What are the two main functions of an investment bank?

Investment banks play a vital role in the financial system primarily through two main functions: helping companies raise capital and providing strategic advice.

When it comes to raising capital, investment banks assist companies in acquiring funds needed for expansion, operations, or projects. This can involve underwriting new debt or equity securities, facilitating initial public offerings (IPOs), or placing private investments. By connecting companies seeking funds with investors willing to provide them, investment banks help ensure that companies can access the necessary resources to grow and thrive.

In terms of strategic advice, investment banks offer insights and expertise on various financial transactions, including mergers and acquisitions, restructuring, and other significant corporate events. They guide companies through complex financial decisions, help evaluate the value of assets, and devise strategies to enhance shareholder value. This advisory role is crucial, especially during high-stakes transactions where informed decision-making can significantly impact a company’s success.

The options regarding regulatory functions and the creation of new financial products, while related to the broader finance industry, do not encapsulate the core functions of investment banks. Regulatory bodies oversee market integrity and compliance, while product creation is often a role of investment research or product development teams rather than a primary function of banks.