What is Corporate Banking?

What is Corporate Banking?

The corporate banking group at CSB caters to the needs of corporate entities and provides a range of commercial banking products and services to corporates. This includes regular banking services, corporate accounts, salary accounts, cash management services, short term funding including working capital finance, long term solutions including Term Loans and trade finance services.

Our Bank has also set up a centralized corporate banking team to work with other banks that arrange syndicated loans.

Corporate banking is the key profit center for most banks. The organization can yield higher profits because of the large sums of money loaned to the corporates and the higher interest received. Hence, corporate banking salary is higher than others.

ICICI Bank defines Corporate Banking as, “They offer corporates a wide range of products and services, the technologies to leverage them anytime, anywhere and the expertise to customize them to client-specific requirements. From cash management to corporate finance, from forex to acquisition financing; they provide you with end-to-end services for all your banking needs.”

Characteristics of Corporate Banking

1. Clientele

A bank’s business banking unit usually serves small to middle-sized businesses and large conglomerates.

2. Authority

A company’s corporate banking accounts can only be opened after obtaining consensus from the board of directors of the company. It means that they must be authorized by an official vote or a corporate resolution. The company’s treasurer usually opens corporate accounts.

3. Liability

Since companies are recognized as separate legal entities under the law, all contents of corporate accounts are the property of the company and not of the individual board members. It means that there is a certain degree of independence to corporate accounts.

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It also indicates that the personal creditors of the board of directors are not entitled to the contents of the corporate account of a company.

4. Credit rating

The conduct or functioning of the corporate account forms part of the credit history of the company. It affects the valuation and share prices of the company, the interest rates applicable to loans extended to the company, etc.

5. Bankers

Corporate banking requires a degree of expertise in the industry. Thus, corporate bankers are extremely well paid. JP Morgan Chase, Bank of America Merrill Lynch, and Goldman Sachs are some of the largest commercial banks in the world.

Corporate Banking Services

1. Credit

Loans and related credit products are offered to corporate customers. Credit facilities form the largest share of profits for commercial banks. The interest rates imposed on the loans are significantly high due to the amount of risk prevalent in lending to corporate customers.

2. Treasury services

Treasury services are used by companies to manage their working capital requirements. Such services are extremely important for multinational companies as they facilitate currency conversion.

3. Fixed asset requirement financing

Fixed asset requirement financing services are important for corporates involved in capital-intensive industries such as transportation, information technology, and heavy machinery manufacturing. Banks facilitate customized loans and lease agreements for the purchase of equipment, machinery, etc.

4. Employer services

Commercial banks also provide services such as the selection of retirement plans and healthcare plans, as well as payroll facilities, for employees.

5. Commercial services

Banks also provide services such as portfolio analysis, leverage analysis, debt and equity restructuring, analyses of real assets, etc. Other services that are of importance to corporate clients include asset management services and underwriters for initial public offering (IPOs), etc.

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The services are undertaken by the investment banking arm of the commercial bank. Investment banking and corporate banking were separated under the provisions of the Glass-Steagall Act.

To learn more about the different corporate banking services, see CFI’s Introduction to Banking course!

Conclusion

Corporate banks are a primary source of finance accrual for entrepreneurial and industrial work. They provide a wide range of financial services to businesses. Hence, they’re crucial for domestic and international trade and commerce.

Corporate banking offers its services and products to small, medium, and large-sized businesses for its efficient functioning. Its main objective is to maintain the value of the currency, ensure price stability, promote the growth of financial institutions, and promote economic growth.

The financial banking industry is changing rapidly. It is welcoming the emerging technologies to build a secure and cost-effective environment for everyone.