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Comparing Capital Markets: DCM Investment Banking vs. ECM

DCM investment banking and ECM investment baking are important capital market features. They both aim to help clients raise funds through the capital market. The difference between these two types of banking is the methods of raising funds. ECM banking stands for Equity Capital Markets and raises funds equity. DCM, on the other hand, stands for Debt Capital Markets and raises funds through debt.

DCM markets experience a higher volume of business than ECM markets since the global credit market is bigger than the global equity market. Hence, DCM investment banks work in an environment that has a faster pace. Additionally, DCM markets pose less risk to companies and organizations. The nuances of the two fundraising methods provide companies with various options and routes for raising funds.

Debt Capital Markets

DCM Investment Banking is when an investment bank helps a company raise funds by trading debt securities. The most common types of securities traded in debt capital markets include corporate and government bonds. Companies borrow these funds from investors by selling bonds, on which they promise to pay interest. In the Debt Capital Market, companies do not lose any share in the ownership since they promise to pay back their investors later. DCM investment bankers may be more exposed to a wider client base. Fundraising is generally done for corporations, agencies, and sovereigns.

Investment banking offers essential services for companies who need guidance on how to raise funds through debt securities. Hence, investment banks and their teams offer various functions to assist companies. 

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These are:

  • The act of executing debt issuances for clients.
  • Present case studies of previous successful deals for companies of a similar nature.
  • Provide advice on how to manage the interest rate of the new debt and how to create the best holistic plan.

Equity Capital Markets

How does a company raise equity? Companies raise equity by selling a portion of their ownership to another party in return for funds. Investment banks help companies fulfill this by taking on a host of responsibilities. These responsibilities include finding investors, devising strategy, choosing price points, analyzing the industry, and more. ECM investment banking is critical for companies who want to raise funds. In ECM, companies can attempt to raise funds through the primary equity market. 

In this market, companies sell shares directly to investors or use public routes such as initial public offerings. Companies can also opt for the secondary equity market, which is the common stock market. Companies do not create any capital in this instance, but rather, the buying and selling of stocks take place here.

In ECM investment banking, three types of teams help companies attain their goals, these are:

  • Equity Origination: This team works to raise capital and finance equity deals.
  • Syndicate: Most equity deals require the involvement of multiple banks. The syndicate works with these other banks to help execute a deal.
  • Convertible Bonds: What are convertible bonds? They are debt issuances converted into equity when a company’s stock price reaches a certain number.


DCM investment banking and ECM investment banking are very important services investment banks offer clients. Debt Capital Markets help companies raise funds through the trading of debt securities. Equity Capital Markets help companies raise funds by selling part of the ownership to investors. Investment banks play an important role in these markets since their skill and expertise become the guiding light for companies who hope to experience success.

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