Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations

or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards,

Wholesale Banking Bank has identified the following new business segments as a step toward becoming Multi Specialist Bank.
   

Wholesale (Large & Mid Corporates) Urban Retail Small & Medium Enterprises Rural/Agri Business

Under Wholesale Banking the corporate customers are identified as Large and Mid corporates. Companies having annual sales turnover of over Rs. 500 crore are classified as Large Corporate and those having annual sales turnover between Rs 100 crore to 500 crore are classified as Mid Corporate. Under Wholesale Banking it has been proposed that Large & Mid Corporate customer of the Bank are located at the identified branches for providing them better services. By locating the Corporates at the identified branches, they would have the following advantages.
  

Single point contact to cater to all the banking requirements of the Corporates. Expeditious decision making and shorter turnaround time. Availability of product specialist who can customize existing products as per the Corporates specific requirements & can also develop new products. Existence of Core Banking Solution facilities & World-class infrastructure.

The Corporate accounts will be served at these branches by the Client Service Team (CST) of competent credit officers. The team will comprise of :
   

Relationship Manager Relationship Officer Product Specialist Credit officer (dedicated from Corporate Office)

The following are the areas in which Client Service Team can help the Large & Mid Corporate :


Trade Finance products

      

Cash Management Products Treasury Products Bridge Loans Syndicated Loans Infrastructure Loans Cross Currency/Interest Rate Swaps Foreign Currency Loans and many more depending upon the needs of the Corporates.

Initially 11 important centers, 2 at Mumbai & 1 each at Delhi, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Baroda, Kolkata and Raipur have been identified for the rollout of Wholesale Banking. The Corporates can take advantage of the expertise available at Wholesale Banking Branches.

RETAIL BANKING AND WHOLESALE BANKING The concept of retail banking The retail banking means products and services offered to individuals and households sector for personal use and consumption like loans for housing, vehicle, for consumer durable, loans for enjoying vacations etc. It not only means lending but also involves whole of the banking services provided to individuals and household sector. The products to tap their savings and other services are included in retail banking. The retail banking concept has been expanded to include services provided to small and medium sized business and also high net worth individuals . The concept of wholesale banking In the whole sale banking the focus is on corporate, i.e. companies, firms, proprietorship concerns, Public Sector, Institutions, societies, Trusts, clubs etc. Why retail banking

Since the year 1991 the process of disintermediation accelerated. The corporate had easy access to funds from the savers thus bypassing the banks. 1 This led to cut throat competition among the banks to advance the corporate even at sub PLR and also to attract them, they started offering value added service at concessional rates. Banks experienced pressure on their margins and the implementation of new stringent norms of income recognition, assets classification and provisioning made the task for the banks more difficult. The corporate loans gave an average return of 0.5 % to 1.5% but had volumes and less workload but if the other services are added which were to be given at concessional rates the yield were still less. If a big loan goes bad, the entire amount outstanding had to provided for under the provisioning norms. The retail lending gave a return of 3 to 4% but with more work and there was hardly any need for value added services at concessional rates as the borrowers did not have any bargaining power and in the beginning there was not much competition among banks as the concept had not picked up in a big way. Before 1991 also the concept of retail lending was there but was very much limited and restricted to few avenues and very few banks were interested in this. While corporate loans and infact their banking was largely dependent on ups and own of economy but this does not affect the retail lending to a great extent. Retail banking gave a lot of stability and public image as compared to corporate banking. 2 Growth of retail banking Housing loans, which is retail banking, has least NPAs and also carry a risk weight of 50%. The market for housing loan is growing @ 50%

Over the years there was a felt need for improving quality of life. More consumerism, increase in salaries and income level and saving potential, change in Indian mind set, small family norms are some of the factors leading to demand for loans for consumption leading to thrust on retail lending. Now a days people want, good house, good cars, decent style of living, good clothing, vacations in India and abroad. Apart from the availability of money, there is competition among manufacturers and service providers to make these things within the easy reach of consumers by availability of goods and tying up with banks and other intermediaries. The peer pressure and demonstration affect is also pushing up further demand Through competitive strategies like product innovations, differential pricing, banks have attempted to develop profitable retail business The retail banking due to its reach, has given opportunities to banks to cross sell other products like credit cards, insurance, mutual funds, foreign exchange etc.

Retail/Wholesale Banking
Retail Banking From touch Point to Base24, our team bring proven expertise in retail banking products spanning multiple functional areas. y y y y Branch Banking: Account opening and maintenance, retail investment services, and branch network strategy Core Banking: Back-office operations and infrastructure Customer Care: Datamarts (Customer value management and retail profitability) Online Banking: Account management, EBPP, and investments

Wholesale Banking The credit crisis put a spotlight on liquidity, cash management, and operational efficiency. Our solutions optimize core lending processes across the entire value chain. Consumer Lending

y y y

Auto Loans o Loan Servicing o Origination and Processing Education Loans o Solutions for U.S. federal and private student loan services spanning the full value chain Mortgages o Loan Servicing and Analytics o Reverse Mortgages o Secondary Marketing o STP Loan Origination and Processing

Commercial Lending y y y Credit Risk Management Loan Origination Servicing

Financial Messaging y y y EDI OFAC Checking SWIFTNET

Transaction Banking y y y y y y y y Automated Clearing House (ACH) operations Cash Collection Services Electronic Bill Presentment and Payment (EBPP) Image-based Transactions Lockbox Services Messaging and Payment (and Cross-Border) Solutions Trade Finance Treasury / Cash Management Services

Aite Group's Banking service covers retail and wholesale areas, with an emphasis on providing an integrated, three-pronged analysis of business, IT, and regulatory issues affecting each area. Sample research topics are listed below. Click here for our Aite Group Banking Research fact sheet. Retail Banking:

y y y y y y y

Payments (Automated Clearing House, checks, cash, credit & debit cards) Customer management (e.g. retention, cross-selling, emerging markets, segmentation) Channels (multi-channel integration, ATM, branch, call-center, Internet & mobile banking) Retail financial products & competitive trends Back-office technologies & strategies Emerging technologies Merchant acquiring

Wholesale Banking:

y y y y y y y

Cash management, small business banking and treasury workstations Trade finance and the physical supply chain Wholesale payments (EDI, Wire, Automated Clearing House, SWIFT, Commercial cards) Foreign exchange Commercial lending (high-end lending, secondary loan trading, commercial mortgages) Core systems Business process outsourcing

Privilege Banking Other Accounts

Privilege Banking Choose the ICICI Bank Privilege Banking account to enjoy exclusive benefits across wide range of product and services. The Privilege banking account variants we offer are - gold and titanium; each designed to suit your specific needs. In addition to benefits like money multiplier, nomination facility, internet banking and mobile banking, you can avail other special privileges like:
y y y y y y

Priority service at all ICICI bank branches and through Customer Care. Preferential rate on purchase of ICICI Bank pure gold and foreign exchange. Discount on annual fee for safe deposit locker. Special rates on ICICI Bank loans. Preferential rate on DD/ PO charges. Multi-city cheque book.

Welcome to the world of DCB Privilege Banking

This is an exclusive offering from DCB that promises the highest level of service standards and the best in banking solutions. As a DCB Privilege Banking customer, you get to enjoy exclusive benefits and services designed to suit all your financial needs. It will be our continuous endeavour to offer you value added services and to keep adding benefits to our bouquet of offerings.

Service Privileges

Dedicated Relationship Manager

As an esteemed Privilege Banking customer, you are entitled to a dedicated Privilege Banking Relationship Manager who will be on call 24x7 to take care of all your financial requirements. Your Relationship Manager will be a one-point contact for all your banking and investment needs.

Exclusive DCB Privilege Banking International Debit Card

y y

The aesthetically designed Privilege Banking Debit Card will identify you as our Privilege Banking customer at any of our branches across India where the service is being offered. The Privilege Banking Debit Card comes with enhanced ATM Cash Withdrawal and POS limits. Apart from the DCB ATMs you can also access your account for cash withdrawal and balance enquiry absolutely free at any of the Visa ATMs in India.

Preferential Treatment At Branch

As a Privilege Banking customer, you will have access to an exclusive service area within the branch. This allows you to conduct all your banking and investment transactions with ease and comfort through your dedicated Relationship Manager or the Branch Manager.

Banking Privileges
As a DCB Privilege banking customer, you are entitled to superior service levels, preferential treatment in branches, Investment Advisory Services and Discounted Rates on products. Some of these features are highlighted below:

y y y y y y y

Doorstep banking that offers you Cash and Cheque Pickup services as per your convenience Free Payable at Par Cheques and Intercity banking Free RTGS based Fund Transfer transactions DCBs back-end process is fully integrated with RBIs electronic clearing systems which enables you to network across the Indian Banking system with direct credit to any bank account spanning 13555 branches across 89 banks across the country. Free DD Issuance at DCB and HDFC Bank locations at over 230 locations. Free Direct Banking through our Phone, Mobile and Internet Banking facility. Free Utility Bill Payment facility DCB offers you the convenience of paying all your utility bills under one roof. Preferential pricing on a range of DCB products such as Lockers (subject to availability), Demat Account and Home Loans

Wealth Management Privileges

We at DCB understand that time is money. Hence we have designed comprehensive wealth management solutions that range from tax saving investment avenues, to buying and selling of mutual funds, to investing in insurance and PMS schemes to tax payment options all under the same roof! Investment Options We offer the widest range of investment options to suit your needs, helping you achieve returns, safety and liquidity in line with your expectations. Your AMFI certified Relationship Manager can assist you in making appropriate investment decisions from a wide array of Mutual Funds, Bonds, Insurance Plans, PMS and Structured Products. The Different classes of Mutual Funds that we offer are:

y y y y y y

Equity Diversified Large cap Equity Diversified Small and Mid cap Equity Sectoral schemes (Banking, Pharma, IT, etc.) NFOs and Systematic Monthly Investment Plans Fixed Maturity Plans Income, Gilt and Liquid Funds

Life Insurance And General Insurance Options Now you have no need to worry about your familys future or your expenses post retirement. DCB Privilege banking has your protection and your pension covered. With our assistance, you can choose a plan tailor made to your needs. In General insurance, we offer products in areas of health insurance, home insurance, travel insurance and motor insurance. Fixed Deposits Choose from our wide variety of Fixed Deposits. So whether its that Recurring Deposit for your monthly saving plans or Lump sum Deposits with Preferential rates, DCB Privilege Banking has it all. Our Fixed Deposits have competitive rates and offer you better yields than similar savings instruments. NRI Services Enjoy Forex facilities with attractive rates on Foreign Currency, Travellers Cheques, Demand Drafts, Telegraphic Transfers, Currency Exchanges and NRI Deposits. You can also avail the benefits of Instant Cash Remittance from First Remit, Moneygram and Xpress money. DCB has an exclusive tie-up with these companies to help you receive money in DCB branches. Trade Services At DCB we understand that business needs are constantly evolving and running such business require effective management of time and money. This is where we step in by providing you with a powerful current account with the following features:

y y y y y y y y

Export Services Import Services Collection of documents and remittances Letters of Credit Bank Guarantees Free cash and cheque pick-up facilities Foreign Exchange products for your business travel Intercity / Anywhere Banking

What is trade finance?

Trade Finance has been reviewing the global trade market since 1983. The remit of what we cover is somewhat broad, and as the market evolves to meet the requirements of financing global trade, so our content has changed. The following is a guide for those of you new to the market, those looking for clarification, and those of you who have bluffed your way through up to this point.
What is trade finance?

There are various definitions to be found online as to what trade finance is, and the choice of words used is interesting. It is described both as a science and as an imprecise term covering a number of different activities. As is the nature of these things, both are accurate. In one form it is quite a precise science managing the capital required for international trade to flow. Yet within this science there are a wide range of tools at the financiers disposal, all of which determine how cash, credit, investments and other assets can be utilised for trade.

In its simplest form, an exporter requires an importer to prepay for goods shipped. The importer naturally wants to reduce risk by asking the exporter to document that the goods have been shipped. The importers bank assists by providing a letter of credit to the exporter (or the exporter's bank) providing for payment upon presentation of certain documents, such as a bill of lading. The exporter's bank may make a loan to the exporter on the basis of the export contract. Below I have outlined the various ways in which trade is financed by banks beyond the basic financial transaction described above which I would refer to as traditional trade finance. I have divided this extended definition into the sectors which Trade Finance as a channel for the latest news and analysis for this market strives to cover.
Trade services and supply chain

Building on what I have termed traditional trade finance, there are a number of ways in which banks can help corporate clients trade (both domestically and cross-border) for a fee. A typical service offering from a bank will include: Letters of credit (LC), import bills for collection, shipping guarantees, import financing, performance bonds, export LC advising, LC safekeeping, LC confirmation, LC checking and negotiation, pre-shipment export finance, export bills for collections, invoice financing, and all the relevant document preparation. Despite this focus on the LC, over the years the term trade finance has been shifting away from this sometimes cumbersome method of conducting business. It is now estimated that over 80% of global trade is conducted on an open account basis. Led by large corporates, this form of trade saves costs and time and so has been adopted by smaller corporates as they become more comfortable with their buyer and supplier relationships. Open account transactions can be described as buy now, pay later and are more like regular payments for a continuing flow of goods rather than specific transactions. This is much cheaper for corporates. In response to this development, the organisation SWIFT launched the TSU (trade services utility), a collaborative centralised data matching utility, which allows banks to build products around its core functionality to improve the speed and flow of open account trade. This is helping banks re-intermediate themselves into these trade flows. While volumes of LCs have remained flat in recent years, their value actually increased and they remain an essential part of emerging market trade and trade in countries where exchange controls are in force. This increase in value is also a reflection of the commodity price boom of 2007/08.
Factoring & Forfaiting

Factoring, or invoice discounting, receivables factoring or debtor financing, is where a company buys a debt or invoice from another company. In this purchase, accounts receivable are discounted in order to allow the buyer to make a profit upon the settlement of the debt. Essentially factoring transfers the ownership of accounts to another party that then chases up the debt. Factoring therefore relieves the first party of a debt for less than the total amount providing them with working capital to continue trading, while the buyer, or factor, chases up the debt for the full amount and profits when it is paid. The factor is required to pay additional fees, typically a small percentage, once the debt has been settled. The factor may also offer a discount to the indebted party. Forfaiting (note the spelling) is the purchase of an exporter's receivables the amount importers owe the exporter at a discount by paying cash. The purchaser of the receivables, or forfaiter, must now be paid by the importer to settle the debt.

As the receivables are usually guaranteed by the importer's bank, the forfaiter frees the exporterfrom the risk of non-payment by the importer. The receivables have then become a form of debt instrument that can be sold on the secondary market as bills of exchange or promissory notes.
Structured Commodity Finance

Structured commodity finance (SCF) as covered by Trade Finance is split into three main commodity groups: metals & mining, energy, and soft commodities (agricultural crops). It is a financing technique utilised by commodity producers and trading companies conducting business in the emerging markets. SCF provides liquidity management and risk mitigation for the production, purchase and sale of commodities and materials. This is done by isolating assets, which have relatively predictable cash flow attached to them through pricing prediction, from the corporate borrower and using them to mitigate risk and secure credit from a lender. A corporate therefore borrows against a commoditys expected worth. If all proceeds to plan then the lender is reimbursed through the sale of the assets. If not then the lender has recourse to some or all of the assets. Volatility in commodity prices can make SCF a tricky business. Lenders charge interest any funds disbursed as well as fees for arranging the transaction. SCF funding techniques include pre-export finance, countertrade, barter, and inventory finance. These solutions can be applied across part or all of the commodity trade value chain: from producer to distributor to processor, and the physical traders who buy and deliver commodities. As a financing technique based on performance risk, it is particularly well-suited for emerging markets considered as higher risk environments.
Export & Agency Finance

This part of Trade Finances remit covers the roles of the export credit agencies, thedevelopment banks, and the multilateral agencies. Their traditional role is complement lending by commercial banks at interest by guaranteeing payment. These agencies have once again become of vital importance to the trade finance market due to the role that they play in facilitating trade, insuring transactions, promoting exports, creating jobs, and increasingly through direct lending. All are important in the current global downturn. ECAs are private or governmental institutions that provide export finance, or credit insurance and guarantees, or both. ECAs can have very different mandates which we will not delve into here (please refer to Trade Finances annual World Official Agency Guide). As the global economic crisis continues we are seeing a trend towards a liberalisation of these agencies remits. The development banks, sometimes referred to as DFIs (development finance institutions), and themultilaterals similarly have different mandates depending on their ownership or regional remit. Most will have a form of trade facilitation programme that promotes trade through the provision of guarantees. ECAs and multilaterals are becoming a crucial part of the financing of large infrastructure projects around the world as credit from commercial banks remains scarce.
And the rest

It doesnt stop there, Trade Finance also follows: the trade credit insurance and political risk insurance markets an important part of doing business in developing economies; thesyndications market as banks and agencies lend funds to enable the trade finance activities of other institutions; Islamic trade finance through its increasing popularity and expansion beyond its historic

markets; and finally Trade Finance follows the changes in global regulations and tracks the law firms and in-house legal teams that contribute to making deals happen. Make sure you stay abreast of the latest news and analysis across the spectrum of global trade with Trade Finance the information source on the trade, supply chain, commodity and export finance markets.

Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange,commodities, and equity securities. Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (Glass Steagall Act) until 1999 (GrammLeachBliley Act), the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G8 countries, have historically not maintained such a separation. There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) is the "sell side", while dealing with pension funds, mutual funds, hedge funds, and the investing public (who consume the products and services of the sell-side in order to maximize their return on investment) constitutes the "buy side". Many firms have buy and sell side components. An investment bank can also be split into private and public functions with a Chinese wall which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information. An advisor who provides investment banking services in the United States must be a licensed brokerdealer and subject to Securities & Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulation.[1] Contents
[hide]

1 Organizational structure o 1.1 Main activities

2 Core investment banking activities o o o o 2.1 Front office 2.2 Other businesses that an investment bank may be involved in 2.3 Middle office 2.4 Back office

3 Size of industry o 3.1 Vertical integration  3.1.1 2008 Financial Crisis

4 Possible conflicts of interest 5 Further reading 6 See also 7 References [edit]Organizational [edit]Main

structure

activities

An investment bank is split into the so-called front office, middle office, and back office. While large service investment banks offer all of the lines of businesses, both sell side and buy side, smaller ones sell side investment firms such as boutique investment banks and smallbroker-dealers focus on investment banking and sales/trading/research, respectively. Investment banks offer services to both corporations issuing securities and investors buying securities. For corporations, investment bankers offer information on when and how to place their to an investment bank's reputation, and hence loss of business. Therefore, investment bankers play a very important role in issuing new security offerings. [edit]Core [edit]Front 

investment banking activities

office

Investment banking (corporate finance) is the traditional aspect of investment banks which also involves helping customers raisefunds in capital markets and giving advice on mergers and acquisitions (M&A). This may involve subscribing investors to a security issuance, coordinating with bidders, or negotiating with a merger target. Another term for the investment banking division is corporate finance, and its advisory group is often termed mergers and acquisitions. Apitch book of financial information is generated to market the bank to a potential M&A client; if the pitch is successful, the bank arranges the deal for the client. The investment banking division (IBD) is generally divided into industry coverage and product coverage groups. Industry coverage groups

focus on a specific industry, such as healthcare, industrials, or technology, and maintain relationships with corporations within the industry to bring in business for a bank. Product coverage groups focus on financial products, such as mergers and acquisitions, leveraged finance, project finance, asset finance and leasing, structured finance, restructuring, equity, and high-grade debt and generally work and collaborate with industry groups on the more intricate and specialized needs of a client.  Sales and trading: On behalf of the bank and its clients, a large investment bank's primary function is buying and selling products. In market making, traders will buy and sell financial products with the goal of making money on each trade. Sales is the term for the investment bank's sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas (on a caveat emptor basis) and take orders. Sales desks then communicate their clients' orders to the appropriate trading desks, which can price and execute trades, or structure new products that fit a specific need. Structuring has been a relatively recent activity as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities. In 2010, investment banks came under pressure as a result of selling complex derivatives contracts to local municipalities in Europe and the US.[2] Strategists advise external as well as internal clients on the strategies that can be adopted in various markets. Ranging from derivatives to specific industries, strategists place companies and industries in a quantitative framework with full consideration of the macroeconomic scene. This strategy often affects the way the firm will operate in the market, the direction it would like to take in terms of its proprietary and flow positions, the suggestions salespersons give to clients, as well as the way structurers create new products. Banks also undertake risk through proprietary trading, performed by a special set of traders who do not interface with clients and through "principal risk"risk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet. The necessity for numerical ability in sales and trading has created jobs for physics, mathematics and engineering Ph.D.swho act as quantitative analysts.  Research is the division which reviews companies and writes reports about their prospects, often with "buy" or "sell" ratings. While the research division may or may not generate revenue (based on policies at different banks), its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients. Research also serves outside clients with investment advice (such as institutional investors and high net worth individuals) in the hopes that these clients will execute suggested trade ideas through the sales and trading division of the bank, and thereby generate revenue for the firm. There is a potential conflict of interest between the investment bank and its analysis, in that published analysis can affect the bank's

profits. Hence in recent years the relationship between investment banking and research has become highly regulated, requiring a Chinese wall between public and private functions. [edit]Other 

businesses that an investment bank may be involved in

Global transaction banking is the division which provides cash management, custody services, lending, and securities brokerage services to institutions. Prime brokerage with hedge funds has been an especially profitable business, as well as risky, as seen in the "run on the bank" with Bear Stearns in 2008.

Investment management is the professional management of various securities (shares, bonds, etc.) and other assets (e.g., real estate), to meet specified investment goals for the benefit of investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g., mutual funds). The investment management division of an investment bank is generally divided into separate groups, often known as Private Wealth Management and Private Client Services.

Merchant banking is a private equity activity of investment banks.[3] Current examples include Goldman Sachs Capital Partners and JPMorgan's One Equity Partners. (Originally, "merchant bank" was the British English term for an investment bank.)

Commercial banking: see commercial bank.

[edit]Middle 

office

Risk management involves analyzing the market and credit risk that traders are taking onto the balance sheet in conducting their daily trades, and setting limits on the amount of capital that they are able to trade in order to prevent "bad" trades having a detrimental effect on a desk overall. Another key Middle Office role is to ensure that the economic risks are captured accurately (as per agreement of commercial terms with the counterparty), correctly (as per standardized booking models in the most appropriate systems) and on time (typically within 30 minutes of trade execution). In recent years the risk of errors has become known as "operational risk" and the assurance Middle Offices provide now includes measures to address this risk. When this assurance is not in place, market and credit risk analysis can be unreliable and open to deliberate manipulation.

Corporate treasury is responsible for an investment bank's funding, capital structure management, and liquidity risk monitoring.

Financial control tracks and analyzes the capital flows of the firm, the Finance division is the principal adviser to senior management on essential areas such as controlling the firm's global risk exposure and the profitability and structure of the firm's various businesses. In the United States and United Kingdom, a Financial Controller is a senior position, often reporting to the Chief Financial Officer.

Corporate strategy, along with risk, treasury, and controllers, also often falls under the finance division.

Compliance areas are responsible for an investment bank's daily operations compliance with government regulations and internal regulations. Often also considered a back-office division.

[edit]Back 

office

Operations involves data-checking trades that have been conducted, ensuring that they are not erroneous, and transacting the required transfers. While some believe that operations provides the greatest job security and the bleakest career prospects of any division within an investment bank,
[4]

many banks have outsourced operations. It is, however, a critical part of the bank. Due to
[citation needed]

increased competition in finance related careers, college degrees are now mandatory at most Tier 1 investment banks. A finance degree has proved significant in understanding the depth of

the deals and transactions that occur across all the divisions of the bank.  Technology refers to the information technology department. Every major investment bank has considerable amounts of in-house software, created by the technology team, who are also responsible for technical support. Technology has changed considerably in the last few years as more sales and trading desks are using electronic trading. Some trades are initiated by complex algorithms for hedging purposes. [edit]Size

of industry

Global investment banking revenue increased for the fifth year running in 2007, to a record US$84.3 billion,[5] which was up 22% on the previous year and more than double the level in 2003. Subsequent to their exposure to United States sub-prime securities investments, many investment banks have experienced losses since this time. The United States was the primary source of investment banking income in 2007, with 53% of the total, a proportion which has fallen somewhat during the past decade. Europe (with Middle East and Africa) generated 32% of the total, slightly up on its 30% share a decade ago.
needed] [citation needed]

Asian countries
[citation [citation

generated the remaining 15%. Over the past decade, fee income from the US increased by 80%.

This compares with a 217% increase in Europe and 250% increase in Asia during this period.

needed]

The industry is heavily concentrated in a small number of major financial centers,

including London, New York City, Hong Kong and Tokyo. Investment banking is one of the most global industries and is hence continuously challenged to respond to new developments and innovation in the global financial markets. New products with higher margins are constantly invented and manufactured by bankers in the hope of winning over clients and developing trading know-how in new markets. However, since these can usually not be patented or copyrighted, they are very often copied quickly by competing banks, pushing down trading margins. For example, trading bonds and equities for customers is now a commodity business,
[citation needed]

but

structuring and trading derivatives retains higher margins in good timesand the risk of large losses in difficult market conditions, such as the credit crunch that began in 2007. Each over-the-counter contract has to be uniquely structured and could involve complex pay-off and risk profiles. Listed option contracts are traded through major exchanges, such as the CBOE, and are almost as commoditized asgeneral equity securities. In addition, while many products have been commoditized, an increasing amount of profit within investment banks has come from proprietary trading, where size creates a positive network benefit (since the more trades an investment bank does, the more it knows about the market flow, allowing it to theoretically make better trades and pass on better guidance to clients). The fastest growing segment of the investment banking industry are private investments into public companies (PIPEs, otherwise known as Regulation D or Regulation S). Such transactions are privately negotiated between companies and accredited investors. These PIPE transactions are non-rule 144A transactions. Large bulge bracketbrokerage firms and smaller boutique firms compete in this sector. Special purpose acquisition companies (SPACs) or blank check corporations have been created from this industry.[citation
needed]

[edit]Vertical

integration

In the U.S., the GlassSteagall Act, initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities, and led to segregation of investment banks from commercial banks. GlassSteagall was effectively repealed for many large financial institutions by the GrammLeachBliley Act in 1999. Another development in recent years has been the vertical integration of debt securitization.[citation
needed]

Previously, investment banks had assisted lenders in raising more lending funds and having the

ability to offer longer term fixed interest rates by converting lenders' outstanding loans into bonds. For example, a mortgage lender would make a house loan, and then use the investment bank to sell bonds to fund the debt, the money from the sale of the bonds can be used to make new loans, while the lender

accepts loan payments and passes the payments on to the bondholders. This process is called securitization. However, lenders have begun to securitize loans themselves, especially in the areas of mortgage loans. Because of this, and because of the fear that this will continue, many investment banks have focused on becoming lenders themselves, making loans with the goal of securitizing them. In fact, in the areas of commercial mortgages, many investment banks lend at loss leader interest rates[citation
needed] [6]

in order to make money securitizing the loans, causing them to be a very popular financing option

for commercial property investors and developers.[citation needed] Securitized house loans may have exacerbated the subprime mortgage crisis beginning in 2007, by making risky loans less apparent to investors. [edit]2008 Financial Crisis
[7] The 2007 credit crisis proved that the business model of the investment bank no longer worked without

the regulation imposed on it by Glass-Steagall. Once Robert Rubin, a former co-chairman of Goldman Sachs became part of the Clinton administration and deregulated banks, the previous conservatism of underwriting established companies and seeking long-term gains was replaced by lower standards and short-term profit.[8] Formerly, the guidelines said that in order to take a company public, it had to be in business for a minimum of five years and it had to show profitability for three consecutive years. After deregulation, those standards were gone, but small investors did not grasp the full impact of the change.[8] Investment banks Bear Stearns, founded in 1923 and Lehman Brothers, over 100 years old, collapsed; Merrill Lynch was acquired by Bank of America, which remained in trouble, as did Goldman Sachs and Morgan Stanley. The ensuing financial crisis of 2008 saw Goldman Sachs and Morgan Stanley "abandon their status as investment banks" by converting themselves into "traditional bank holding companies", thereby making themselves eligible[7] to receive billions of dollars each in emergency taxpayer-funded assistance.[8] By making this change, referred to as a technicality, banks would be more tightly regulated.[7] Initially, banks received part of a $700 billion Troubled Asset Relief Program (TARP) intended to stabilize the economy and thaw the frozen credit markets.[9] Eventually, taxpayer assistance to banks reached nearly $13 trillion dollars, most without much scrutiny,[10] lending did not increase[11] and credit markets remained frozen.[12] A number of former Goldman-Sachs top executives, such as Henry Paulson and Ed Liddy moved to highlevel positions in government and oversaw the controversial taxpayer-funded bank bailout.[13] The TARP Oversight Report released by the Congressional Oversight Panel found, however, that the bailout tended to encourage risky behavior and "corrupt[ed] the fundamental tenets of a market economy".[14]

The TARP has all but created an expectation, if not an emerging sense of entitlement, that certain financial and non-financial institutions are simply too-big-or-too-interconnected-to-fail and that the government will promptly honor the implicit guarantee issued for the benefit of any such institution that suffers a reversal of fortune. This is the enduring legacy of the TARP. Unfortunately, by offering a strong safety net funded with unlimited taxpayer resources, the government has encouraged potential recipients of such largess to undertake inappropriately risky behavior secure in the conviction that all profits from their endeavors will inure to their benefit and that large losses will fall to the taxpayers. The placement of a government sanctioned thumb-on-the-scales corrupts the fundamental tenets of a market economy the ability to prosper and the ability to fail.

Congressional Oversight Panel, TARP Oversight Report

Under threat of a subpoena by Senator Chuck Grassley, Goldman Sachs revealed that through TARP bailout of AIG, Goldman received $12.9 billion in taxpayer aid (some through AIG), $4.3 billion of which was then paid out to 32 entities, including many overseas banks, hedge funds and pensions.[15] The same year it received $10 billion in aid from the government, it also paid out multi-million dollar bonuses to 603 employees and hundreds more received million-dollar bonuses. The total paid in bonuses was $4.82 billion.[16][17] Morgan Stanley received $10 billion in TARP funds and paid out $4.475 billion in bonuses. Of those, 428 people received more than a million dollars and of those, 189 received more than $2 million.[18] [edit]Possible

conflicts of interest

Conflicts of interest may arise between different parts of a bank, creating the potential for market manipulation. Authorities that regulate investment banking (the FSA in theUnited Kingdom and the SEC in the United States) require that banks impose a Chinese wall to prevent communication between investment banking on one side and equity research and trading on the other. Some of the conflicts of interest that can be found in investment banking are listed here:  Historically, equity research firms have been founded and owned by investment banks. One common practice is for equity analysts to initiate coverage of a company in order to develop relationships that lead to highly profitable investment banking business. In the 1990s, many equity researchers allegedly traded positive stock ratings for investment banking business. On the flip side of the coin: companies would threaten to divert investment banking business to competitors unless their stock was rated favorably. Laws were passed to criminalize such acts, and increased pressure from regulators and a series of lawsuits, settlements, and prosecutions curbed this business to a large extent following the 2001 stock market tumble.[citation needed]

Many investment banks also own retail brokerages. Also during the 1990s, some retail brokerages sold consumers securities which did not meet their stated risk profile. This behavior may have led to investment banking business or even sales of surplus shares during a public offering to keep public perception of the stock favorable.

Since investment banks engage heavily in trading for their own account, there is always the temptation for them to engage in some form of front running the illegal practice whereby a broker executes orders for their own account before filling orders previously submitted by their customers, there benefiting from any changes in prices induced by those orders.