Lehman Brothers developed the Lehman formula to determine the commission an investment bank should receive for arranging client transactions.
Large investment banks partner with corporations to raise capital, often through initial public offerings (IPOs), mergers or acquisitions, or spin-offs.
For its services, an investment bank may charge a fixed fee for each transaction, receive commissions depending on the amount of the transaction in dollars, or a combination of both options.
The Lehman formula structures the investment banking fee as a percentage of the transaction amount based on a set of tiered fees.
The 3-6-3 rule is a slang term for an informal practice in banking, especially in the 1950s, 1960s and 1970s, that was the result of the industry’s uncompetitive and simplistic conditions.
The account balance represents the available funds or present value of an account of a particular financial account, such as a checking, savings or investment account.
The annual equivalent rate (AER) is the actual interest rate on investments, loans or savings accounts that can be obtained after compounding interest.
The bank reconciliation report summarizes the banking and commercial activities by reconciling the organization’s bank account with its financial statements.
A bank run occurs when large groups of depositors withdraw their money from banks at the same time, out of fear that the institution will become insolvent.