozen structures, and all the rest are simply intermediary organizations. On this, perhaps, everything.

Investment banks of the second type

They, as a rule, are created on a shareholder basis. It often happens that they are organized together with the state. Their main goal is to provide medium- and long-term loans for certain branches of the economy or special targeted programs. In addition, they can operate in the loan capital markets, mobilizing the funds of the population and small businesses. They also carry out credit activities and investments in state and local securities. It is impossible not to evaluate their contribution to the development of various financial services. Such banking houses arose during the transition to capitalism and were formed primarily from usurers who joined together in partnership. Initially, they assumed the fulfillment of trade, settlement, acceptance and issuing functions. They also worked with securities, but, as a rule, state. As of the twenty-first century, about fifty strong banking houses were formed. Their peculiarity is that they, as a rule, were formed from family enterprises and only with time were transformed into joint-stock organizations. But to this day, there is a priority of representatives of a particular kind.

What are they doing?

Speaking about passive operations, it is their own capital, which was formed from family share contributions, equity and reserve capital, retained earnings, borrowed funds and other. This is the own resource of credit institutions.

But the most interesting in the study are active operations. The investment banks built their true power on them. Activity in this case means working with cash. Private and public securities, real estate and financial instruments.

Features

It should be noted that investment banks are, as a rule, the prerogative of developed countries. Only a relatively small group of developing countries can boast of their availability. After all, they are engaged in real investments, that is, investments in fixed assets, which contributes to the growth of inventories. And for greater efficiency, technological development is required as a result of the scientific and technological revolution and skilled work.

Conclusion

For investment banks, when they decide on the issue of investments, the important ones are:

• Intellectual potential of production.
• Qualification.
• Experience and knowledge of employees.
• Expenses for training.
• Everything else that will make it possible to use the acquired capital as efficiently as possible.