Investment Banking: Products, Challenges, and Regulations

This report provides a comprehensive analysis of investment banking, exploring the usefulness of its key products and services, the contemporary challenges faced by the sector, and the impact of recent regulatory changes. The report begins by defining investment banking and its core services, including merger and acquisition services, corporate finance, and the various roles of investment bankers. It then delves into the usefulness of these products, highlighting their significance in business expansion, capital raising, and financial restructuring. The report also addresses the challenges faced by investment bankers, such as relationship management, deal execution, competition, and the need for skilled personnel and technological advancements. Furthermore, it examines the impact of regulatory changes, particularly those from the Prudential Regulation Authority and The Financial Conduct Authority, on the operations and freedom of investment bankers. The analysis covers the Financial Services and Markets Act 2000 and 2001 and their implications on investment banking practices. The report concludes by summarizing the key findings and emphasizing the importance of innovation and adaptability in the face of evolving market dynamics and regulatory landscapes.

Running head: INVESTMENT BANKING
INVESTMENT BANKING
Name of Student
Name of University
Author’s Note

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Table of Contents
INTRODUCTION:..............................................................................................................2
USEFULNESS OF INVESTMENT BANKING PRODUCTS:.........................................2
Merger and Acquisition Services:...................................................................................2
Corporate Finance:...........................................................................................................3
Services provided by Investment Banker:.......................................................................4
CHALLENGES FACED BY INVESTMENT BANKER:.................................................5
Relationship Management:..............................................................................................5
Structuring Skills:............................................................................................................6
Deal Execution:...............................................................................................................6
Competition:....................................................................................................................6
New Business Opportunities:..........................................................................................7
Skilled Personnel:............................................................................................................7
Technology:.....................................................................................................................7
IMPACT OF REGULATORY CHANGES IN INVESTMENT BANKING SECTOR:. . .8
CONCLUSION:..................................................................................................................8
REFERENCES:.................................................................................................................10

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INTRODUCTION:
Investment Banking can be termed as the management of the investments that are made
by the client of any bank. Thus, investment banking is the services that the banks or other
financial institutions around the world provide to their respective customers. The customers
include high net-worth individuals, corporate companies and even the governments. There are
several services that these investment bankers provide to their customers. They are managing of
the large projects, identifying the risks and implementing remedies that can reduce such risks.
The services may also include the analysis of the financial status of that individual. The
corporations around the world often take help from the investment bankers to investigate about
the risks that are associated with the projects that the corporations are planning to take. The
investment banker industry is being divided into three major heads. They are “Bulge Bracket”
(upper tier), “Middle Market” (middle-level business) and “Boutique Market” (specialized
business). Some of the notable services that the investment bankers deal with are merger and
acquisitions, corporate finance – financial restructuring and leveraged finance, equity research,
sales and trading and the most important asset management. Some of the most notable products
that the investment banker offers are insurance of securities, underwriting, sales and trading of
equity and derivatives, fixed income instruments, currency exchange and also sale of
commodity.
USEFULNESS OF INVESTMENT BANKING PRODUCTS:
Merger and Acquisition Services:
In recent times the business around the world are engaging in the merger and
acquisitions. The reason behind the rise in the merger and acquisitions activities is due to the rise
in the pressure on the business and also due to the globalization. In order to expand the business

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the companies around the world are engaging in merger and acquisition activities (Al-Qeisi et al
2014).
The major role that the investment banker plays during the merger and acquisitions is to
identify the fair value of the companies that are involved in this activity. Investment bankers are
experts in calculating the worth of the companies. Investment banker also identifies the worth of
the companies in different situations (Sartori et al 2014). In order to value the worth of the
companies in different situations the investment banker uses financial models that are influenced
on the basis of the fixed and variable components that can affect the company. The expertise in
the valuation of the companies enables the investment banker to provide arbitrage services to
their clients/customers.
Corporate Finance:
The investment banker plays a very significant role in managing the corporate finance of
other corporations. Investment banker assists their clients to raise the capital, which requires for
present and future operations of the business (Söderholm and Svahn 2015). Thee investment
banker mainly fulfils their duty by analysing the net worth of the company, loan repaying ability
of the company and growth projections of the company.
During the period where the organizations faces substantial challenges, financial
restructuring and leveraged finance often assists the company to recover. The financial
restructuring is one of the primary services that investment banker provides to their clients. In
order to restructure the finance of the company the investment banker creates a balance between
the equity capital and debt capital of the company. The balance between the equity capital and
debt capital saves the company from bankruptcy. Under leverage finance activities, investment

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banker advices the organizations about the loans to the private equity companies and firms for
leveraged buyouts.
Services provided by Investment Banker:
Investment banker provides different types of services that assist the organization to
increase their financial performance. The financial performance of the company increases the
sustainability of the company in the industry. An investment banker may provide several
ancillary services to the organizations (Mishan 2015). Some of them are issuance of securities,
underwriting, sales and trading of equity, equities, derivatives, commodities and currencies.
The documentation for the Securities and Exchange Commission of the country and
raising money for the companies comes under the purview of issuance of securities. It is the
investment banker who creates the documentation for the organization that assists them to get
enlisted with the Securities and Exchange Commission of the country. Raising money for the
company through exchange market is also one of the major roles of the investment banker.
Investment banker also provides services like becoming the underwriter for the company.
The underwriter functions enable any company or organizations to gain fund from the bank for
business purposes. Investment banker also acts as underwriter during the IPO of the company. In
this case the investment banker provides a great amount of credibility to the company, which
assists the company to raise fund from the market (Shaikh and Karjaluoto 2015).
Investment bankers are the specialist for selling and trading of the equity or other types of
securities. The investment bankers are specialized in offering accurate data about different
securities. The analysis of the market condition and the price of the shares and other securities
are the speciality of an investment banker. An investment banker cans analyses about the

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fluctuations of specific securities. These skills assist the traders to buy or sell the products for
their customers.
Like stocks, investment banker also provides services that come under the purview of
FICC services. FICC services include managing of fixed income instruments, currencies and
commodities. Tough the market of income instruments, currencies and commodities are less
risky, but the growth percentages in these instruments are less. Thus, investment banker assists
the company to create a portfolio that has the balance of the high risk and low risk products,
which enables the company to gain maximum return.
CHALLENGES FACED BY INVESTMENT BANKER:
Investment banking is considered as one of the most dynamic professions of the world.
After globalization the investment banking saw a great change. The changes came in various
ways. The irregular movement in the security market assists the company force the investment
banking industry to change. The change brought several challenges in the industry. Some of the
challenges that investment banking industry are facing nowadays are as follows:
Relationship Management:
Relationship management is considered as the cornerstone in the investment banking
industry. Relationship management nurtures clients, who are very much important for the
investment banker as the customer bases remain high (Bello and Abubakar 2014). Understanding
the needs of the customers is one of the integral parts in the investment banker profession, which
can be identified through proper relationship management. In order to meet the needs of the
clients the investment banker needs to thrust for Customer Relationship Management.

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Structuring Skills:
The increase in sophistication in the business world led to the rise in the complexity of
the financial requirements. The plain products that investment banker has to offer, no longer
satisfy the needs of their clients (Bultum 2014). The backdated products are the main cause due
to which the profitability of the whole investment banking industry is being compromised. In
order to mitigate such problem the investment banking industries needs to launch new innovative
products that can meet the needs of the customers.
Deal Execution:
In this world the need for the strong distribution placement capabilities is very necessary.
The same stands for investment banking industries also. The investor universe kept on
increasing, which on the other hand, creates a substantial pressure on the investment banking.
Thus, investment banker needs to concentrate more on the marketing, so that they can get the
specific idea about the investor’s preferences (Manikyam 2014). In this way the investment
banker not only gets a grip on the capital market, but they can get an idea about the corporate
mergers, buyouts and hive - offs. The marketing effort enables the investment banker to conduct
their job more proficiently. If the investor banker develops strong distribution capabilities then
they can easily maximise the wealth of their clients.
Competition:
After globalisation the business world saw a steep rise in new comer in almost every
industry. The entry of new company in the market increases the demand for the financial
assistance. The demand for the investment banker led to the rise in the new comer in the
industry. The entrance of new comer led to the rise in the competition in the market (Lee and
Shin 2018). In order to stay in the market, the investment banker needs to create and introduce

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new products to the market, so that they can meet their client’s needs. The introduction of new
products and services in the market will enable the investment banker to gain more customers
from the market.
New Business Opportunities:
The change in the policies of the government directly affects the business of the
company. The more linnets the government policies are the more fruitful the business will be.
The change in the government policies also affects the investment banking industry. The
introduction of the favourable government policies enables the investment banker to expand their
business. The change in polices also enables the investment banker to opt for new business
opportunities.
Skilled Personnel:
Recruitment and retention of fast and efficient employees can assists any company to
grow. The investment banking field is a knowledge based industry where the main and key asset
for any investment banking institution is the human resource.
Technology:
The development of technology also affects the world’s finance industry. In order to meet
the changing demand of the customers, the investment banker needs to include modern
technology, so that they can easily manage the demand of the client (Mahendra Dev s2014). The
acceptance of modern technology also enables the company to reduce the cost, which on the
other hand, assists the investment banker to generate more revenue. The introduction of new
technology also increases the quality of the products and services, which enables the investment
banker to satisfy their client more efficiently.

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IMPACT OF REGULATORY CHANGES IN INVESTMENT BANKING SECTOR:
There are mainly two significant financial regulators in the United Kingdom. They are
Prudential Regulation Authority (PRA) and The Financial Conduct Authority (FCA). Prudential
Regulation Authority deals with the financial soundness and safety of the bank. The Financial
Regulation Authority deals with the behaviour of the banks in the markets and with their clients.
As per Financial Services and Markets Act 2000 (FSMA), any individual are not entitled
to carrying out the regulated financials services business. The only individual are liable to
operate the business that has relevant permission. This regulation decreases the freedom of the
investment banker. Any individual who wants to open an investment banking industry needs
permission from the governing financial body of the country (Bonin, Hasan and Wachtel 2014).
On the other hand, the regulation provides credibility to the investment banker, which in turn
assists the investment banker to get client easily. Another major legislation that also affects the
investment banking industry is the Financial Services and Markets Act 2001. This legislation
acts as a regulator for all the activities of an investment banker (Efing et al 2014). The constant
regulation creates a problem for the investment banker because it delays the working procedure
for the company. This legislation also forces the investment banker to share their client’s details
with the regulatory board. The sharing compromises the privacy of the company.
CONCLUSION:
As per the above discussion it can be analysed that the products and services that the
investment banker has to offer assists the companies to become more financially stable. After the
introduction of the new challenges, investment banker needs to develop innovative products, so
that they can meet the demand of their clients. The development of the new products and

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services can assist the investment banker to satisfy the needs of their clients. The legislation of
the United Kingdom that governs the investment banking industry of the United Kingdom also
affects the business. Thus, it is necessary for the country to re-create the legislation, so that the
investment banking business can work more efficiently.

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