Investment bankers are allowed to act

Investment banking explained simply: what is investment banking?

This article was published on July 8, 2019 by Orange - the young portal of the Handelsblatt.

The business field definitely has a glamor factor. Investment bankers are the top earners in the finance industry. Because they are paid for success, they often earn salaries in the millions. A small Porsche for payday is already in there. However: The job is not for the faint of heart. And overtime and worked nights are the rule.

Investment banker: advisor to companies

At Deutsche Bank, investment banking is one of several business areas. But there are also financial institutions that specialize in investment banking, for example Goldman Sachs from the USA.

Investment bankers offer various services. Part of it relates to business on the stock exchange. Trading in stocks, bonds and commodities takes place in investment banking.

The other part is advising companies when they need money or want to merge with another company. The bankers help their customers go public. And they find out the price at which investors are willing to buy the company's shares.

Investment bankers check for companies whether it makes sense to buy a competitor - or better not. One then speaks of a takeover. Often companies only want to sell a certain part of their company, a so-called division. This is where investment bankers help find the right buyer.

Investment banking: business with a bad image

Investment bankers have a bad reputation. Greedy and only interested in short-term success is a common judgment. Some investment bankers got extremely high salaries while the banks they worked for went bust during the financial crisis. Other investment bankers manipulated interest rates for years in order to turn them into profit for their own business.

Investment banks have also sold bad US real estate loans to their clients without properly educating them about the risks. As a result, many people lost their wealth during the financial crisis. That is why there are now stricter and stricter rules for investment banking.

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