What exactly does Financing Division do in an investment bank?
- Is it part of Sales and Trading?
- How does it relate to other divisions?
- How respectable is it? Is it font-office, middle or back?
banks operate with leverage...they borrow money at low rates, and use that money to buy / short other assets (stocks, bonds, FX, etc...)
The interest rate at which the banks borrow is not set in stone, and depends on the underlying assets...there is a competitive market to borrow money secured by assets of varying credit quality (what interest rate would you charge to lend $100 million where the use of proceeds was to buy the bond of a company in bankruptcy and that bond was the posted collateral with no other recourse?)....and this happens all day, every day....so this is an exercise in taking bets on various credits...where some loans do in fact default. This can be a profit (or loss) generating activity...so can be "front office"....but not typical front office and depends on the bank and how much risk they take.
Thank you. It sounds like "repo market" activities. On average, would you expect these guys to be inside S&T (i.e. next to guys pricing and selling derivatives), or somewhere tucked away in the basement?
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