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What are Bulge Bracket Banks?

Definition: Bulge bracket banks are the largest and most profitable financial institutions around the globe that offer investment banking and advisory services to their institutional clients.

What Does Bulge Bracket Banks Mean?

What is the definition of bulge bracket banks? Bulge bracket banks are huge, multinational corporations whose clients are the government, other large corporations, and institutions that seek financing and advisory services.

BB banks offer a wide range of financial products, including equities, derivatives, credit line, and commodities, but also alternative investment vehicles such as credit default swaps, asset-backed securities (ABS), collateralized debt obligations (CDOs), and various insurance products. The term corresponds to the way that these investment banks are presented on the tombstone, i.e. the advertisement of a new issue.

Letís look at an example.

Example

Typical examples of bulge bracket banks are Bank of America Merrill Lynch, Barclays Capital, Citi, Credit Suisse, Morgan Stanley, and UBS. All these corporations are prestigious investment banks with trillions of dollars in total assets, and a wide range of offered products, including corporate banking, investment banking, private banking, wealth management, private equity, finance and insurance, and mortgage loans, among others.

Furthermore, they employ between 50,000 and 80,000 employees in branches all over the world, and they seek to promote cultural diversity and a growth-oriented culture, in which anyone can participate provided they work hard, and they deliver the best they can.

All the above corporations have participated in several IPO underwritings, and they have a quite big exposure on the Chinese market, since 2003, when the Quota for Qualified Foreign Institutional Investors (QFII) was originally introduced. The key advantage of the BB banks is that they formed joint ventures, and they entered the Chinese market by trading large tranches of equity, thereby buying large shares of target Chinese companies for as low as possible. When the Chinese banks defaulted on their loans, the US BB banks sold their shares in the Chinese banks, thereby realizing capital gains.

Summary Definition

Define Bulge Bracket Banks: Bulge bracket bank means a financial institution that offer investment banking services to clients.

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