How Investment Banking Works


Currently, many investment banking options, like, are emerging in countries around the world. Even so, not everyone knows for sure what their role is in the marketplace.

Investment banks are private financial institutions. They allow individuals or companies to invest money in various modalities, such as CDB, Letters of Credit, Bills of Exchange, shares and the like.

It turns out that they are a little different from traditional banks because they are exclusively focused on the universe of investments. Therefore, they do not offer a checking account, for example.

Investment banking institutions are regulated as corporations. They are also required to bear the expression “Investment Bank” in their corporate name. According to the Central Bank, which is responsible for regulating them, they specialize in the following operations: temporary shareholding, financing of productive activities and third party resource management.

In this way, they act as financial intermediaries, facilitating the connection between those who want to invest and those who borrow. That is, if you have a spare capital and are considering investing, they may be an alternative.

This form of banking has some specific possibilities and limitations. This means that they do not work like ordinary banks. Investment banks, as the name implies, are specialized in investment operations. Therefore, they do not receive deposits into account or perform other activities such as traditional banks.

They raise their resources in the following ways: term deposits, transfers of external and internal resources as well as the sale of investment fund quotas. Sounds complicated at first glance, right? Nevertheless, it is not so difficult to understand. In other words, when you invest in these banks, they can raise funds and can lend that money to other people.

You can make good money from it. It all depends on the title you choose and the goals you hope to achieve with your applications. Therefore, we can say that the role of these banks is to support and facilitate various forms of investment – from issuing debentures to going public on the stock exchange, for example.

Principal operations of investment banks

Investment activities vary widely. These banks deal with different application modalities. Funds are usually taken by issuing Bank Deposit Certificates (CDB) and Bank Deposit Receipts (RDB). In addition, securities and investment fund shares are also sold.

Investment banks can still offer the following services: financing of production-related activities for capital supply, operations with equity interest, financial advisory, third party capital management, medium and long term loans, acquisition of securities, and issuance of securities.

The same applies to the issuance of debentures, administration and sale of investment fund quotas. interbank deposits and foreign loan lending.

Commercial Bank

A commercial bank offers other possibilities compared to investment banks. It can be public or private. Its objective is to raise funds to finance industry, commerce, service delivery and individuals. The focus is on capturing demand deposits – which is nothing more than the famous checking account.

There are also multiple banks, which are the most common institutions. They are those traditional banks where people usually have checking accounts and also a savings account.

They are named after them because they have two portfolios: commercial and investment. This can be noticed when you are going to solve a problem inYour checking account and your manager offer some security for you to invest, for example.

Therefore, it is only possible to invest money through a bank if it is investment or multiple. Whether this is the best way to make your money yield depends a lot on your needs and profile. So, go through all the options before making your choice, okay?

Investment banks emerged after the New York Stock Exchange crisis of 1929. At that time, there was a separation of banks by law in the United States.