Investment banks are split up into front office, middle office, and back office. Each sector is very different yet plays an important role in making sure that the bank makes money, manages risk, and runs smoothly.
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. 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, and global transaction banking.
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.
Typically includes operations and technology. The back office provides the support so that the front office can do the jobs needed to make money for the investment bank.
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