In the case of commercial banks, however, depositors normally do not care about information on business performance of borrowing firms, except at the time of a banking crisis. This is because commercial banks themselves are taking their own risks associated with lending to firms, but not depositors. In sharp contrast, however, in the case of the bond market, ultimate investors take risks associated with investment in borrowing firms. This difference in who is directly taking risks of investment explains the difference in the purpose of the aforementioned information collection and production between commercial banks and investment banks. On the one hand, commercial banks need to acquire such information about borrowing firms in order to minimize banks own risks associated with their lending.
Information is often idiosyncratic, depending on the borrowing individual firm.
Therefore, banks need to collect confidential, inside information from borrowers through long-term relationship s and through the settlement account with particular borrowers, both of which provide commercial banks with unique informational advantage over other financial institutions. That is, commercial banks attempt to minimize information asymmetry between borrowing firms and banks themselves , not between borrowing firms and depositors. In contrast, investment banks do not directly take risks as ultimate investors. Instead, investment banks intermediate as an underwriter to reduce information asymmetry between borrowing firms as issuers of corporate bonds and ultimate investors. Collected and produced information about corporate bond issuers should be reflected in publicly open issue conditions attached to new bonds such as interest rate and maturity.