Investment banks can work with governments to raise money, trade securities, and buy and sell crowns. Bankers work with private and public companies to help the companies go public, raise capital, grow businesses, make acquisitions, etc.
Banks work with investors to manage other companies’ money to help trade securities and provide research. They also work with private equity firms to help acquire portfolio companies and exit those positions by selling to strategic buyers.
In general, investment banks are divided into three offices categories :
- Front office
- Middle office
- Back-office services.
Why Investment Bank Divides into Front Office
The front office usually consists of the service that will assist the company in activities such as an acquisition or merger and corporate finance. In addition, they will also help with managing the professional investment high net-worth individual, company, or institution.
In addition, the front office also helps merchant banking, reports in investment and capital market research prepared by professional analysts.
It’s either for the company’s use or a selective group of clients. They also help make the correct formula for strategy, including risk limits and asset allocation parameters.
The Middle Office Service
Investment bank middle office services are important because it includes compliance with the regulations from the government and professional clients restrictions such as insurance companies, banks, and finance divisions.
The middle office is often seen as a function of the back office that helps monitor the entry and exit of money from the company to determine the liquidity amount that needs to be maintained by the company so as not to experience financial problems.
The middle-office team, in charge of capital flow may use the information to limit, the trades by reducing the buy/trade power available for the other divisions.
The Back Office Service
It can be likened to the bolts and nuts of an investment bank. Because the back office handles things like trade confirmations and ensures that the suitable securities are sold, bought, and settled in the right amounts.
Investment banks, also provide technology platforms and softwares. That enable traders to perform their work in a sophisticated and professional manner, create new algorithms, etc.
The jobs are often underestimated. However, without them, many things will not work correctly. Those are some things you need to know why investment banks are critical in the economy.
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