What Are the Best Tips for Investment Banking Industry Development?

The investment banking industry refers to the industries that provide comprehensive financial services and financial consulting through project financing, fund management, and corporate wealth management.

Investment banking

1. Evolution of the regulatory system for issuance

The core content of the issuance supervision system:

Positioning of the investment banking industry

From foreign experience, investment banks are the product of the development of the joint stock company system to a specific stage, and are important subjects in developed securities markets and mature financial systems. They play a role in communicating capital supply and demand, constructing securities markets, promoting corporate mergers and acquisitions, Promote the important role of industrial concentration, the formation of economies of scale, and optimization of resource allocation.

With the rapid development of the investment banking industry, it is also difficult to define investment banks. Investment banks are the titles of the United States and continental Europe. The United Kingdom calls them merchant banks and in Japan it refers to securities companies. There are four main international definitions of investment banking. The first: Any financial institution operating Wall Street financial services can be called an investment bank. Second: Only financial institutions operating part or all of the capital market are investment banks. The third type: financial institutions engaged in securities underwriting and corporate mergers and acquisitions are called investment banks. Fourth: Financial institutions that only underwrite securities on the primary market and trade securities on the secondary market are called investment banks. It can be seen that the investment banks that people define are mainly aimed at the business division of investment banks.

In China, there are no special investment banking companies. Since China began to build a capital market, state-owned capital has invested in the establishment of securities companies. The securities companies have set up an investment banking department to engage in stock underwriting business. Investment banks mainly provide a set of risk-return matching programs, tools and high-quality financial media services for the development of the capital market. (Wu Xiaoqiu, 2001) In terms of business, investment banks refer to institutions engaged in securities issuance, underwriting, trading, corporate restructuring, mergers and acquisitions, and other businesses. The intermediary role of investment banks is illustrated below.

Development Opportunities Facing the Investment Banking Industry

China is experiencing an important historical period of developing the socialist market economic system. The adjustment of the economic structure and the establishment of a modern enterprise system have provided a huge space and market for the further development of the investment banking industry.

1. New opportunities brought by the reform of the state-owned asset management system to investment banking business. The report of the 16th National Congress of the CPC put forward a new direction to deepen the reform of the management system of state-owned assets, that is, to give full play to the central and local enthusiasm while maintaining state ownership. The state must formulate laws and regulations, and establish a central and local government to perform the role of investor on behalf of the state, enjoy ownership rights, unity of rights, obligations, and responsibilities, and manage assets with the management of state-owned assets. This has created conditions for the local government to transfer a number of state-owned shares of listed companies, and the speed of approval of equity transfers will also accelerate. Since the transfer of state-owned shares to Optoelectronics was approved on August 15, 2002, a number of listed companies have issued announcements on the transfer or approval of state-owned shares. In this way, a state-owned stock transfer market that accounts for 47% of the stock market may be formed. After the state-owned stock transfer is accelerated, the transferee and the transferor will consider asking brokers to act as financial advisors for M & A and restructuring due to professional, fair, and regulatory considerations. Investment banking brings opportunities for M & A and restructuring.

2. "Administrative Measures on the Acquisition of Listed Companies" and "Notice on Issues Related to the Transfer of State-owned Shares and Corporate Shares of Listed Companies to Foreign Investors" have been issued. The State Economic and Trade Commission, the Ministry of Finance, the State Administration for Industry and Commerce, and the State Administration of Foreign Exchange jointly issued the "Interim Provisions on the Reorganization of State-owned Enterprises with Foreign Capital", which means that the transfer of state-owned property rights of non-listed companies will enter a new stage, and the transfer of state-owned property rights is also for adjustment and optimization The layout of the state-owned economy also provides investment banks with opportunities for business innovation-serving as government financial advisors.

At the meeting of the heads of central enterprises held on July 10, 2003, Zhang Delin, the director of the Policy and Regulation Bureau of the SASAC, revealed that the "Interim Measures for the Transfer of State-owned Property Rights of Enterprises" has been discussed and passed for the introduction in August. The "Interim Measures for the Transfer of State-owned Equity of Listed Companies" has also been included in the 2003 legislative plan of the State Council and the SASAC. Investment banks should actively pay attention to policy trends, take the initiative to make suggestions for enterprises, use professional advantages to act as financial advisors, establish good cooperative relationships with enterprises, and lay the foundation for long-term cooperation.

3. Opportunities brought by the internationalization of the market to investment banks. The development of international investment banks is a real and pressing issue.

Challenges facing the investment banking industry

1. Reduction of barriers to entry for investment banking. The traditional investment bank underwriting business is fiercely competitive, foreign capital entry, mixed operation of banking and securities, and the opening of securities company entry thresholds have made the securities industry farewell to the era of monopoly in the past. If the securities firms cannot adapt to this sudden change, they will be eliminated by the market. After several major institutional changes in the investment industry, the market structure has undergone fundamental changes, and many former investment bank bosses have disappeared. Some of the original leading companies in the industry were unable to adapt to the general environment of system reform, frequently fell down due to violations of laws and regulations, and entrepreneurs of most securities companies were forced to withdraw from the market.

2. There is a single type of business and a high degree of convergence in business structure. At present, among the 101 domestic securities companies, there are about 40 investment banks with qualifications for lead underwriting. In fact, except for major underwriting projects that are basically undertaken by CICC, few investment banks have unique characteristics. The big brokerage companies that are in the top ranking mainly rely on advantages in scale and government support. In the final analysis, the competition launched by investment banks is non-discriminatory competition, which leads directly to vicious competition and price competition, while reducing prices can not avoid risks. Improper underwriting activities will only bring huge losses to investment banks, including reputation On and on money. How to shape the characteristics of an investment bank in a certain area and realize its uniqueness in a certain field will be more issues to be considered in future work. In addition, after joining the WTO, foreign investment banks have fixed their eyes on China's securities market. Their entry will also make the domestic investment banking business face a more severe competitive environment.

3. The assets scale is relatively small and the competitiveness is weak. The development history of China's investment banks is only a dozen years. Although there are a large number of investment banks, their scale is small and the industry concentration is extremely poor. According to statistics, the average assets of China's securities companies are only over 2 billion yuan, which is far from the world's famous investment banks. Too small a size of capital makes the foundation for securities companies to expand very weak. The 11 largest investment banks in China have less than $ 2.5 billion in capital, while the Merrill Lynch has $ 70.3 billion. The larger the investment bank's capital scale, the stronger its strength, and the more advantages it has in expanding business areas and occupying market share. It can be said that the growth of capital is the material foundation for investment banking business expansion, opening up new areas, and participating in market competition.

System innovation and risk control work together to build the core competitiveness of the investment banking industry

(I) System innovation shapes competitive advantage

Innovation has always been the theme of the development of the securities industry, and it is also the basic element that shapes the core competitiveness of investment banks. Without innovation, today's highly developed capital markets are impossible. Brokers without a spirit of innovation and innovation have no place in the era of global competition, let alone have core competitiveness. Drucker, a master of management, believes that the financial industry itself is a risk mitigation industry, and innovation is the best way to overcome risks. The investment bank itself is a system, and the success of the system depends on the organic combination of various elements. This shows that there is an advantage in individual innovations. If there is no systematic innovation, it is not necessarily competitive. Core competence can be transformed into core competitiveness only after undergoing system innovation. For securities companies, product (service) innovation is the core of system innovation, organizational innovation is the guarantee, and management innovation is the foundation. The system innovation of a securities company should include at least the three above-mentioned innovations, otherwise it can only be a single innovation and cannot guarantee core competitiveness.

1. Build your own business brand through business innovation. In order for an enterprise to continue to develop and maintain its leading position in the industry, it must have a core business, that is, a brand advantage, and it must constantly give new content to its brand. The development and growth of securities companies must also take the road of branding. Although the world-famous securities companies have a wide range of operations, they all have one or more unique businesses that have a great influence in the industry. They rely on their own brands to win the trust of customers and obtain good operating benefits. Investment banks should improve their business structure, develop business such as investment consulting, asset restructuring, debt-to-equity swaps, mergers and acquisitions, and step out of the limitations of the primary and secondary markets. At present, with the continuous increase in the number of securities investment funds, the continuous entry of insurance funds into the market, and the future entry of pension funds into the market, China's securities market has increasingly demanded financial derivatives such as stock index futures and options. Investment banks should focus on the cultivation and development of core competences, strive to develop unique business spaces that meet their own conditions, and at the same time respond to external competition through structural adjustment, correctly analyze their strengths and weaknesses, conduct market positioning, and take advantage of opportunities to get ahead To seize market share and take the road of characteristic operation.

2. Improve operational efficiency through organizational innovation. Establish an investment banking system of "unified leadership, professional division of labor, and centralized management", focusing on shaping a professional and reasonable knowledge structure of the team to improve operational efficiency and quality. The business of an investment bank requires extensive information resources, in-depth and professional analysis, highly divergent ideas, and precise and rigorous planning. It also requires the ability to operate the capital market and the ability to handle legal, financial, and interpersonal relationships. This all needs to be achieved through a well-formed team. Team building can achieve the following goals: (1) improve job satisfaction. While team norms encourage their employees to work, they also create an atmosphere that increases job satisfaction. (2) More rational decisions. Groups of individuals with different backgrounds and experiences experience problems more widely than groups of a single nature. Similarly, decisions made by teams of individuals with different styles are more creative than decisions made by individuals. (3) Improve performance. The work team approach can reduce waste, reduce bureaucracy, actively propose work and improve work efficiency. Therefore, a scientific and reasonable team building is important for investment banks.

3. Marketing innovation. The sales ability of the lead underwriter will directly affect the quality of stock issuance, including the price level, issuance efficiency, market performance, optimizing investor structure, and issuer market recognition. Marketing ability is an important performance of investment bank competitiveness in the market, including competition for underwriting projects with issuance quality, profit growth points for specialized sales, and brand effects recognized by investor groups. (1) Establish a good investor network. The main object of stock sales is institutional investors. The strength of the investor network that the lead underwriter can operate is directly related to the ability to sell stocks. (2) Pricing power. The difficulty in issuing shares is to reasonably determine the issue price, which must reflect the value and also reference the market price, taking into account the needs of the market and the investor's approval of the price; it must meet the issuer's financing needs and take care of the investor's rise Price gains. (3) Referral ability. Ultimately, the value of stocks needs the approval of investors, and referrals are necessary. There are many ways of promotion, including one-on-one promotion, small promotion, public roadshow promotion, online promotion, media promotion and so on. The key to recommending is to accurately locate the "selling point" of the stock, tap the issuer's investment value, and find the right investment group. Roadshow promotion is a key measure to stimulate the desire to buy.

4. Incentive mechanism and talent management. An important part of the development of investment banks is the introduction and training of talents. The 21st century is an intelligent society, and the knowledge economy will become the protagonist. As a knowledge carrier and a source of knowledge innovation, it will play an increasingly important role. Some small and medium-sized investment banks have been able to rise rapidly, and share a share with large investment banks in a certain business area, which is related to their own expertise in certain areas. Investment banks should be based on the long-term, establish a talent strategy focusing on self-cultivation and supplemented by the introduction of talents, establish and improve talent incentive and restraint mechanisms, and establish a performance evaluation and mobility mechanism to form a talent competition effect.

(2) Risk control guarantees sustainable competitiveness

In recent years, the risks of investment banking have emerged, and some brokerages have tasted the lessons brought by the inadequate risk control: such as the huge underwriting risks in stock underwriting, the typical ones are Zhejiang Guangsha, Harbin Pharmaceutical, etc .; Risks caused by the listing of false packaging: For example, the events of Tonghai Hi-Tech and McCort, some brokerages that have had outstanding investment bank performance in the past have paid a heavy price for this. While other securities companies have not yet been penalized by investment bank risks, they are mostly because of few projects or good luck. The stock issuance and underwriting business has been almost risk-free for many years. It's basically blank. Risk management in foreign investment banks has always been the top priority in corporate management. Reasonable and scientific control of investment bank risks not only helps the company's long-term survival and development, but also avoids unnecessary investment and waste and directly generates economy. The level of efficiency and risk control ability will directly reflect the level of the company's comprehensive competitiveness.

1. Establish the concept of risk management. In the next few years, China's stock market will eliminate bubbles. Whether the Chinese stock market squeezes out the bubble through a soft landing or a hard landing, a large number of participants (listed companies, intermediaries, investors) will pay a heavy price. Supervisory departments have their embarrassing situation, but their policy trends can only develop in the direction of standardization and marketization. It can be predicted that in the next 3-5 years, a large number of securities companies that do not understand the capital market and have weak risk control capabilities will be unable to pass the capital market test, and it is inevitable to exit the capital market arena. Changes in the market environment will also lead to a change in the management philosophy of investment banks. "Who can live long" will become a more important issue than "who can live well". The risk control, prevention, and resolution capabilities of investment banking business have become a top priority for the life and death of securities firms, and have become an important indicator of the comprehensive competitive advantages of securities firms.

2. Risk control in investment banking business. Now investment banks have set up quality control departments, which are responsible for formulating the company's investment banking business operation procedures; responsible for project establishment, planning, and review of project materials to be reported. (1) In the project establishment, the project is screened based on the guidelines of the relevant project establishment standards, and strives to improve the quality of the business and reduce the risks to the bud state. (2) Project tracking phase. Keep abreast of the progress of the project at any time, and find out problems in time with the project contractor to resolve them. (3) The kernel phase. Improve the kernel program. The kernel of the project is first reviewed by the quality control department, and then submitted to the kernel meeting for discussion, and external lawyers and accountants are invited to participate in the discussion to improve the quality and effectiveness of the kernel.

3. Strengthen employees' awareness of risk control. It can be seen from the risk cases of foreign securities companies that human factors always play a very important role in fatal risk events. Although people can formulate various rules and regulations and operating procedures to prevent and control risks, introduce hedging tools to reduce market risks, implement strict review procedures to reduce risks, and establish effective monitoring mechanisms to avoid operational risks, but all these are Artificially set. Since people can create them, they can use them in the opposite direction. Therefore, while vigorously advocating the establishment of a risk management system and improving the risk monitoring mechanism, strengthening employees' ethics and codes of conduct and improving their professional quality are the key factors for the success of risk management and internal control. In the process of implementing risk management and internal control, it is also necessary and important to effectively exert or restrain man-made factors.