BANKING AND INVESTMENT - The Careers Service

THE CAREERS BANKING AND SERVICE INVESTMENT The financial services sector is a significant contributor to UK income and employment. It contributed some £63.bn in taxes during 2011, or 12.1% of all UK Government receipts, with more than two- thirds of this coming from the banking sector. Over a million people in Britain are employed in financial services, with almost half of these employed in banking. It is also one of the largest export industries in the UK. The UK is the leading centre for international banking, home to several of the largest global banks and conducting about a half of all European investment banking activity. The world’s financial system has gone through a severe crisis and as a result the

financial services landscape, and banking especially, is changing significantly. Significant reforms will be seen with the implementation of the recommendations from the Independent Commission on Banking (June 2012 white paper). Despite the crisis, at a graduate level employment is looking positive; the 2012 highfliers report shows demand for graduates in banking and finance up by 16% from 2011 – 2012. For investment banking specifically, growth continues at a steady level, with graduate hires up 12% from 2010 – 2011 and demand set to rise another 5% in 2012. The banking and investment sector is fast-moving and dynamic, it offers a huge variety of interesting roles in a broad range of organisations including retail banks, investment banks and wealth management firms. The sector is renowned for high salaries ranging from £25,000 - £50,000 with the most generous on offer from investment banks (average of £45,000). This reward however comes in exchange for hard work, a high level of responsibility and often long hours. W H A T T Y P E S O F J OB S A R E T H E R E ? Front Office roles are among the most competitive graduate positions, often with hundreds of applicants per position. There are a large range of front office roles available in banks and in deciding which business area would suit your profile most, you should carefully consider your strengths in and appetite for persuasion, risk-taking, analysis, working under pressure and research. Organisations such as Goldman Sachs have tools on their websites to help you decide where you might best fit. Front office roles include: • Investment Banking - Corporate finance • Investment Banking - Capital markets • Sales and trading • Private equity • Asset and private wealth management • Research • Structuring © Oxford University Careers Service, September 2012, www.careers.ox.ac.uk 1 Middle Office roles include: • Risk management • Compliance • Finance Back Office roles include: • Operations • Technology Investment Management – also known as fund management and asset management – is all about managing money, including investment in equities, fixed income, property and hedge funds, on behalf of clients. Asset managers are responsible for achieving this, and are typically called fund managers in the UK or portfolio managers in the US. Asset management is often referred to as the ‘buy side’, because it buys investment products with the aim of making profit for investors. Research...

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Collective Investment Funds - Office of the Comptroller of the Currency

AM-CIF Comptroller of the Currency Administrator of National Banks Collective Investment Funds Comptroller’s Handbook October 2005 AM Asset Management As of January 6, 2012, this guidance applies to federal savings associations in addition to national banks.* Collective Investment Funds Table of Contents Overview Background.............................................................................................1 Regulatory Overview...............................................................................2 12 CFR 9.18.......................................................................................3 Federal Tax Laws................................................................................4 Federal Securities Laws ......................................................................5 ERISA .................................................................................................6 Risks …………..........................................................................................7 Risk Management..................................................................................10 Board and Management Supervision ................................................10 Policies and Procedures ...................................................................12 Fund Administration.........................................................................12 Examination Procedures Planning Activities.................................................................................21 Quantity of Risk ....................................................................................24 Quality of Risk Management .................................................................27 Examination Conclusions ......................................................................41 Appendices A. Types of Collective Investment Funds...............................................44 B. 12 CFR 9.18(b), Administrative Requirements ..................................48 C. Collective Investment Funds and the ’40 Act ....................................59 D. Specialized Collective Investment Funds .........................................61 References ...............................................................................................63

Comptroller’s Handbook i Collective Investment Funds As of January 6, 2012, this guidance applies to federal savings associations in addition to national banks.* Collective Investment Funds Overview This booklet provides an overview of collective investment funds (CIFs), outlines their associated risks, and establishes a framework for managing those risks. It applies to CIFs administered by a national bank pursuant to 12 CFR 9.18 and supplements the “Investment Management Services” booklet of the Comptroller’s Handbook. This booklet also provides expanded examination procedures that supplement the minimum core assessment standards in the “Large Bank Supervision” and “Community Bank Supervision” booklets of the Comptroller’s Handbook. The use of the expanded procedures is optional; they are designed to be used when the risks posed by a CIF warrant review beyond the standard core assessment. Background A CIF is a bank-administered trust that holds commingled assets that meet specific criteria established by 12 CFR 9.18. Each CIF is established under a “plan” that details the terms under which the bank manages and administers the fund’s assets. The bank acts as a fiduciary for the CIF and holds legal title to the fund’s assets. Participants in a CIF are the beneficial owners of the fund’s assets. While each participant owns an undivided interest in the aggregate assets of a CIF, a participant does not directly own any specific asset held by a CIF. CIFs are designed to enhance investment management by combining assets from different accounts into a single fund with a specific investment strategy. By commingling, or pooling, fiduciary assets, a bank may lower the operational and administrative expenses associated with investing fiduciary assets and enhance risk management and investment performance for the participating accounts. A fiduciary account’s investment in a CIF is called a “participating interest.” Like other fiduciary assets, participating interests in a CIF are not FDIC- insured and are not subject to potential claims by a bank’s creditors. In addition, a participating interest in a CIF cannot be pledged or otherwise encumbered in favor of a third party. Many banks establish CIFs as an investment vehicle for their smaller personal trusts or for employee benefit (EB) accounts. By using a CIF, a smaller trust may obtain investment diversification that would otherwise be difficult to Comptroller’s Handbook 1 Collective Investment Funds As of January 6, 2012, this guidance applies to federal savings associations in addition to national banks.* achieve. From the bank’s perspective,...

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Small Business Investment Companies

Comptroller of the Currency A dministrator of National Banks US Department of the Treasury Community Developments SEPTEMBER 2012 Community Affairs Department Insights Small Business Investment Companies: An Investment Option for Banks Abstract This Insights report describes the Small Business Investment Company (SBIC), its role in capital markets, and how banks can use SBICs to expand their small-business finance activities. The report also outlines risks and regulatory considerations of SBIC investments and explains how these investments may receive consideration under the Community Reinvestment Act (CRA). The information presented in this report was obtained from a variety of sources, including bankers, nonsupervised financial intermediaries, SBIC general partners, trade groups, the Office of Investment at the Small Business Administration (SBA), and other parties

involved with SBICs. Appendix E contains a resource directory of additional information on the SBIC program. I. What Are Small Business Investment Companies? SBICs are privately owned and managed investment funds licensed and regulated by the SBA. The SBIC license allows SBICs to employ private capital and funds borrowed at low cost using SBA-guaranteed securities, called debentures, to make investments 1 in qualifying small businesses and smaller enterprises as defined by SBA regulations. The SBIC program was created in 1958 to stimulate growth in America’s small-business sector by supplementing the long-term debt and private equity capital available to small businesses. The American Recovery and Reinvestment Act of 2009 enhanced the program 2 by increasing the maximum funding available to SBICs and, in turn, to small businesses. SBICs generally are formed as limited partnerships, with the fund managers acting as the general partner (GP). The limited partners (LP), who supply the majority of the private funding, are typically institutional investors, including banks, and high-net-worth individual investors. SBICs invest in small businesses that range in size from $1 million to $100 million in annual revenues but fulfill the regulatory small-business size requirements, including having less than $18 million in net worth and posting net 1 SBICs are required to dedicate 25 percent of their investment dollars to smaller enterprises. Definitions of a small business and a smaller enterprise can be found in 13 CFR 121.301(c) as well as parts 121.101, 121.103, and 107.710. See www.access.gpo.gov/nara/cfr/waisidx_09/13cfr107_09.html. 2 For more information on the impact of the American Recovery and Reinvestment Act, see “Economic Development Programs: Providing Lending Opportunities for Banks” in the OCC’s Community Developments Investments Spring 2010 newsletter, at www.occ.gov/static/community-affairs/community-developments-investments/spring10/cde10spring_index. htm. revenue of less than $6 million annually. On average, SBICs invest between $1 million and $10 million per investment, although some SBICs go outside this range. As of July 31, 2012, there were 299 licensed SBICs using private capital and SBA- 3 guaranteed securities of more than $18 billion. In fiscal year (FY) 2011, the SBA issued $1.82 billion in new SBIC commitments and SBICs invested $2.83 billion in 1,339 small 4 businesses that created an estimated 56,211 jobs. SBICs have invested in a variety of industries. From FY 2007 through FY 2011, nearly 20 percent of SBICs’ investments were in the manufacturing sector. Next in volume were investments in consumer-related businesses, transportation, and business services. Additionally, the SBIC portfolio is geographically...

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The Role of Investment Banking for the German Economy

The Role of Investment Banking for the German Economy Final Report for Deutsche Bank AG, Frankfurt/Main Michael Schröder, Mariela Borell, Reint Gropp, Zwetelina Iliewa, Lena Jaroszek, Gunnar Lang, Sandra Schmidt, and Karl Trela Dokumentation Nr. 12-01 ISSN 1611-681X The Role of Investment Banking for the German Economy Final Report for Deutsche Bank AG, Frankfurt/Main Michael Schröder, Mariela Borell, Reint Gropp, Zwetelina Iliewa, Lena Jaroszek, Gunnar Lang, Sandra Schmidt, and Karl Trela Dokumentation Nr. 12-01 Laden Sie diese ZEW Dokumentation von unserem ftp-Server: http://ftp.zew.de/pub/zew-docs/docus/dokumentation1201.pdf © Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW), Mannheim The Role of Investment Banking for the German Economy Final Report for Deutsche Bank AG, Frankfurt/Main Michael Schröder, Mariela Borell, Reint Gropp, Zwetelina Iliewa, Lena Jaroszek, Gunnar Lang, Sandra

Schmidt, and Karl Trela Mannheim, October 14, 2011 Zentrum für Europäische Wirtschaftsforschung (ZEW) © ZEW 2012 Contact: Prof. Dr. Michael Schröder Centre for European Economic Research (ZEW) Research Department International Finance and Financial Management L 7, 1 · 68161 Mannheim · Germany www.zew.de · www.zew.eu Tel.: +49-621-1235-140 Fax: +49-621-1235-223 E-mail: schroeder@zew.de Project Team: Prof. Dr. Michael Schröder, ZEW (Project Coordinator) Dr. Mariela Borell, ZEW Prof. Reint Gropp, PhD, European Business School and ZEW Zwetelina Iliewa, ZEW Lena Jaroszek, ZEW Gunnar Lang, ZEW Dr. Sandra Schmidt, ZEW Karl Trela, ZEW Research Assistance: Thorsten Franz, Thomas Wolf ISSN 1611-681X The Role of Investment Banking for the German Economy i CONTENT FIGURES ....................................................................................................................... III TABLES ......................................................................................................................... VI 1 INTRODUCTION AND EXECUTIVE SUMMARY ......................................................... 8 1.1 MOTIVATION AND SCOPE OF THE STUDY ....................................................................... 8 1.2 OUTLINE OF THE STUDY ............................................................................................. 8 2 INVESTMENT BANKING AND GROWTH ................................................................. 11 2.1 INVESTMENT BANKING DEFINITION ............................................................................ 11 2.2 FINANCE AND GROWTH LITERATURE .......................................................................... 16 2.2.1 Theoretical Literature ................................................................................... 16 2.2.2 Empirical Literature ...................................................................................... 18 3 EMPIRICAL ANALYSIS OF THE CONTRIBUTIONS OF INVESTMENT BANKING TO THE ECONOMY .................................................................................................................... 24 3.1 FINANCIAL ADVISORY WITH FOCUS ON M&A ADVISORY ................................................. 25 3.1.1 The M&A Market in Germany ....................................................................... 26 3.1.2 Company Survey on the Corporate Use of M&A Advisory ............................ 30 3.1.3 Impact of M&A on profitability and productivity .......................................... 42 3.1.3.1 Literature Review ..................................................................................... 42 3.1.3.2 Descriptive analysis .................................................................................. 47 3.1.3.3 Empirical analysis ..................................................................................... 50 3.1.3.4 Conclusion ................................................................................................ 51 3.2 PRIMARY MARKET .................................................................................................. 52 3.2.1 Empirical results on the relationhip between credit and GDP ...................... 52 3.2.2 Securitized products and their relationship to credit and GDP growth ........ 57 3.2.3 Equity and Debt Financing ............................................................................ 61 3.2.4 Company Survey on Capital Market Access .................................................. 64 3.3 DERIVATIVES ......................................................................................................... 72 3.3.1 Descriptive Analysis of the Derivatives Market ............................................ 72 3.3.2 Literature Review on Role of Derivatives for the Economy ........................... 80 3.3.3 Literature Review on Exchange Rate Uncertainty and Trade ....................... 83 3.3.4 Company Survey on Corporate Usage of Derivatives ................................... 89 3.4 INVESTMENT BANKS AND SYSTEMIC RISK SPILLOVERS .................................................. 106 3.4.1 Methodology .............................................................................................. 107 3.4.2 Data ............................................................................................................ 109 3.4.3 Results ........................................................................................................ 110 3.4.4 Concluding Remarks................................................................................... 121 The Role of Investment Banking for the German Economy ii 4 IMPLICATIONS OF REGULATORY CHANGES ON INVESTMENT BANKS .................. 123 4.1 INTRODUCTION .................................................................................................... 123 4.2 EXPERT ESTIMATES ON THE IMPACT OF REGULATORY MEASURES ..................................... 124 4.3 FROM BASEL II TO BASEL III AND...

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Investment in Bank Premises Booklet

Investment in Bank Premises Comptroller’s Licensing Manual Washington, DC December 2005 Investment in Bank Premises Table of Contents Introduction............................................................................................................. 1 Multiple Transactions ................................................................................... 1 Key Policies............................................................................................................. 2 Decision Criteria........................................................................................... 2 Special Conditions........................................................................................ 2 Application and Notice............................................................................................ 3 After-the-Fact Notice..................................................................................... 3 Standard Processing...................................................................................... 4 Timing Considerations.................................................................................. 4 Specific Requirements ............................................................................................. 4 Investment in Real Estate .............................................................................. 4 Transactions with Insiders............................................................................. 5 Accounting ................................................................................................... 6 Appraisal ...................................................................................................... 6 Options to Purchase ..................................................................................... 6 Procedures............................................................................................................... 8 After-the-Fact Notice..................................................................................... 8 Application................................................................................................... 9 Glossary ................................................................................................................ 11 References............................................................................................................. 13 ii Investment in Bank Premises Introduction A national bank may hold property directly or invest in bank premises indirectly through a subsidiary, such as a bank premises corporation (that is, by owning the stock, bonds, or debentures

of such a corporation). Loans to a bank premises corporation or upon the security of its stock also are considered to be investments in bank premises. A bank premises corporation is a statutory subsidiary under 12 USC 371d, not an operating subsidiary. Accordingly, a national bank may establish a subsidiary to hold bank premises in another corporate entity without seeking the Comptroller of the Currency’s (OCC’s) prior approval, subject to capital limitations. Any bank having a composite CAMELS rating of 1 or 2 that also is well capitalized, as defined in 12 CFR 6.4(b)(1), may make an aggregate investment in bank premises of up to 150 percent of its capital and surplus without OCC’s prior approval. However, the OCC does require an after-the-fact notice in certain circumstances (see After-the-Fact Notice section for complete discussion). A bank that intends to invest an amount greater than its capital stock in its bank premises, directly or indirectly, must file and obtain the OCC’s prior approval, unless it satisfies certain requirements (see the Exception section). This booklet contains policies and procedures to guide a bank in requesting an additional investment in bank premises. Investments in real estate necessary for the transaction of the bank’s banking business must comply with 12 USC 29 and 12 CFR 7.100. A bank should contact the appropriate supervisory office or district counsel if it has questions whether or not an investment in real estate would comply. (Refer to Investment in Real Estate section for details.) This booklet should be used together with other booklets of the Comptroller’s Licensing Manual; for example, the “General Policies and Procedures” booklet for a discussion of general filing instructions. Users also should refer to the “Business Combinations” and “Branches and Relocations” booklets for additional discussion of filing instructions and procedures, if an investment in bank premises is related to one of those filings. There is also a step-by-step procedures section for applicants and the OCC to follow and a glossary of the terms used in this booklet. The reference section includes applicable laws, regulations, and OCC issuances to assist applicants in completing the filing process. Throughout the booklet, there are hyperlinks to other related booklets and to filing samples. Multiple Transactions 1 A bank may submit a request for an investment in bank premises with an application for a business combination (12 CFR 5.33), branch or branch relocation (12 CFR 5.30), change in main...

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SBA's Small Business Investment Company Program

SBA’s Small Business Investment Company Program Created in 1958, the Small Business Investment There are two types of SBICs: leveraged, which Company (SBIC) program is designed to use SBA leverage in the form of SBA-backed stimulate growth in America’s small businesses borrowings; and unleveraged, which do not. The by supplementing the long-term debt and private majority of active SBICs are leveraged. equity capital available to them. The American Unleveraged SBICs, including bank-owned Recovery and Reinvestment Act of 2009 SBICs, make up about 15 percent of active enhanced the program by increasing the SBICs. maximum funding available to SBICs and, in turn, to small businesses. What Are the Benefits of Investing in SBICs for Banks? What Is a Small Business Investment

Company? National banks and federal savings associations (collectively, banks) may be interested in SBICs are privately owned and managed investing in SBICs for the following reasons: investment funds licensed and regulated by the U.S. Small Business Administration (SBA). The • Investment performance: The main SBIC license allows SBICs to employ private advantage of leveraged SBIC funds is their capital and funds borrowed at low cost using potential for producing competitive returns, SBA-guaranteed securities to make investments compared with similar classes of investment in qualifying small businesses and smaller funds. This is a direct result of employing enterprises as defined by SBA regulations. low-cost, SBA-guaranteed debentures to supplement the funds’ private capital. SBICs generally are formed as limited partnerships, with the fund managers acting as • Community Reinvestment Act (CRA) the general partner. The limited partners, who consideration: Investments in SBICs meet supply the majority of the private funding, are the definition of qualified investments under typically institutional investors, including banks, the CRA. and high-net-worth individual investors. SBICs invest in small businesses that fulfill the • Volcker rule exemption: SBICs are regulatory small-business size requirements, exempted from the Volcker rule, which including having less than $18 million in net generally prohibits “banking entities” from worth and posting net revenue of less than engaging in proprietary trading and $6 million annually. On average, SBICs invest investing in hedge funds or private equity between $1 million and $10 million for each funds. investment, although some SBICs go outside this range. January 2013 1 Office of the Comptroller of the Currency • Small-business development What Are the Key Risks of Investing opportunities: When investing in an SBIC, in SBICs? many banks build mutually beneficial financial relationships with companies Investments in SBICs have risks similar to those included in the SBIC’s investment portfolio. in other types of private investment firms. These risks can be mitigated by performing proper due What Are the Regulatory diligence on the SBIC funds being considered Considerations of Investing in SBICs? for investment. The following are key issues to consider in any risk management strategy Banks may make investments in SBICs using associated with investing in SBICs: one or more of the authorities discussed below: • Loss of principal: Loss of principal is a risk • Small Business Investment Act: Banks of investing in small businesses. Investments have authority under the Small Business in SBICs, therefore, are long-term in nature Investment...

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Analyzing and Investing in Community Bank Stocks

ANALYZING AND INVESTING IN COMMUNITY BANK STOCKS David B. Moore ANALYZING AND INVESTING IN COMMUNITY BANK STOCKS David B. Moore Icarus Publishing Copyright © 2005 by David B. Moore All rights reserved under International and Pan-American Copyright Conventions. CONTENTS Introduction & Acknowledgements Chapter 1: Introduction to Banks and Bank Investing 1 Chapter 2: The Balance Sheet 9 Appendix I: Common Borrowing Arrangements 17 Appendix I: Trust Prefered Securities 23 Chapter 3: The Income Statement 25 Chapter 4: Aset/Liability Structure 35 Chapter 5: Asset Quality and Reserve Coverage 43 Appendix III: Asset Quality and Economic Cycles 52 Chapter 6: Acounting Shenanigans 5 Appendix IV: Gain on Sale Accounting – A Primer 63 Chapter 7: Regulatory Environment 69 Appendix V: A Brief

History of Major Banking Legislation 76 Chapter 8: Bank Acquisitions 101 81 Appendix VI: Understanding Reflexivity 98 Chapter 9: Valuing Bank Stocks 101 Appendix VII: A Valuation Conundrum – Book Value vs. Earnings 124 Chapter 10: Common Investment Strategies 127 Chapter 11: Case Studies 143 Research Reports: Community First Bankshares, Inc. CNB Bancshares, Inc. Hamilton Bancorp, Inc. Appendix VIII: The Savings & Loan Crisis 205 Glossary of Terms 209 Footnotes 221 References 225 About the Author 227 INTRODUCTION & ACKNOWLEDGEMENTS Although the audience for a book on investing in community bank stocks is limited by the very nature of its somewhat narrow and obscure subject matter, I decided to write one anyway. Why? Clearly I’m a glutton for punishment. To describe community bank analysis as a dry topic would be an understatement, to say the least. So, with that said, let me address a few issues about the book itself. First, this is a book about community banks and thrifts, which I define as those depositories with less than $15 billion in assets. If you want to know more about how to analyze larger banks like Bank of America, JP Morgan or Northern Trust, you’re reading the wrong book. Second, use of the terms “bank,” “institution” and “depository” throughout this book also refers to thrifts (that is, Savings & Loans), unless specifically noted to the contrary. Third, almost all of the italicized terms – where italics are not used for emphasis – are either defined in the text or in the glossary. Finally, you will notice that there is no chapter on a bank’s statement of cash flows. While all banks, obviously, have a cash flow statement, I chose not to spend any time on this subject. Unlike most industrial companies, banks don’t have meaningful amounts of depreciation and short-term receivables. Consequently, unless a bank is engaging in accounting shenanigans (as addressed in Chapter 6), its net income should be a close approximation of its operating cash flow. And there’s no great mystery about a bank’s investment and financing cash flows. So, rather than having a two-page chapter explaining the obvious, I just left analysis of the cash flow statement out of the book altogether. I encourage you to read the footnotes. I actually have little pride of authorship where specific ideas are concerned. In many respects, this book is a compilation of both my thoughts (primarily) and those of...

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