Commercial and Investment Banking Essay Example | Topics and Well Written Essays - 2500 words

Commercial and Investment Banking - Essay ExampleLending relationships, peculiarly those that ar long-term associations make it simpler for small sized organizations to have access to outside funds. Owing to the unsafe nature of the small firms, it becomes very difficult for them to borrow funds if they lack add relationships with buzzwords. However, such diverseness of organizations predictably attempts to get access to further diversified sources of funds, after they have formed long-term lending associations with banks. Thus, it corporation be stated that the organizations preceding lending association with a bank enables it to gain admission to the public securities market. Furthermore, the association of the organization with a bank persists to play a all-important(a) role even when the organization is capable of issuing public securities. Nonetheless, when an organization diversifies its sources of funds, it has to face certain of import drawbacks. The funding diversif ication restricts the banks readiness to assist the organization when it faces financial distress. This restriction in the banks flexibility is true even when the organization had taken up only niggling values of public debt. In spite of everything, it can be conclusively stated that a well-behaved lending relationship with a bank augments the probability of fruitful negotiation when an organization encounters financial difficulties (Berlin, 1996). come 2 a) Kwan (2004) defines a large bank merger as the amalgamation of the operations of two banks, which ar huge in size and the merger provides a large geographic scope to the subsequently merge institute. In the recent years, the large bank mergers have been an indication of the process for creating an extensive nationwide banking franchise. b) The restrictive modifications in the 1990s have created immense opport social unities for the banks to pursue the overseas economies. The banks have benefitted in terms of economies of surmount as well as scope. Mergers have enabled the banks to provide the number of products and services and as a issuing, the unit price of production has reduced. Additionally, the expansion had created a circumstance where the shared expenses of providing two corresponding services are not more than the joint expenses of providing the two services separately. c) It is believed that mergers can increase the banks efficacy to diversify risk. Prior studies have implied that geographic spreading out would offer diversification advantages to a banking organization. This can be accomplished in the form decreased portfolio risk on the asset side, in growth to a decline in the funding risk on the liability side. Banks are likely to stumble these benefits as it spreads funding actions over a wider geographic region. Furthermore, studies have also indicated that product extension could result in diversification benefits. The benefits would be more distinguished amid the banking as well as the securities activities, while it would be less prominent in the activities between banking and insurance (Kwan & Laderman, 1999).