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What is Investment Banking?

The term Investment Banking is termed as “Mediator and financial governing body  comprising of lead banks, financial and security advisors from expert panel of individuals chosen by government, corporation and on financial board of companies acting on principles  of enhancing trade, accumulate investments, building amicable relationship between traders and investors, and last but not the least assuring general investors and public about safety of invested property or money”. The Investment Banking considers three core areas into consideration and they are safety, capital involved and so as to avoid any loss or depreciation in the value of amount invested. This mainly revolves around Involvement of making transactions based on cash or securities which also include underwriters like Bank, insuring firms etc to assess, monitor the funds in the form of debentures, equity, insurance, mortgage or credit receiving ability of any buyer or customer. It also include asset management and inflict advisory role to maintain stock of different funds on behalf of general public, investors or even consumers. The main motive is maximisation of the return for investment and this is a tool for which any company, general public or investors share a part of their earned market or profit share.

With the advent of change in process of capitalization, bankruptcy of the leading financial firms, banks and not to ignore effect of recession, world of Investment Banking has undergone drastic and measurable changes. Underwriters and other financial advisory bodies have become more aggressive and impose strict rules in lending out any form of funds on credit as it eliminates the prime issue of distress caused due to high debts, reduce the involvement of black money.  However having said regard the pros of the Investment banking let’s discuss the key areas to ponder when it comes to Investment banking meaning the constraints. The main areas of improvement highlighted are:

  • Though termed as effective tool in reduction of debt standards, this tool lead to high risk pertaining to increase in feud and also conflict amongst financial advisors, firms, Investors and public.
  • It also lacks the overall credibility in controlling the banks and lacks administrative powers thereby creating state of manipulation of stock and business markets.
  • The main issue regard Investment Banking is malpractices done by traders in acquiring commodities on higher price than actually being quoted to a buyer and procuring it in large quantity leading to inflation.

Thus the role of economic regulators like American Bankers association, Association for financial markets in Europe, Securities Association of China in Chinese financial institutions have now imposed strict rules regard trading standards, issue of funds based on fluctuation in the market conditions like Hedge and Mutual funds, stock commodities, issue of debentures, shares, partnership firms and deals impacting foreign trade in wake of conversion of high inflation and high greyed market which means conversion of all illegal trading standard i.e to convert all illegal black money to white. This gives a boost to the economic condition and curbing occurrence of any further financial crisis which shook the world in early advent of 80’s, 90’s and recently in 2008.

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