investment bank

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A banking institution specialised in operations of larges businesses related to financial and investment products, risk evaluation, major trading operations, etc. They also provide their services for public institutions.

An investment bank will carry out its own investment activities by issuing debt or other securities; they will advise and counsel businesses and will look for resources and capital for new companies. For example, some of the operations they carry out are:

  • Receiving mature deposits.
  • Issuing securitiesbonds or loans.
  • Extending credit, usually in the medium or long-run.
  • Obtaining credit from outside sources and acting as an intermediary between institutions.

It´s worth mentioning that these banks became quite famous during the housing market crisis for the junk housing bonds that they issued, calling them mortgage backed securities. The financial and subprime crises made some investment banks, such as Lehman Brothers, go bankrupt when the real estate bubble popped.