Abstract
Investment banking changed dramatically during the 20-year period preceding the global financial crisis that started in mid-2007 as market forces pushed banks from their traditional low-risk role of advising and intermediating to a position of taking considerable risk for their own account and on behalf of clients. This high level of risk-taking, combined with high leverage, transformed the industry during 2008, when several major firms failed, huge trading losses were recorded, and many firms were forced to reorganize their business. Although each investment bank takes a somewhat different approach, the principal businesses of most large investment banks include: an investment banking business managed by the Investment Banking Division, which focuses on capital raising and M&A transactions for corporate clients and capital raising for government clients; sales and trading business managed by the Trading Division, which provides investing, intermediating, and risk-management services to institutional investor clients, performs research, and also participates in nonclient-related investing activities; and asset management business managed by the Asset Management Division, which is responsible for managing money for individual and institutional investing clients.
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