Research On The Adjustment Of US Investment Banking Business After The Financial Crisis

The financial crisis triggered by the subprime mortgage crisis has caused a great impact on the economy and society of the United States and the world.U.S.investment banks bear great responsibility for the outbreak of financial risks.The high leverage and high-risk business development methods of investment banks,the high complexity of asset securitization products and the risk diversification mechanism are the main factors leading to the emergence and rapid spread of the subprime mortgage crisis.The securities industry is the largest component of the US financial sector,and investment banks are at the core of the securities industry and play an irreplaceable role in the capital market.After the crisis broke out,the Obama administration promulgated the Dodd-Frank Act in 2010,including the Volcker Law,which stripped investment banks for short-term proprietary business,prohibited investment banks from owning hedge funds,and provided incentives for investment banks The system is strictly restricted.The Basel Committee also promulgated the "Basel III" in 2010,which raised the requirements for the core capital ratio of investment banks.Although large US investment banks were hit hard by the financial crisis and their businesses were subject to certain restrictions and supervision,the profitability and market value of US investment banks recovered or even exceeded their pre-crisis levels in a very short period of time.The rapid recovery of US investment banks is inseparable from business adjustments.People can't help thinking about how quickly the US investment banking business has adjusted?This article uses a large number of domestic and foreign documents,especially the United States,financial statements of American investment banks and other statistical data,using Marxist economic theories and Western modern capital market theories,using macro and micro,theories and cases,qualitative and quantitative analysis,etc.The research method is to systematically research and analyze the business adjustments of American investment banks after the financial crisis,and explore its experience and lessons,in the hope of providing reference and reference for the healthy development of my country's investment banking industry.In the research on US investment banking business,this article abandons the traditional investment banking business classification method of traditional business,extended business and innovative business,but classifies investment banking business according to the division of business departments commonly practiced by major US investment banks,Namely: investment banking department business,transaction department business and asset management department business.This business classification method based on business model and actual operation department is more in line with the development trend of investment banking business,is more conducive to the research on the connection between investment banking businesses,and helps to better start from the actual work of investment banks To study the situation and characteristics of various businesses,including income sources,risk composition,etc.,can better avoid the disconnection between problem research and actual operation,and facilitate understanding and solving practical problems.According to the major events in the development of investment bank business,the development history of the US investment bank for more than 200 years can be divided into three stages:(1)From1783 to 1929.Investment bank developed from the germination to the first peak stage,the United States Investment Bank formed a more complete business system and business model from chaotic and disorderly operations;(2)1929 to 1981.After the Great Depression,the implementation of the “Grass—Steagall Act” established a separate business model for US commercial banks and investment banks.The US government gradually strengthened the supervision of investment banks under the pressure of external factors such as floating commission systems.American Investment Bank began to try to expand the business scope,looking for new profit growth points;(3)1982 to the present.Under the competitive pressure of US commercial banks constantly trying to operate investment banking business and international comprehensive banks,the United States promulgated the “Financial Services Modernization Act” in 1999,abolishing the “Grass—Steagall Act” and prohibiting commercial banks due to restrictions in the field of investment banking,the US investment banking industry has once again entered mixed operation.During this period,the US investment bank gradually transformed from a traditional channel intermediary to a capital intermediary,shifting its business focus to the seller's business,realizing rapid business growth and capital accumulation.After the crisis broke out in 2007,the US investment banking business was adjusted again.The adjustment of US investment banking business after the financial crisis was influenced by internal and external factors.From the perspective of external factors,it is mainly reflected in the sluggish macroeconomic environment,sluggish real estate market,the Fed's long-term low interest rates,strict government monitoring policies,and the opportunities and challenges brought about by the European debt crisis.From the perspective of internal factors,it is mainly reflected in the investment banks' need to reverse large-scale losses and reduce risks.In terms of theoretical foundation,the blind expansion of U.S.investment banks deviates from the real economy,and business adjustments after the crisis will inevitably strengthen the connection with the real economy,focusing on the same track and rapid development with the real economy.The asset portfolio theory and efficient market hypothesis in the modern capital market theory promote the balanced development of large-scale investment banks in the United States and reduce the highly complex and hidden asset securitization derivatives business.In the research on the adjustment of the investment banking department of the US investment bank,this paper analyzes the financing business and merger and acquisition business in the investment banking department,and compares the business before the subprime crisis with the current business.Thepaper has itsown conclusion is that after the subprime mortgage crisis,the US investment bank strengthened its traditional business in financing business,and the proportion of profits in the securities underwriting business rebounded.The concentration of the securities underwriting business industry in the US market declined slightly,the dependence of the US investment bank's securities underwriting business on the US mainland has increased.Traditional business and local business play a more important role in the business structure of the US investment bank.In terms of M&A business,the M&A and restructuring business has been further subdivided and refined.The income and proportion of M&A business have increased.In recent years,the new wave of M&A has boosted the U.S.investment bank's M&A business and maintained a continuous growth trend.In the research of the business adjustment of the transaction department of the US investment bank,the paper believes that after entering the 21 st century,the transaction department has become the most important source of income for the US investment bank.The business of the trading department according to the capital owner can be divided into two types: customer transactions and self-employed business,and according to the business entity can be divided into equity transactions and fixed income,currency and commodity transactions.The paper makes an in-depth analysis of the nature,characteristics and main contents of the two businesses.It also compares the business composition and income changes of the trading department before and after the crisis.The paper supposes that due to the divestiture of short-term selfoperated business,the transaction revenue and the proportion of total revenue of large investment banks such as Goldman Sachs declined significantly.Among them,investment banks turned to equity investment in self-operated business Goldman Sachs and Morgan Stanley chose different strategies in the choice of business adjustment direction of the trading department,which is also the focus of the analysis of these changes and their effects.In the research of the business adjustment of the asset management department of the US investment bank,the paper believes that the investment direction of the asset management business is diverse,involving the securities market,bond market,real estate,etc.,which can be mainly divided into asset management,wealth management,and capital market research services for institutions and individual clients.After the financial crisis,the asset management department became the main development direction of the US investment banking business.This department accounted for a significant increase in the total income of large investment banks in the United States,and the total amount managed by investment banks increased significantly duringthisperiod.The client group of the asset management department business of large US investment banks has also undergone significant changes.The main major customers before the crisis were institutional investors and high-net-worth individuals.After the crisis,US investment banks began to strengthen the asset management retail business toprovide services for more individuals.Thepaper analyzes the effects and problems of US investment banking business adjustment from a macro and micro perspective.The macro effect is mainly reflected in suchways:it is conducive to the stability of the stock market;it promotes the recovery of the US economy;and reduces the risk of the outbreak of the financial crisis system.However,in the macro aspect,there are still problems such as “too bigto fail”,credit default risk and potential risk.The microscopic effect is mainly reflected in suchways: it can make the US investment bank quickly get rid of the impact of the financial crisis;the investment bank's operating risk is significantly reduced.However,at the micro level,there are also problems such as declining profitability,employee incentive mechanisms at the expense of system risks,and falling asset turnover.Studying the adjustment of US investment banking business can provide an important reference for the development of Chinese investment banks and the improvement of the stability of the national financial system.Compared with the United States,China's investment banking industry has developed late,and there are still many spaces for improvement in terms of supporting measures such as enterprise size,business types,service scope,and supervision.China's securities companies,commercial banks and other institutions engaged in investment banking business should fully exploit China's huge market potential,expand its business scope,properly develop derivatives and financing services for SMEs,and improve capital market stratification and business differentiation reduce homogeneous competition.At the same time,government departments should properly guide mergers and acquisitions among securities companies to form large-scale companies with advantages in scale.