(7) What is an investment bank?
Now then, why does that new bank have to be an “investment bank?”
To begin with, what is an investment bank? In a nutshell, an investment bank is the provider of industrial finance. An investment bank means a bank that has the power to transform money into an industry, or paper into real assets. It means a bank with a thorough knowledge of both the world of money and the world of industry ― a bank that mobilizes money to develop the nation through developing industries in the mid- to long term. Taking Japan as an example, the former Industrial Bank of Japan used to be a typical investment bank. More specifically, an investment bank raises ― of its own accord ― money from the public and lends it on a stable and long-term basis, in order to develop industries and the nation in the mid- to long term.
[In contrast], an ordinary commercial bank collects money on deposit on a principal-guaranteed basis, and lends it with a maturity of about a year ― at the longest ― to businesses in general mainly as working capital. Hence, funds to develop industries in the mid- to long term cannot be procured by simply increasing the size of commercial banks.
Then, how about raising funds from the market by issuing stocks or bonds? It is impossible to stably procure a large sum of well-intentioned funds by these means, because of the extremely high volatility of market prices as well as the arbitrary manipulation of markets by some corrupt, extremely cash-rich investors.
If we are to develop a truly competitive industry and build a new nation in the age to come, we need a financial institution that can lend, for example, 100 billion yen for ten years at a fixed interest rate. In Japan, such bold financing arrangements used to be taken care of by the Industrial Bank of Japan and other long-term credit banks, government-affiliated financial institutions, or directly by public finance.
However, such a system that provides medium- and long-term finance has been destroyed by the structural reforms of the Heisei era. That is why Japan must establish a new investment bank for the purpose of building a new nation henceforth.
(Date published / 公開日： 8/19/2021)
(Date last updated / 最終改訂日: 8/19/2021)