Role of Investment Banking in Financial Market ?

What does an invesment bank do ?

• Raise capital for clients
• Advise corporations, states or entities on capital structure, strategy, business combinations.
• Create and sell securities to institutional and retail clients.
• Manage money for institutional and retail clients.
• Trade on proprietary basis.

Importance of investment banking

• Helps the corporations in raising capital. It facilitates the trading in securities thereby increasing the liquidity of the securities.


• It provides investment opportunities to the individual or entities.
• Most of the corporations get advisory services from the investment bank regarding the mergers, acquisitions and divestiture.

Structure of investment banking

Investment banks are organized into 3 categories.

Front office

• Helping customers raise funds in the capital market and advise on mergers and acquisitions.


• professional management of various securities and other assets.


• Buying and selling financial products with a goal of making money on each trade.


• Creating and marketing financial products.


• researching industries, companies and products.

Middle office

• analyzing credit and market risk for banks.


• Making sure operations are complying with regulations.


• Responsible for capital management and risk monitoring.

Back office

• Making sure the bank runs smoothly by submitting trades, maintaining database and transacting required money transfer.


• The information technology department.