Investment and Commercial Banking

• Banking encompasses a wide range of financial activities and services

Investment Banking

• Investment banking is a financial intermediary that performs a variety of services
• Investment banks act as agents for corporations issuing securities
• Investment banks are involved in underwriting new debt and equity securities for all types of corporations
• Investment banks aid in the sale of securities
• Investment banks help facilitate mergers and acquisitions, reorganizations and broker trades for both institutions and private investors
• Unlike commercial and retail banks, investment banks do not take deposits
• Investment banks serve as intermediaries between investors and corporations
• They analyze a company's financial situation and provide advice on the best way to raise capital

Commercial Banking

• Commercial banks provide financial services to businesses
• These banks accept deposits, and offer business loans
• Commercial banks are crucial for the economy because they provide the capital that businesses need to grow
• The main role of a commercial bank is to take deposits from customers and then lend that money out to individuals and businesses
• Commercial banks create credit
• They evaluate the creditworthiness of borrowers to manage risk
• Commercial banks also offer a variety of other services, including wealth management, foreign exchange, and trade finance
• Commercial banks are heavily regulated to protect depositors and maintain financial stability

Retail Banking

• Retail banking focuses on providing services to individual customers
• Services include savings and checking accounts, mortgages, personal loans, and credit cards
• Retail banks generate revenue through interest, fees, and commissions
• They provide convenience through branch networks, ATMs, and online banking platforms
• Customer service is a key aspect of retail banking

Financial Regulations

• Financial regulations are rules and standards for financial institutions
• They are designed to maintain the integrity of the financial system
• Regulations aim to protect consumers and prevent financial crises
• Can include capital requirements, reserve requirements, and consumer protection laws
• Regulatory bodies like the Securities and Exchange Commission (SEC) and central banks enforce these rules
• Compliance with regulations is a critical part of banking operations

Risk Management

• Risk management is the process of identifying, assessing, and controlling risks
• Banks face various types of risks, including credit, market, and operational risk
• Credit risk is the risk of borrowers defaulting on loans
• Market risk is the risk of losses from changes in market conditions, such as interest rates and exchange rates
• Operational risk is the risk of losses from internal failures, such as fraud or system errors
• Banks use various techniques to manage risk, including diversification, hedging, and insurance
• Effective risk management is essential for the stability and profitability of banks