What is Investment Banking?

Define Investment banking

If anyone wants to know what is Investment banking, they immediately related whether it belongs to Investing, or Banking, but in fact it is not belong to Investing or banking, This terminology of the word Investment Banking is often used to explain about the business of creating capital for many companies and properly give suggestions on financing and other merger alternatives.

In the past there was a lot of confusion between Investment banking and other banking, but nowadays with the invention of Mega banks which is dynamic and can operate at any levels help investment banking expand its process and extend to each area of an individual or company.

Commercial Banking Vs Investment Banking

Commercial Banking

Commercial Banks and Investment banks operate at different levels, commercial banks acts as an mediator between the issuer of securities and Investing public, It gives suggestions on mergers and other information about corporate re-organizations like exact company turnovers and other details. They are named as commercial banks because they focus mainly and give loans to various industrial and commercial businesses.  This type of banks are owned by private investors like stockholders or otherwise by bank holding companies. 

Commercial banking process is easy and straightforward, commercial banks get the source cash from the people who deposit and the bank loans that money to consumers or industrial business people who are in need of capital. Companies borrow from commercial bank can be very small to huge multinational corporations. Commercial Bank Make profit by paying depositors a less interest and charge higher interest to the lenders this way Commercial banks make profit.

Investment Banking

Compared to the above commercial bank, Investment bank works in a different way. Investment bank does not have any cash like commercial bank, In simple terms Investment bank will act as a Mediator and help in the process of selling stocks and bonds between the buyers and sellers.  But as far as companies are concerned they use and treat investment banks as the same as commercial banks If a company requires a loan it asks commercial bank for money, If it’s a investment bank rather than asking for money it ask Investment bank to sell their equity or debts i.e., (stocks and Bonds). Nowadays Investment bank have become popular to the extent it has become a One stop financing source.

I hope this information will be useful. Note this article information is for informative purposes only.