Question

Essay on 'Discuss the main differences between a commercial banks and investment banks balance sheet.

Answer 1

Main difference between commercial bank and investment bank balance sheet is that -

A. commercial banks will be having a large number of deposits in their hands whereas investment banks will not be having that much of deposits in their hands

B. Commercial banks are also having mostly stronger balance sheet and more risk weighted balance sheet than that of investment bankers.

C. investment bankers will be entering into a large number of hedging transactions which can be seen on their balance sheet whereas commercial banks are not entering into a large number of hedging transactions.

D. investment bankers are also holding a very large number of investment into other companies and securities which are related to share market whereas banks are generally having a lower amount of investment in these securities and shares.

E. commercial banks will be offering with very high amount of loans and investment banks are not offering with loans so it will not be reflected in the balance sheet

F. Investment bankers are having lot of income in form of underwriting commission whereas banks will be earning most of its short term income in form of net interest income.