Front office risk teams, on the other hand, engage in revenue-generating activities

involving debt structuring, restructuring, syndicated loans, and securitization for

clients such as corporates, governments, and hedge funds. Here "Credit Risk
Solutions", are a key part of capital market transactions, involving debt structuring,
exit financing, loan amendment, project finance, leveraged buy-outs, and sometimes
portfolio hedging. The "Market Risk Team" provides services to investors via
derivative solutions, portfolio management, portfolio consulting, and risk advisory.

Well-known "Risk Groups" are at JPMorgan Chase, Morgan Stanley, Goldman

Sachs and Barclays. J.P. Morgan IB Risk works with investment banking to execute
transactions and advise investors, although its Finance & Operation risk groups
focus on middle office functions involving internal, non-revenue generating,
[20][21][22]
operational risk controls. The credit default swap, for instance, is a famous
credit risk hedging solution for clients invented by J.P. Morgan's Blythe Masters
[23]
during the 1990s. The Loan Risk Solutions group within Barclays' investment
[24]
banking division and Risk Management and Financing group housed in Goldman
Sach's securities division are client-driven franchises.

Risk management groups such as credit risk, operational risk, internal risk control,
and legal risk are restrained to internal business functions — including firm
balance-sheet risk analysis and assigning the trading cap — that are independent of
client needs, even though these groups may be responsible for deal approval that
directly affects capital market activities. Similarly, the Internal corporate strategy
group, tackling firm management and profit strategy, unlike corporate strategy
groups that advise clients, is non-revenue regenerating yet a key functional role
within investment banks.

This list is not a comprehensive summary of all middle-office functions within an

investment bank, as specific desks within front and back offices may participate in
[25]
internal functions.

Back office

The back office data-checks trades that have been conducted, ensuring that they are
not wrong, and transacts the required transfers. Many banks have outsourced
[citation needed]
operations. It is, however, a critical part of the bank.

Technology

Every major investment bank has considerable amounts of in-house software,

created by the technology team, who are also responsible for technical support.
Technology has changed considerably in the last few years as more sales and
trading desks are using electronic processing. Some trades are initiated by complex
algorithms for hedging purposes.

Firms are responsible for compliance with local and foreign government regulations
and internal regulations.

Other businesses
●​ Global transaction banking is the division that provides cash
management, securities services (including custody and securities lending
etc.) to institutions. Prime brokerage with hedge funds has been an
especially profitable business, as well as risky, as seen in the bank run
with Bear Stearns in 2008.
●​ Investment management is the professional management of various
securities (stocks, bonds, etc.) and other assets (e.g., real estate), to meet
specified investment goals for the benefit of investors. Investors may be
institutions (insurance companies, pension funds, corporations etc.) or
private investors (both directly via investment contracts and more
commonly via investment funds e.g., mutual funds). The investment
management division of an investment bank is generally divided into
separate groups, often known as private wealth management and private
client services.
●​ Merchant banking can be called "very personal banking"; merchant
banks offer capital in exchange for share ownership rather than loans, and
offer advice on management and strategy. Merchant banking is also a
[26]
name used to describe the private equity side of a firm. Current
examples include Defoe Fournier & Cie. and JPMorgan Chase's One
Equity Partners. The original J.P. Morgan & Co., Rothschilds, Barings and
Warburgs were all merchant banks. At the present date, a LionTree, an
independent investment and merchant bank originally became a
"merchant bank" was the British English term for an investment bank.

Industry profile
The investment banking industry can be broken up into Bulge Bracket (upper tier),
Middle Market (mid-level businesses), and boutique market (specialized businesses)
categories. There are various trade associations throughout the world which
represent the industry in lobbying, facilitate industry standards, and publish statistics.
The International Council of Securities Associations (ICSA) is a global group of trade
associations.

In the United States, the Securities Industry and Financial Markets Association
(SIFMA) is likely the most significant; however, several of the large investment banks
are members of the American Bankers Association Securities Association
 [27]
(ABASA), while small investment banks are members of the National Investment
Banking Association (NIBA).

In Europe, the European Forum of Securities Associations was formed in 2007 by

[28]
various European trade associations. Several European trade associations
(principally the London Investment Banking Association and the European SIFMA
affiliate) combined in November 2009 to form the Association for Financial Markets
[29]
in Europe (AFME).

In the securities industry in China, the Securities Association of China is a

self-regulatory organization whose members are largely investment banks.

Global size and revenue mix

Global investment banking revenue increased for the fifth year running in 2007, to a
record US$84 billion, which was up 22% on the previous year and more than double
[30]
the level in 2003. Subsequent to their exposure to United States sub-prime
securities investments, many investment banks have experienced losses. As of late
2012, global revenues for investment banks were estimated at $240 billion, down
[31]
about a third from 2009, as companies pursued fewer deals and traded less.
Differences in total revenue are likely due to different ways of classifying investment
banking revenue, such as subtracting proprietary trading revenue.

In terms of total revenue, SEC filings of the major independent investment banks in
the United States show that investment banking (defined as M&A advisory services
and security underwriting) made up only about 15–20% of total revenue for these
banks from 1996 to 2006, with the majority of revenue (60+% in some years) brought
in by "trading" which includes brokerage commissions and proprietary trading; the
[6]
proprietary trading is estimated to provide a significant portion of this revenue.

The United States generated 46% of global revenue in 2009, down from 56% in
1999. Europe (with Middle East and Africa) generated about a third, while Asian
[30]: 8
countries generated the remaining 21%. The industry is heavily concentrated in
a small number of major financial centers, including New York City, City of London,
Frankfurt, Hong Kong, Singapore, and Tokyo. The majority of the world's largest
Bulge Bracket investment banks and their investment managers are headquartered
[32]
in New York and are also important participants in other financial centers. The city
of London has historically served as a hub of European M&A activity, often
[33][34]
facilitating the most capital movement and corporate restructuring in the area.
Meanwhile, Asian cities are receiving a growing share of M&A activity.
According to estimates published by the International Financial Services London, for
the decade prior to the 2008 financial crisis, M&A was a primary source of
investment banking revenue, often accounting for 40% of such revenue, but dropped
[30]: 9
during and after the 2008 financial crisis. Equity underwriting revenue ranged
from 30% to 38%, and fixed-income underwriting accounted for the remaining
[30]: 9
revenue.

Revenues have been affected by the introduction of new products with higher
margins; however, these innovations are often copied quickly by competing banks,
pushing down trading margins. For example, brokerages commissions for bond and
equity trading is a commodity business, but structuring and trading derivatives have
higher margins because each over-the-counter contract has to be uniquely
structured and could involve complex pay-off and risk profiles. One growth area is
private investment in public equity (PIPEs, otherwise known as Regulation D or
Regulation S). Such transactions are privately negotiated between companies and
accredited investors.

Banks also earned revenue by securitizing debt, particularly mortgage debt prior to
the 2008 financial crisis. Investment banks have become concerned that lenders are
securitizing in-house, driving the investment banks to pursue vertical integration by
becoming lenders, which has been allowed in the United States since the repeal of
[35]
the Glass–Steagall Act in 1999.