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Investment Banking Industry & Trends

The investment banking industry has undergone tremendous change in the past three decades. The industry suffered its greatest public relations problems during the 1980s, when it was generally associated with the savings and loan crisis and when individuals such as Michael Milken and Ivan Boesky were portrayed by the media as rogue traders playing with the pensions and life savings of investors. However, a number of trends besides the development of the junk bond market have coalesced to produce an environment in the investment banking industry which is vastly different from that of the early 1960s. Based on these trends, it is likely that the industry will undergo continued development in the near future to the point that it is again competitive in a global economy.

The trends which have shaped the investment banking community involve macroeconomics, the globalization of the world economies, increased deregulation in the American banking industry, rapid change in technology, increased competition, disintermediation and repositioning. As companies have reacted to these trends, two distinct strategies have emerged: some investment banks have consolidated efforts with the result that they are participating in markets and activities separate from traditional investment banking; other companies have begun to specialize in traditional investment banking services, and have sold off operations not specifically related to these services.

Increasing inflation and rapidly fluctuating interest rates have combined with declining economic growth to deplete bank deposits. Since Regulation Q of the Banking Act of 1933 imposed ceiling on the interest rates commercial banks were allowed to pay on deposits, large investors began turning to other ways to invest their money to take advantage of extraordinarily high interest rates. This influx of capital helped fuel the growth in investment banking opportunities during the 1980s as companies w...

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Investment Banking Industry & Trends. (1969, December 31). In LotsofEssays.com. Retrieved 07:58, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1696072.html