Corporate banking: Difference between revisions
No edit summary |
m (Text cleaning) |
||
| (18 intermediate revisions by 3 users not shown) | |||
| Line 1: | Line 1: | ||
'''Corporate banking''' can also be called '''corporate [[financing]]''' or '''business banking'''. It is a segment of '''commercial banking''' that offers tailored solutions to financial institutions, large companies, and the public sector. The average depositor with a check and savings accounts never sees this part of commercial banking because it deals solely with corporate customers. Corporate Banking drives other parts of the bank. | |||
'''Corporate banking''' can also be called '''corporate financing''' or '''business banking'''. It is a segment of '''commercial banking''' that offers tailored solutions to financial institutions, large companies, and the public sector. The average depositor with a check and savings accounts never sees this part of commercial banking because it deals solely with corporate customers. Corporate Banking drives other parts of the bank. | Corporate Banking provides services to companies. These companies range from small, medium-sized enterprises (SME) to multinational companies. It also carters for large scale businesses. Corporate banking helps large companies finance their corporate projects in the best possible way (lower [[risk]], [[cost]], and better profitability). Corporate Banking activities relies on [[customer]] relationship. It involves developing and maintaining a global portfolio of business relationships targeted by economic activity sector and by geographical area. The aim is to detect opportunities for customer and business support hence offering its customers [[project]] financing [[options]] which it will develop, [[resource]] financing solutions, and financial [[investment]] solutions(Dan, Stephane 2014, p. 28). | ||
Corporate Banking provides services to companies. These companies range from small, medium-sized enterprises (SME) to multinational companies. It also carters for large scale businesses. Corporate banking helps large companies finance their corporate projects in the best possible way (lower risk, cost, and better profitability). Corporate Banking activities relies on customer relationship. It involves developing and maintaining a global portfolio of business relationships targeted by economic activity sector and by geographical area. The aim is to detect opportunities for customer and business support hence offering its customers project financing options which it will develop, resource financing solutions, and financial investment solutions(Dan, Stephane 2014, p. 28). | |||
==Corporate Banking Services== | ==Corporate Banking Services== | ||
Below is a list of corporate banking services(Giacomo et al 2005, p. 55): | Below is a list of corporate banking services (Giacomo et al 2005, p. 55): | ||
* Bond Issues | * [[Bond]] Issues | ||
* Foreign exchange Services | * Foreign exchange Services | ||
* Cash Management | * Cash [[Management]] | ||
* Liquidity management | * [[Liquidity management]] | ||
* Credit Management | * Credit Management | ||
* Risk Management | * Risk Management | ||
* Asset | * Asset Management | ||
* Treasury Management | * Treasury Management | ||
* Insurance | * [[Insurance]] | ||
* Medium and long term Project financing | * Medium and long term [[Project financing]] | ||
* Issuing structured Loans(Loan management) | * Issuing structured Loans(Loan management) | ||
| Line 21: | Line 20: | ||
2. '''Risk Management''' | 2. '''Risk Management''' | ||
Risk management involves risk assessment, analyzing the impact of risk its potential consequences as regards financial losses. The risk analysis is usually managed by Risk Managers, who, after the assessment phase also determines the method and techniques of handling the identified risk or risks. It is important to note that when the level of risk exposure is defined, the measures necessary to cater to it are in place. The risk manager also recognizes the many types of risk to be managed (Bill, Richard 2009, p. | [[Risk management]] involves risk assessment, analyzing the [[impact of risk]] its potential consequences as regards financial losses. The risk analysis is usually managed by Risk Managers, who, after the assessment phase also determines the [[method]] and techniques of handling the identified risk or risks. It is important to note that when the [[level of risk]] exposure is defined, the measures necessary to cater to it are in place. The risk manager also recognizes the many types of risk to be managed (Bill, Richard 2009, p. 324). | ||
3. '''Issuing Structured Loans''' | 3. '''Issuing Structured Loans''' | ||
Corporate banking is the biggest originator of customers' loans which is a primary source of capital for business expansion, equipment purchase, and acquisitions. It is a key profit hub for most banks as a result of these services. Corporate banks offer fixed-term loans, short and long-term loans, asset-based loans, and lines of credit. Its specialized loan department oversees the process of granting loans to the corporation; compliance with the credit regulation policies, and other management-related functions. This specialized loan department must ensure that they maintain the bank's profit. | Corporate banking is the biggest originator of customers' loans which is a primary source of capital for business expansion, equipment purchase, and acquisitions. It is a key [[profit]] hub for most banks as a result of these services. Corporate banks offer fixed-term loans, short and long-term loans, asset-based loans, and lines of credit. Its specialized loan department oversees the [[process]] of granting loans to the corporation; compliance with the credit regulation policies, and other management-related functions. This specialized loan department must ensure that they maintain the bank's profit. | ||
4. '''Treasury Management''' | 4. '''Treasury Management''' | ||
Treasury Management is central to the whole of corporate banking. The function provides a service to operations and implements strategies for interest rate and foreign exchange exposure management. The common treasury risk to which most companies are exposed relates to movements in interest rates and currencies. The overall treasury function is to control these exposures while striking an appropriate balance between minimizing risk and costs. | Treasury Management is central to the whole of corporate banking. The function provides a [[service]] to operations and implements strategies for [[interest]] rate and foreign exchange exposure management. The common treasury risk to which most companies are exposed relates to movements in interest rates and currencies. The overall treasury function is to control these exposures while striking an appropriate balance between minimizing risk and costs. | ||
5. '''Asset Management''' | 5. '''Asset Management''' | ||
Asset Management takes care of the money owned by corporations. It helps in deciding where to invest the money. | Asset Management takes care of the [[money]] owned by corporations. It helps in deciding where to invest the money. | ||
6. '''Credit Management''' | 6. '''Credit Management''' | ||
Credit management covers various stages from granting to its recovery. It involves setting up of terms and conditions, policies f agreement, analyzing risk factors, etc. | [[Credit management]] covers various stages from granting to its recovery. It involves setting up of terms and conditions, policies f agreement, analyzing risk factors, etc. | ||
7. '''Cash Management''' | 7. '''Cash Management''' | ||
The corporate banking division offers cash management that includes collecting cash and managing changes in foreign exchange. | The corporate banking division offers cash management that includes collecting cash and managing changes in foreign exchange. | ||
== | ==The Corporate Banker's Task== | ||
Below are some | Below are some task performed by corporate bankers (Giacomo et al 2005, p. 108): | ||
* | * Management of corporate [[client]] portfolio assigned by bank and no longer governed by traditional structures | ||
* | * Customer [[needs]] diagnosis | ||
* | * Credit management and credit risk analysis | ||
* | * Triggering of [[product]] specialists and advisors on the basis of identified [[customer needs]] | ||
* | * Scouting (development of relations with new clients) | ||
* | * Service pricing on the basis of guidelines and independent decisions as established by the corporate [[area manager]] | ||
* Coordination of product specialists and advisors | |||
* Credit approval | |||
==Role of Corporate Banking In Economic Development== | ==Role of Corporate Banking In Economic Development== | ||
Corporate banking plays important | Corporate banking plays important role in the development of real economy as seen below (Giacomo et al 2005, p. 60): | ||
* Corporate Banks are a basic source of creating capital that is significant for the working and development of an economy through capital formation. | * Corporate Banks are a basic source of creating capital that is significant for the working and development of an economy through [[capital formation]]. | ||
* Corporate Banks are a primary source of finance for industrial and entrepreneurial works as they provide a wide range of financial services to businesses. | * Corporate Banks are a primary source of finance for industrial and entrepreneurial works as they provide a wide range of financial services to businesses. | ||
* Corporate Banks are instrumental in the government's monetary support and plan. | * Corporate Banks are instrumental in the [[government]]'s monetary support and [[plan]]. | ||
* Corporate Banks provide credits necessary for establishing and developing industries. | * Corporate Banks provide credits necessary for establishing and developing industries. | ||
* Corporate banks provide long-term credit to the government through government securities and treasury bills. | * Corporate banks provide long-term credit to the government through government securities and treasury bills. | ||
| Line 58: | Line 59: | ||
==Difference between Corporate Banking and Retail Banking== | ==Difference between Corporate Banking and Retail Banking== | ||
Below are some differences between corporate banking and retail banking: | Below are some differences between corporate banking and retail banking: | ||
'''Corporate banking''' and '''retail banking''' are two different sectors of commercial banks. Its many difference is the kind of customers they deal with. Corporate banking deals with big businesses while retain banks cater to individuals. | |||
'''Corporate banking''' and '''retail banking''' are two different sectors of commercial banks. Its many difference is the kind of customers they deal with. Corporate banking deals with big businesses while retain banks cater to individuals (Giacomo et al 2005, p. 1). | |||
The second difference is the amount of money involved. Corporate banks handle large sums of money, whereas retail banks handle money for individuals or small businesses. Therefore, the money involved in the corporate bank is greater than the retail bank. | The second difference is the amount of money involved. Corporate banks handle large sums of money, whereas retail banks handle money for individuals or small businesses. Therefore, the money involved in the corporate bank is greater than the retail bank. | ||
Finally, corporate banking and retail banking have significant differences. The objective of the two remains the same. Ultimately, they aim to promote economic growth. | Finally, corporate banking and retail banking have significant differences. The objective of the two remains the same. Ultimately, they aim to promote economic growth. | ||
{{infobox5|list1={{i5link|a=[[Funding Operations]]}} — {{i5link|a=[[Source of financing]]}} — {{i5link|a=[[Bankers Bank]]}} — {{i5link|a=[[Financial resources]]}} — {{i5link|a=[[Cash control]]}} — {{i5link|a=[[Bridge Bank]]}} — {{i5link|a=[[Principles of financial planning]]}} — {{i5link|a=[[Capital Base]]}} — {{i5link|a=[[Corporate agent]]}} }} | |||
==References== | ==References== | ||
* Bill N., Richard P. (2009). ''[https://books.google.pl/books?id=oQ22OQAACAAJ&dq=corporate+finance+and+investment:decisions+and+strategies+2009&hl=en&sa=X&ved=2ahUKEwjsoNLb2JntAhXmmIsKHRP9CVIQ6AEwAHoECAIQAg Corporate Finance and Investment: Decisions and Strategies]'' Pearson [[Education]]. | |||
* Bill N., Richard P. (2009). ''[https://books.google.pl/books?id=oQ22OQAACAAJ&dq=corporate+finance+and+investment:decisions+and+strategies+2009&hl=en&sa=X&ved=2ahUKEwjsoNLb2JntAhXmmIsKHRP9CVIQ6AEwAHoECAIQAg Corporate Finance and Investment: Decisions and Strategies]'' Pearson Education. | |||
* Dan C., Stephane S. (2014). ''[http://mboudier.fr/mediaServe/Etude_metiers_BFI_anglais.pdf?ixh=3042132345543983127 Professions in Corporate and Investment Banking]'' OBP Publications. | * Dan C., Stephane S. (2014). ''[http://mboudier.fr/mediaServe/Etude_metiers_BFI_anglais.pdf?ixh=3042132345543983127 Professions in Corporate and Investment Banking]'' OBP Publications. | ||
* Giacomo L., Stefano C., Paola S., Ozlem Y., Severino M. | * Giacomo L., Stefano C., Paola S., Ozlem Y., Severino M.(2005)''[https://books.google.pl/books?id=DY24CghTxCoC&pg=PA176&dq=corporate+banking&hl=en&sa=X&ved=2ahUKEwif9pSfuJvtAhVjmYsKHVXaBd8Q6AEwAnoECAYQAg#v=onepage&q=corporate%20banking&f=false Strategy and Organization of Corporate Banking]'' Springer. | ||
{{a|Linda Akam}} | {{a|Linda Akam}} | ||
[[Category:Economics]] | [[Category:Economics]] | ||
Latest revision as of 19:06, 17 November 2023
Corporate banking can also be called corporate financing or business banking. It is a segment of commercial banking that offers tailored solutions to financial institutions, large companies, and the public sector. The average depositor with a check and savings accounts never sees this part of commercial banking because it deals solely with corporate customers. Corporate Banking drives other parts of the bank. Corporate Banking provides services to companies. These companies range from small, medium-sized enterprises (SME) to multinational companies. It also carters for large scale businesses. Corporate banking helps large companies finance their corporate projects in the best possible way (lower risk, cost, and better profitability). Corporate Banking activities relies on customer relationship. It involves developing and maintaining a global portfolio of business relationships targeted by economic activity sector and by geographical area. The aim is to detect opportunities for customer and business support hence offering its customers project financing options which it will develop, resource financing solutions, and financial investment solutions(Dan, Stephane 2014, p. 28).
Corporate Banking Services
Below is a list of corporate banking services (Giacomo et al 2005, p. 55):
- Bond Issues
- Foreign exchange Services
- Cash Management
- Liquidity management
- Credit Management
- Risk Management
- Asset Management
- Treasury Management
- Insurance
- Medium and long term Project financing
- Issuing structured Loans(Loan management)
1. Project Financing Project financing involves a thorough analysis of large-scale projects by financial experts. It is a financial arrangement based solely on its profitability as such that its granted financing is repaid from the cash generated from the project. To limit the risk of funding large scale projects, financial analyst thorough examines the profitability and viability of the project. Corporate banking supports its customers in the structuring of their projects.
2. Risk Management Risk management involves risk assessment, analyzing the impact of risk its potential consequences as regards financial losses. The risk analysis is usually managed by Risk Managers, who, after the assessment phase also determines the method and techniques of handling the identified risk or risks. It is important to note that when the level of risk exposure is defined, the measures necessary to cater to it are in place. The risk manager also recognizes the many types of risk to be managed (Bill, Richard 2009, p. 324).
3. Issuing Structured Loans Corporate banking is the biggest originator of customers' loans which is a primary source of capital for business expansion, equipment purchase, and acquisitions. It is a key profit hub for most banks as a result of these services. Corporate banks offer fixed-term loans, short and long-term loans, asset-based loans, and lines of credit. Its specialized loan department oversees the process of granting loans to the corporation; compliance with the credit regulation policies, and other management-related functions. This specialized loan department must ensure that they maintain the bank's profit.
4. Treasury Management Treasury Management is central to the whole of corporate banking. The function provides a service to operations and implements strategies for interest rate and foreign exchange exposure management. The common treasury risk to which most companies are exposed relates to movements in interest rates and currencies. The overall treasury function is to control these exposures while striking an appropriate balance between minimizing risk and costs.
5. Asset Management Asset Management takes care of the money owned by corporations. It helps in deciding where to invest the money.
6. Credit Management Credit management covers various stages from granting to its recovery. It involves setting up of terms and conditions, policies f agreement, analyzing risk factors, etc.
7. Cash Management The corporate banking division offers cash management that includes collecting cash and managing changes in foreign exchange.
The Corporate Banker's Task
Below are some task performed by corporate bankers (Giacomo et al 2005, p. 108):
- Management of corporate client portfolio assigned by bank and no longer governed by traditional structures
- Customer needs diagnosis
- Credit management and credit risk analysis
- Triggering of product specialists and advisors on the basis of identified customer needs
- Scouting (development of relations with new clients)
- Service pricing on the basis of guidelines and independent decisions as established by the corporate area manager
- Coordination of product specialists and advisors
- Credit approval
Role of Corporate Banking In Economic Development
Corporate banking plays important role in the development of real economy as seen below (Giacomo et al 2005, p. 60):
- Corporate Banks are a basic source of creating capital that is significant for the working and development of an economy through capital formation.
- Corporate Banks are a primary source of finance for industrial and entrepreneurial works as they provide a wide range of financial services to businesses.
- Corporate Banks are instrumental in the government's monetary support and plan.
- Corporate Banks provide credits necessary for establishing and developing industries.
- Corporate banks provide long-term credit to the government through government securities and treasury bills.
- Corporate Banks are critical to the development and promotion of entrepreneurship in countries. From generating ideas and providing managerial guidance to the provision of funds and credits.
Difference between Corporate Banking and Retail Banking
Below are some differences between corporate banking and retail banking:
Corporate banking and retail banking are two different sectors of commercial banks. Its many difference is the kind of customers they deal with. Corporate banking deals with big businesses while retain banks cater to individuals (Giacomo et al 2005, p. 1).
The second difference is the amount of money involved. Corporate banks handle large sums of money, whereas retail banks handle money for individuals or small businesses. Therefore, the money involved in the corporate bank is greater than the retail bank.
Finally, corporate banking and retail banking have significant differences. The objective of the two remains the same. Ultimately, they aim to promote economic growth.
| Corporate banking — recommended articles |
| Funding Operations — Source of financing — Bankers Bank — Financial resources — Cash control — Bridge Bank — Principles of financial planning — Capital Base — Corporate agent |
References
- Bill N., Richard P. (2009). Corporate Finance and Investment: Decisions and Strategies Pearson Education.
- Dan C., Stephane S. (2014). Professions in Corporate and Investment Banking OBP Publications.
- Giacomo L., Stefano C., Paola S., Ozlem Y., Severino M.(2005)Strategy and Organization of Corporate Banking Springer.
Author: Linda Akam
