Investment Bank (IB)

Definition

The term investment bank refers to a financial institution that provides a wide variety of complex services to individuals, corporations, and governments. The services provided by investment banks include raising capital, managing risk, conducting research, and facilitating mergers and acquisitions.

Explanation

Investment banks (IB) have the resources to provide their clients with a vast array of financial services.  Clients can include small and large companies, government agencies as well as individual investors.  Generally, the services provided by investment banks can be divided into consulting services and securities trading.  Examples of the financial services provided by an investment bank include:

  • Issuing Securities:  includes both debt financing as well as initial public offerings of common stock used by corporations to raise capital.  Services include consulting, market making, underwriting of securities, and the initial sale of the securities.
  • Research:  includes both buy and sell side advice such as the trading (selling) of securities as well as underwriting and promotion.  Buy side services include providing advice on the quality of securities to its clients.  Services in this area may also include credit research as well as strategic consulting on a variety of topics including mergers and acquisitions.
  • Risk Management:  includes providing their clients with market and credit risk analyses, evaluation of balance sheets, and developing credit solutions.

Related Terms

depository bank, corporate banking, advising bank, industrial bank