Corporate and
Merchant Banking are business related activities. Corporate Banking
incorporates corporate finance i.e. credit risk assessment and technical
aspects such as raising capital, business mergers and acquisitions as well as
all banking activities related to large organizations.
While Merchant
Banking implies investment management e.g. management of trusts, securities,
mutual and pension funds, public issue management and international funds.
Merchant Banking involves offering advisory services to corporate clients on
capital structure decisions, public issue management, underwriting, raising
funds through public issue from overseas markets, project appraisals besides
mergers and acquisitions. With merger and acquisitions as well as joint
ventures and alliances being formalized by corporate for the sake of expansion,
opportunities for merchant bankers have grown.
INVESTMENT BANKING:
Investment
Banking activities are associated with financial activities such as securities
underwriting, markets and arranging mergers, acquisitions and restructuring.
Investment bankers work in retail banking and corporate clients and
institutional banking. These banks hold large financial assets as they manage
dealer activities and in trading and distribution of securities. The function
is advisory and the bank support financial activities through lending to
customers using securities as collateral or for repurchase agreements where in
they use their own securities. Investment banking is fund based and not only
fee based while Merchant Banking, on the other hand, is fee based.
The world’s top
six investment banking houses manage the major portion of new issue
investment-grade securities and are referred to as special bracket firms; these
are Solomon Brothers, First Boston, Goodman Sachs, Morgan Stanley, Merrill
Lynch, and Shearson Lehman Brothers. In India, some of the top investment
Bankers is DSP Merrill Lynch, PNB Capital Services, GE Caps, IFCI Financial
Services, IDBI Capital Markets, SBI Capital & JM Financial and Investment.
The role of
Investment Banks is to participate in direct markets by bringing financial
claims for sale. They operate to help businesses and governments sell their new
security issues. Once the securities are sold investment bankers make secondary
markets for securities as brokers and dealers. They are largely doing
underwriting business. Investment Banking can be carried on as part of the
normal range of business activities. In India ICICI Bank can be regarded as
investment banking.
TREASURY AND FOREX FUNCTION
With the
increase in forex (foreign exchange) flow in the country and reliance of
corporate on the international market in sourcing their fund requirements, the
treasury and forex functions are becoming increasingly important.
Since fund
management is an important determinant of success of any business, treasury
management has become a very important finance function. Knowledge of global
money markets and financial instruments such as deposit certificates, treasury
bills, forecasting, financial management and manipulation, source evaluation
and domestic and foreign currency funds has become critical for managing the
treasury profit center. Treasury and risk management ensures cost effectiveness
in planning strategies in this era of deregulation.
Forex marketing
technically is an inter banking activity. The job entails two major
responsibilities assessing various markets e.g. Stock or money markets on
behalf of the bank and customer desk to advise corporate or other banks that
require foreign currency. The job entails checking on current prices, keeping
abreast with policies of the regulatory bodies, analyzing past trends for
making predictions and bids for forex trading. The task is affected by the high
volatility of the markets and involves taking risks.
