FINANCIAL INSTITUTIONS MANAGEMENT

INVESTMENT BANKING
Group 1
Nguyễn Lê Nhược Thuỷ - BAFNIU20115
Hoàng Nhi - BAFNIU20088
Nguyễn Lan Hoàng My - BAFNIU20075
Đào Nhật Hưng - BAFNIU20296
Trần Thị Hồng Phúc - BAFNIU20092

Lecturer: Dr Trinh Quoc Dat

 TABLE OF
CONTENT
Overview Case study

Risk of Investment Bank Investment Bank

Risk management in Vietnam

DEFINITION
A financial services company that acts as an intermediary in large

and complex financial transactions.

Usually involved when a startup company prepares for its launch

of an initial public offering (IPO) and when a corporation merges

with a competitor.

It also has a role as a broker or financial adviser for large

institutional clients.
KEY ACTIVITIES
1. INVESTMENT BANKING
Underwriting and distributing new issues of debt and equity.
Primary: the first-time issues of companies (IPOs)
Secondary: the new issues of seasoned firms whose debt or equity
is already trading
Evaluate a company and determine a reasonable price at which to
offer stock shares.
2. MARKET MAKING
Market making can involve either agency or

principal transactions:

Agency transactions: two-way transactions on

behalf of customers

Principal transactions: seeks for profit from the

price movements of securities.

3. MERGERS AND ACQUISITIONS

Frequently involved in providing advice or

assisting in mergers and acquisitions.
Assist in finding merger partners,
underwriting new securities to be issued by
the merged firms, assessing the value of
target firms, and recommending terms of the
merger agreement.
4. ASSET MANAGEMENT
Manage assets for clients, like managing investment portfolios, providing
research and financial market analysis, and making investment decisions on
behalf of clients based on the client’s objective, risk appetite, investment
amount, and period.

5. BACK-OFFICE AND OTHER SERVICES

Include custody and escrow services, clearance and settlement services, and
research and other advisory services.
Traditional bank services areas such as small business lending and the trading
of loans.-> acts as an agent for a fee.
ROLES OF INVESTMENT BANKS
Broker: Connect buyers and sellers in the capital market together,
thereby receiving a fee and commission for their efforts.
Investor and market maker: Transfer investment products from
sellers to buyers, and loans to borrowers.
Entrustment: Perform transactions and manage investments on
behalf of customers.
Financial advisors: Provide financial advice on securities, M&A,
strategic planning, alliance establishment, and risk management.
 Investment Banks Commercial Banks

Consumers, small to medium-sized

Clients Investors, corporations, government.
businesses

Assisting institutional investors and Deposit, mortgage loans, and

Primary services
corporations with financial needs lending loans.

Underwriting, M&A, asset

Internet banking, mobile banking,
Secondary services management, broker services, financial
credit cards
advisory services

Difference between lending and

Profits Fees charged on different services
deposit rates

Risk Level High Low

Connected with Perforamnce of financial markets Credit demand

MAJOR RISKS OF INVESTMENT BANKS
Adverse changes in the market such as changes in
Market risk
interest rates, exchange rates, etc.

Credit risk Nonperformance or untimely performance by the

counterparty or clients

Operational risk Ineffective internal processes or unexpected

external events

Liquidity risk Unable to meet its short-term obligations

due to a shortage of liquid assets
OTHER RISKS OF INVESTMENT BANKS

Legal risk
Reputation risk
Negative consequences
Negative public opinion due to non-adherence to
leading to loss of legal and regulatory
reputation standards or litigation
 THE RISKS MANAGEMENT
Market risk can be controlled through diversification,
hedging, and risk monitoring
Credit risk can be managed through credit analysis,
diversification, and credit risk transfer
Operational risk management involves recognizing,
evaluating, and managing risks in daily operations
 THE RISKS MANAGEMENT (CONT.)
Liquidity risk management involves ensuring a company can meet
its financial obligations and balance cash inflows and outflows
Reputation risk can be managed by promoting ethical behavior,
conducting compliance reviews, and having crisis management
plans
Legal risk management is applying rules and processes to
guarantee compliance with laws and regulations while mitigating
any potential losses caused by noncompliance or litigation
2 FAMOUS SCANDALS
ABOUT INVESTMENT BANK
Credit Suisse
Lehman Brothers

NEXT SLIDE
Founded and based in Switzerland
A global investment bank and financial services firm
As of the end of 2021: Credit Suisse had assets under management of 1.6
trillion CHF => the second-largest bank in Switzerland after UBS.
Beginning in 2023: Credit Suisse was organized into five divisions (Wealth
Management, Swiss Bank, Asset Management, Investment Bank, and Capital
Release Unit.)
March 2023: it was collapsed and was bought by rival UBS for 3 billion CHF
WHAT CAUSED
THE COLLAPSE OF
CREDIT SUISSE?
Despite its long history, Credit Suisse was
plagued by a series of scandals, management
shifts, and significant losses in recent years.
 Time Events

2019 and Credit Suisse faces a spying scandal regarding an outgoing wealth management executive;
early 2020 then-CEO Tidjane Thiam resigns.

Archegos Capital and Greensill Capital collapse, leading to $1 billion in losses for Credit
2021
Suisse and another management shake-up.

January Chairman Antonio Horta-Osorio resigns from the company following news that he broke
2022 COVID-19 quarantine regulations.

July and
Rumor circulates that Credit Suisse faces impending failure, prompting clients to pull about
August
2022
$119 billion in funds in the last quarter of the year.

January Credit Suisse says it will borrow up to $54 billion to shore up liquidity, but top backer Saudi
2023 National Bank says it will not give money because of regulatory issues.

U.S. institutions Silicon Valley Bank fail, setting the global financial system on edge⇒ sent
March
2023
fear throughout the global banking system ⇒ Switzerland’s executive branch votes to
allow the takeover without shareholder approval
 REASONS TO COLLAPSE
CREDIT SUISSE HAD TO DEAL WITH OPERATIONAL RISK, REHULATION RISK, AND
LEGAL RISK. ALL OF THEM LEAD TO A DANGEROUS RISK - LIQUIDITY RISK

The bank had failed to “effectively manage risk”

The bank has a failure of regulatory culture which can be seen
from changing top management many times.
The collapse of its reputation in the eyes of its customers.
IMPACT OF COLLAPSE
Impact on Switzerland’s financial reputation, could leave Swiss
citizens in and out of the banking industry devastated
The collapse of Credit Suisse creates an uncertainty future for
its 50,000 employees
The country’s reputation for banking stability may have been
shaken because now, Swissland just has single national champion in
banking
primarily shows special purpose entities, and obligations and liabilities
under variable interests in unconsolidated entities that provide
financing, liquidity, credit and other support.
 OVERVIEW
A global financial services firm that provided
various services such as investment banking,
trading, investment management and etc.
One of the largest investment banks in the
United States until 2008, when it declared
bankruptcy
Its failure was largely caused and
accelerated by the subprime mortgage crisis
WHAT CAUSED THE
COLLAPSE OF
LEHMAN BROTHERS?
There were several reasons that
led to Lehman's downfall.
 REASONS
Subprime mortgage exposure: Invest heavily
in the subprime mortgage market, which was
already showing signs of trouble by 2007.
Over-leveraging: Borrow heavily to invest in
the subprime mortgage market and other
risky assets, leading to excessive leverage and
a lack of liquidity.
Lack of diversification: Depend on its
investment banking business and lacked
diversification into other areas, such as retail
banking.
 REASONS
Accounting irregularities: Be accused of accounting
irregularities and using "Repo 105" transactions to manipulate
its balance sheet and make its financial position look stronger
than it actually was.
Failure of regulators to adequately monitor the investment
bank's activities and to prevent its collapse
Loss of confidence: investors lost confidence in the firm and
began to withdraw their money, leading to a liquidity crisis.
Inadequate risk management: Have inadequate risk
management practices in place, which made it difficult to
identify and manage the risks associated with its investments.
IMPACT OF THE COLLAPSE
Create a massive impact on the global financial system and
the world economy which lead to a severe credit crunch, and
that resulted in the freezing of credit markets and reduced
lending to individuals and businesses -> caused a recession,
rising unemployment, and a decrease in economic growth.
Contributed to a loss of trust and confidence in the banking
system and financial institutions.
AFTER THE
BANKRUPTCY FILING
Barclays acquired some of Lehman's assets,
including its North American investment banking
and capital markets businesses, as well as its New
York headquarters building.
However, the sale did not go through, and
Lehman's businesses were sold off in pieces to
various other financial institutions.
 OFF-BALANCE SHEET

COMPANY REVENUE
IN 2022

=> Lehman Brothers' off-balance sheet activities were complex and often involved highly
leveraged structures that allowed it to take on more risk than would have been possible
through its on-balance sheet activities alone. These off-balance sheet activities were a
contributing factor to the company's eventual collapse.
 LESSONS FOR OTHER
Importance of risk The role of regulators
management The need for coordinated
Need for transparency global action
The danger of excessive
leverage
=> Serve as a reminder that even the most established and seemingly secure
institutions are not immune to failure. It is crucial for investors and stakeholders to
continuously monitor the financial health and stability of institutions to identify
potential risks and take appropriate measures to mitigate them.
INVESTMENT BANK
IN VIETNAM
Considerable potential for growth for
investment banking service

NEXT SLIDE
 POTENTIAL FOR GROWTH FOR
INVESTMENT BANKING
~ The Vietnamese government has taken steps to encourage the
development of the capital market.
Relaxing foreign ownership restrictions for public companies,
Making efforts to streamline the IPO process for newly-listed firms
Taking steps to improve corporate governance standards
=> Increase investor confidence in Vietnam's financial markets.
~ A rise in interest from international investment banks looking to expand
into Vietnam.
 POTENTIAL FOR GROWTH FOR
INVESTMENT BANKING
~ The Vietnamese government has been actively working to privatize and
divest state-owned enterprises
~ The main portion of the work for investment banking service in Vietnam is:
IPOs
M&A deals
=> Creating new opportunities for investment banking service to provide
advisory services
 NOTABLE SECURITIES
COMPANIES HAVE
INVESTMENT BANKING
SERVICE IN VIETNAM
 REFERENCE
Managing risks in investment banking. Investment Banking Council of America. (2021, March 5).
Retrieved April 14, 2023, from https://www.investmentbankingcouncil.org/blog/managing-risks-in-
investment-banking
Hayes, A. (2023, March 9). Market risk definition: How to deal with systematic risk. Investopedia.
Retrieved April 14, 2023, from https://www.investopedia.com/terms/m/marketrisk.asp
The Investopedia Team. (2023, April 4). Credit risk: Definition, role of ratings, and examples.
Investopedia. Retrieved April 14, 2023, from https://www.investopedia.com/terms/c/creditrisk.asp
Segal, T. (2023, January 16). Operational Risk Overview, Importance, and Examples. Investopedia.
Retrieved April 14, 2023, from
https://www.investopedia.com/terms/o/operational_risk.asp#:~:text=Operational%20risk%20is%20th
e%20risk,business%20activity%20of%20a%20company.
Kenton, W. (2021, May 12). Understanding liquidity risk in banks and business, with examples.
Investopedia. Retrieved April 14, 2023, from https://www.investopedia.com/terms/l/liquidityrisk.asp
What is reputational risk for banks in 2022? LogicManager. (2022). Retrieved April 14, 2023, from
https://www.logicmanager.com/resources/finance-management/what-is-reputational-risk-for-banks/
Khandelwal, R. (2020, November 20). Understanding banks' market and reputational risks. Market
Realist. Retrieved April 14, 2023, from https://marketrealist.com/2019/10/understanding-banks-
market-and-reputational-risks/
Wallstreetmojo Team. (n.d.). Legal risk. WallStreetMojo. Retrieved April 14, 2023, from
https://www.wallstreetmojo.com/legal-risk/
 THANK YOU
FOR YOUR ATTENTION