The risks of investment banks do not include

The risks of investment banks do not include financial risks.

Investment bank risk refers to the fact that due to various uncertain factors, the actual income of an investment bank deviates from the expected income, thus suffering losses or reducing the possibility of gaining income. It can be said that risks run through all aspects of the investment bank, which is determined by its own business characteristics.

Investment banking business, whether it is traditional securities underwriting and securities trading business, or innovative businesses such as mergers and acquisitions, venture capital, corporate wealth management, and credit asset securitization, is accompanied by risks. Moreover, unlike commercial banks, investment banks have no deposit and loan business and no relatively stable source of income and profit.

Therefore, in order to hunt for higher profits, we must be brave in exploring all kinds of businesses with higher risks. However, high risk does not guarantee high return, so the axis of investment banking business management is not asset-liability ratio management, but the corresponding management of risk and return.

On the basis of the coordination of profitability, safety and liquidity, we should reasonably carry out businesses with low, medium and high risk levels (so that the income levels are different) and try our best to obtain the maximum income with the minimum comprehensive risk.

The inherent fragility of investment banks is mainly manifested in the following aspects.

1. High-debt operation of investment banks

High debt management of investment banks is characterized by high asset-liability ratio and relatively weak self-owned funds.

2. Institutional defects

In the specific operation process, due to the defects in operating system design, investment banks are facing great risks. This can be explained by principal-agent theory.

3. Competitive pressure

With the strengthening of financial integration and mixed operation, investment banks are facing great challenges from many domestic and foreign peers and other financial institutions to enter the investment banking industry, and the market competition is extremely fierce.

4. The contagiousness of financial risks

Compared with other industries, the financial industry is more prone to systemic instability. One of the important reasons is that there are close and complicated financial links between financial institutions, and financial risks are highly contagious, which makes single or partial financial difficulties easily evolve into global financial turmoil.