FRM Part I · FRM Exam Part I · Banks
Which activity best distinguishes an investment bank's operations from those of a traditional commercial bank?
Underwriting securities issues and advising on mergers and acquisitions distinguishes investment banking. Commercial banks instead focus on taking retail deposits, granting loans and overdrafts, and operating branch networks, which are not the core activities of an investment bank.
- AUnderwriting securities issues and advising on mergers and acquisitionsCorrect
- BAccepting retail demand deposits insured by a deposit guarantee scheme
- CGranting consumer overdrafts funded by savings accounts
- DOperating a branch network for cash withdrawals
Explanation
Investment banks underwrite securities offerings, advise on M&A and make markets. Retail deposits, overdrafts and branch networks are characteristic of commercial banking.
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