Investment Banking by Dr Andreas Krause

Investment Banking by Dr Andreas Krause

Lecture 1: Overview and History of Investment Banking
In this introductory lecture we will see what investment banking is about, what the
current market situation is and finally how the UK market has evolved over the past
decades.
We will address the following questions in this lecture:
1. What is investment banking ?
2. Who are the main investment banks and how important are the different activ-

ities ?
3. How did the investment banking industry in the UK develop ?

What is investment banking ?
• Investment banking has increased its typical areas of business in recent years,
so that we now can say that it includes all transactions with respect to capital
markets and their aim is to facilitate these transactions. E.g. trading, IPOs,
derivatives, M& A
• In contrast commercial banks take deposits from the public and give loans to
private and corporate customers. Investment banks only have a marginal role,
they act mostly as agents rather than principles (except for underwriting as we
will see later in this course). The limits between investment and commercial
banking are blurring, however.
• Any principal positions investment banks take are short-term, i.e. a few days
(except in the non-core business of venture capital through subsidies), while
the principal positions taken by commercial banks are long-term (up to several
years).
• Business areas include services to investors as well as issuers of securities:
– Investors
∗ Brokerage
∗ Asset Management
∗ Market making
∗ Financial engineering
– Issuers
∗ Underwrting
∗ Advisory in M& A and corporate restructuring
∗ Financial engineering
∗ Market making

Investment Banking by Dr Andreas Krause