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Investment Bank Organizational Structure

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How are Investment Banks Structured?

Front Office vs. Middle Office vs. Back Office

The structure of an investment bank is split up into front office, middle office, and back office functions.

Each function is very different yet plays an important role in making sure that the bank makes money, manages risk, and runs smoothly.

Investment Banking Front Office

Think you want to be an investment banker?  Chances are the role you are imagining is a front office role.  The front office generates the bank’s revenue and consists of three primary divisions: investment banking, sales & trading, and research.

Front office investment banking is where the bank helps clients raise money in capital markets and also where the bank advises companies on mergers & acquisitions.

At a high level, sales and trading is where the bank (on behalf of the bank and its clients) buys and sells products.  Traded products include anything from commodities to specialized derivatives.

Research is where banks review companies and write reports about future earnings prospects.  Other financial professionals buy these reports from these banks and use the reports for their own investment analysis.

Other potential front office divisions that an investment bank may have include:

  • Commercial Banking
  • Merchant Banking
  • Investment Management
  • Global Transaction Banking

Investment Banking Middle Office

Typically includes risk management, financial control, corporate treasury, corporate strategy, and compliance.

Ultimately, the goal of the middle office is to ensure that the investment bank doesn’t engage in certain activities that could be detrimental to the bank’s overall health as a firm.

In capital raising, especially, there is significant interaction between the front office and middle office to ensure that the company is not taking on too much risk in underwriting certain securities.

Investment Banking Back Office

Typically includes operations and technology.  The back office provides support so that the front office can do the jobs needed to make money for the investment bank.

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Winny
Winny
December 25, 2016 10:21 am

Hi

May I know who is the author of this post and when it was published?

I wanted to include some information from this post for my assignment and I want to do a proper citation.

Thank you.

Best regards,
Winny

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