Investment Banking

Assignment: Investment banking business model and financial stability

Question: The high risk and high leverage business model applied by investment banks is described as the major contributor of the recent financial crisis. Due to the capital-intensive nature of business, investment banks are more vulnerable to exogenous shocks on money market funding conditions. In the post-Basel III era, hitting by high capital requirements and the imposition of ring-fencing in several European countries, investment banks tend to increase revenue streams from less capital intensive businesses to slash costs and improve profits.
Go through the relevant literature on bank business model and financial stability and answer the following two questions:

1. Compare the business models of retail banking and investment banking.
2. Discuss the relationship between investment banking business model and financial stability.

This is a group assignment. You can build a team for maximum 3 persons (