The term ‘investment bank’ may be slightly misleading at times, as not everyone who works at an investment bank is strictly an investment banker. However, the below summary should help to clarify the roles of various departments within investment banks. More detail on some of the teams and departments mentioned is included later on in this handbook.
Investment Banking Division (IBD)
This division’s fundamental role is to advise corporates, governments, high net-worth individuals (or families) and other institutions on corporate finance matters, most notably mergers and acquisitions (M&A) and raising finance. This includes work involving the equity capital markets (ECM) and debt capital markets (DCM). The Investment Banking Division may also offer services such as liability management, risk hedging, derivatives advice and restructuring. Bankers work together with companies to assess their options and then implement their chosen courses of action.
- Capital Markets: these are financial markets that link organisations looking to raise capital (through selling equity and/or debt instruments) with investors looking to supply capital (through buying equity and/or debt instruments). Products including shares, bonds and securitised products are traded between governments, companies, banks, private investors and other investors such as hedge funds and pension funds.
Markets / Sales, Trading & Research / Securities
The Markets Division of an investment bank is typically split up into three separate departments: Sales, Trading and Research. These each have their own individual roles, but also work together to help clients achieve their investment objectives. As with any other front office role within an investment bank, the main objective of each role is to help to generate financial gains for clients and the bank. The Sales team essentially generates trade ideas and provides market information for clients, based upon its own research and research conducted by the Research teams. Traders then execute trade requests made by (or on behalf of) clients.
Investment Management / Asset Management
Investment/Asset Management departments manage and invest in securities (such as shares or bonds) and assets (such as real estate) on behalf of clients. These clients are typically large, institutional investors such as pension funds and insurance companies.
Private Banking / Wealth Management
Private Banking (or Wealth Management) focuses more on providing services such as investment advice, efficient tax planning and financial planning. Typically, advice is individually tailored to help satisfy the unique personal and professional financial objectives of high net-worth individuals or families.
The Finance team in a bank manages the bank’s internal finances. This includes reporting trades executed by the Markets teams into financial accounts; preparing the bank’s management accounts and financial statements; analysing the bank’s financial performance; and conducting internal auditing (which involves liaising with external auditors). Those working in Finance teams are usually expected to take accounting qualifications.
The Operations Division provides general support to the revenue generating (or ‘front office’) departments, helping to run and streamline a bank’s internal processes. Examples of the work conducted by Operations employees include controlling and managing the processing of trades made by other divisions of the bank and trying to ensure traders receive confirmations of trades earlier and quicker than anyone else in the market (thereby ensuring a commercial advantage).
Compliance / Legal
Work that banks undertake is often governed by substantive and complex regulation and legislation. One of the core functions of the Compliance/Legal departments is to ensure that a bank complies with this regulation and legislation within the jurisdictions in which the bank operates. This can involve liaising with regulators; ensuring sufficient controls are in place to reduce the risk of non-compliance; keeping employees up-to-date on their legal obligations; and providing legal advice (whilst at times working alongside external legal counsel). Candidates should have a good basic knowledge of relevant regulations when applying for this role.
By Jake Schogger - City Career Series