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Seminar Report on

Submitted by
Akshatha upadhyay 1MS11MBA03

Under the coordination of Mr. Santhosh Kumar.S Assistant Professor, MSRIT


Under the guidance of Mahalakshmi .A Assistant Professor, MSRIT

Table of content 1. 2. 3. 4. Topic Introduction Literature review History of investment bank Regulation of investment bank in USA and India Functions of investment bank Structure of investment bank Current scenario of investment bank in the world and India. Page no 3 to 5 6 7 to 9 10 to 11

5. 6. 7.

12 to 14 16 to 18 19 to 22

An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing securities. Most also maintain broker/dealer operations, maintain markets for previously issued securities, and offer advisory services to investors. investment banks also have a large role in facilitating mergers and acquisitions, private equity placements and corporate restructuring.

Unlike traditional banks, investment banks do not accept deposits from and provide loans to individuals .

From 1933 (GlassSteagall Act) until 1999 (Gramm LeachBliley 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. In recent years, some investment banking firms have diversified or merged with other financial firms to become full service financial firms.

Literature review
Sl .no 1 2
Name of the Author / source H R Machiraju Internet Title of article Indian financial system Investment Banking at 50,000 Feet summary fourth edition textbook structure of investment bank by John Spacey Financial theory

The Rise Of The Modern Investment Bank What do investment bank do ?


article by Laurence Knight Business reporter, BBC News video and activates of Goldman Sachs

Goldman Sachs webpage

what do we do

Definition of Investment banking

The dictionary of banking and finance defines investment bank as a term used in US To mean, a bank which deals with the underwriting of new

issues and advices Corporations on their financial affairs.

Bloomberg provides a more consolidated definition for an investment bank, 'A financial Intermediary that perform a verity of service, including aiding in sales of securities, Facilitating mergers and other corporate re- organizations, acting as broker to both The individual and the institutional client and trading in its own accounts.

History of investment banking A historical 1792 agreement called as a Buttonwood Agreement was signed among 24 New York brokers to band the brokers into an investment group. By the middle of 1800s, professional investment banks had sprung up in the US to help government raise funds for infrastructure projects and the civil war. In the 1830s, commercial banks started adding investment banking services to their regular banking activities in the US.

Investment Banking hit a milestone in the 1870s when a syndicate of banks from Europe and US teamed up to buy $50 million worth of US Treasury Bonds for resale to public.

The Glass-Steagall Act, passed on June 16, 1933, and officially named the Banking Act of 1933, introduced the separation of bank types according to their business(commercial and investment banking), and it founded the Federal Deposit Insurance Corporation for insuring bank deposits. In the mid-20th century, large investment banks were dominated by the deal makers. Advising clients on mergers and acquisitions and public offerings was the main focus of major Wall Street partnerships. These firms included Goldman Sachs, Morgan Stanley, Lehman Brothers, First Boston and others.

Investment Banking in India Grindlays bank began Investment Banking (Merchant Banking) in India in 1967 with RBI issuing the second license to Citi in 1970.

SBI was the first Indian public sector bank to set up its merchant banking division in 1972.
In 1972, a Banking Commission report asserted the need for Merchant Banking ser ices in India by public sector banks they recommended the same structure as American investment banks (Glass-SteagallAct)

Regulation of investment bank in USA

1. The Securities Exchange Commission (SEC) exercises advisory and regulatory role of Bankers . The powers of SEC was further strengthened in 1960 by authorizing it to inspect the records and Accounts of firms engaged in the business.
2. Investment trusts were covered by the investment company act, 1940 which sought to regulate them. Investment advisors are required to be registered under the investment advisor Act, 1940. 3. The investment and portfolio activities became subject to SEC supervision.


Regulation of investment bank in India

Pure investment banks which do not have presence in the lending or banking business are governed primarily by the capital market regulator (SEBI). However, Universal banks and NBFC (non banking financial companies) investment banks are regulated primarily by the RBI in their core business of banking or lending and so far as the investment banking segment is concerned, they are also regulated by SEBI
Apart from the above specific regulations relating to investment banking, investment banks are also governed by other laws applicable to all other businesses such as tax law, contract law, property law, local state laws, arbitration law and the other general laws that are applicable in India.

Functions of Investment Banking 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, public 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.

Investment banks carry out multilateral functions. Some of the most important functions of investment banking are as follows: Investment banking helps public and private corporations in issuance of securities in the primary market. They also act as intermediaries in trading for clients. Investment banking provides financial advice to investors and helps them by assisting in purchasing and trading securities as well as managing financial assets Liability management, The Liability Management team advises on and executes public and private debt transactions including tenders, exchange offers, and consents.


Structured Finance; they helps clients securitize assets, businesses and risks associated with acquisition financing and balance sheet management.
Mergers and acquisitions advice Example of Goldman Sachs; Johnson & Johnson, on its planned acquisition of Synthesis ($20.8bn), 2011 E.ON, on the sale of its U.S. business to PPL ($8bn), 2010 Underwriting The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).

SPIN-OFFS AND RESTRUCTURINGS Example; Fiat, on the spin-off of its capital goods activities into Fiat Industrial ($18bn), 2011 Motorola, on its split into two companies and the spin-off of Motorola Mobility ($10bn), 2010 Small firms which provide services of investment banking are called boutiques. They mainly specialize in bond trading, providing technical analysis or program trading as well as advising for mergers and acquisitions


Structure of investment bank





Current Scenario Two collapses of the stock market ,the tech bubble and the sub-prime crisis have taken their toll on the investment banking industry. Landmark companies including Bear Stearns, Lehman Brothers and Merrill Lynch have been destroyed in the subprime crisis. Goldman Sachs and Morgan Stanley have moved from pure play investment banks to become commercial banks after the repealing of the Glass-Steagall Act. But still, investment banking remains a key element of our capital markets. Goldman Sachs, UBS, Credit Suisse are the major players in the global investment banking industry

Leading investment banks in the world


Investment bank scenario in India

Investment banking will grow over ten-fold: Investment banking will be among the fastest growing segments in the banking industry rising from 4 percent to 7 percent of the entire corporate banking revenue pool. larger corporate customers expect to demand higher support for i nternational expansion and mergers and acquisitions over next decade
The revenue pool will shift from traditional corporate banking to investment banking and advisory. Banks with international presences and to benefit.


Leading investment bank in India


Future scope for investment banks After the world faced a major economic recession in the second half of 2008, many scholars and think tanks were skeptical about the restoration of the economy. However, as the market has its own share of ups and downs, the positive aspects and financial strength of investment banks cannot be neglected. The future of investment banking might comprise the following: More Stringent Laws and Restrictions

Emphasis on Equity Derivatives and Currency trading

Fewer big banks and more small boutiques

Lesser Dependence on Short-Term Funding



Investment Banking could be termed as a relatively American phenomenon. Indian Investment Banking industry has still a long way to go before it catches up with its global peers.
The sub-prime crisis of 2008 has been a hammer blow for pure play investment banks.


Learning experience

The various functions carried out by investment banks. Which includes advisory service , mergers and acquisition, etc.
Various investment banks in India and the top notch bank among them. The scope for career in investment bank and the various functions that can be carried out. Difference between commercial bank and investment bank.