Future of Investment Banking
Future of Investment Banks is extremely relevant topic for today’s studies. This type of banks institutions plays one of the main roles, being circulating element in the whole body of financial system. Vital role guaranteed by the abilities to help clients to raise capital through debts, equity or other potential deals. Needless to note that investment banks are those privileged institutions that are involved in processes of mergers and acquisitions.
Concern about future of such an important investment banks are brought up by relatively recent events in bank sector of the economy. Even when BNP Paribas signaled that they had problems with properly pricing its book of subprime related bonds, a lot of experts were starting to worry. Chain of events is noticeable because of Lehman Brothers’ collapse as well. And nowadays questions of the development perspectives of investment banks increased dramatically.
In attempts to describe possible development perspectives of investment banks, following picture can be drawn. First of all, it’s given that quantity of “investment banks” already decreased. It’ better to describe it as consolidation process with a lesser amount of big banks and more small boutiques. Acquisition of JP Morgan in massive less effective structure proves this argument.
Second, the problem of maturity gap should be solved. Dealing with asymmetric by the means of Repurchasing Agreements is not acceptable anymore due to the lack of trust. Moreover, asset/liability mismatch is risky and hard to control. Therefore it’s important to relay on long-term funding such as deposits.
The next gesture of brush is certainly about the regulation issue. Industry experienced some sort of deregulation caused by Gramm-Leach-Bliley Act, which had replaced Glass-Steagall Act. Thus, commercial banks with more conservative structure noticeably had gotten closer to investment banks with all their risk-taker items. Good example is illustrated by Citigroup, where blend
Concern about future of such an important investment banks are brought up by relatively recent events in bank sector of the economy. Even when BNP Paribas signaled that they had problems with properly pricing its book of subprime related bonds, a lot of experts were starting to worry. Chain of events is noticeable because of Lehman Brothers’ collapse as well. And nowadays questions of the development perspectives of investment banks increased dramatically.
In attempts to describe possible development perspectives of investment banks, following picture can be drawn. First of all, it’s given that quantity of “investment banks” already decreased. It’ better to describe it as consolidation process with a lesser amount of big banks and more small boutiques. Acquisition of JP Morgan in massive less effective structure proves this argument.
Second, the problem of maturity gap should be solved. Dealing with asymmetric by the means of Repurchasing Agreements is not acceptable anymore due to the lack of trust. Moreover, asset/liability mismatch is risky and hard to control. Therefore it’s important to relay on long-term funding such as deposits.
The next gesture of brush is certainly about the regulation issue. Industry experienced some sort of deregulation caused by Gramm-Leach-Bliley Act, which had replaced Glass-Steagall Act. Thus, commercial banks with more conservative structure noticeably had gotten closer to investment banks with all their risk-taker items. Good example is illustrated by Citigroup, where blend