Difference Between Corporate Banking and Commercial Banking (With Table)

There are so many confusing terms when it comes to banking, and people normally do not know about that. Just like that, people usually get confused between the terms corporate banking and commercial banking.

The term Corporate banking mainly has large multinational companies and big institutions as their customers. They give them a loan for setting up businesses and then take a small amount of money from them yearly or monthly as interest, and Commercial banking accommodates individuals and small businesses for credit and full-fill their financial needs.

Corporate banking is for large businesses, and it mostly accommodates a big amount of money. Corporate banking provides loans to big companies and provides them financial security. Commercial banking accommodates individuals and small businesses and provides them with the loan needed.

Corporate Banking vs Commercial Banking

The difference between Corporate banking and Commercial banking is that Corporate banking mainly has large multinational companies and big institutions as their customers. They give them a loan for setting up businesses and then take interest from them. And Commercial banking has mainly individual and small businesses as their customers.

Corporate banking mainly has large MNCs and big institutions as their clients. They give them a loan for setting up businesses and then take interest from them. The loans they provide are in large amounts and not for individual use. Corporate banks provide full financial security to their clients.

Commercial banking is for all types of small startups and personal credit. Commercial banks offer loans to them, and then they charge a small portion of that amount or loan as interest yearly or monthly from them. They give loans to a lesser extent only as compared to Corporate banking.

Comparison Table Between Corporate Banking and Commercial Banking

Parameters of ComparisonCorporate BankingCommercial Banking
Primary servicesCorporate banking mainly has large MNCs and big institutions as their customers. They give them a loan for setting up businesses and then take interest from them.Commercial banking accommodates individuals and small businesses for credit and full-fill their financial needs.
GlobalizationCorporate banking accommodates locally as well as internationally as they interact with clients globally.Commercial banking deals with local use only. It does not interact with people globally.
Loan amountCorporate banking involves a large amount of money, and mainly their customers are big institutions.Commercial banking offers less money or small loans as they deal with individual and small businesses only.
Short term loansIt provides you with the shortest-term loans.It does not provide shortest-term loans.
Commission levelCommission level is low or moderate.Commission level is high as compared to corporate banks.

What is Corporate Banking?

Corporate banking mainly has large MNCs and big institutions as their customers. They give them a loan for setting up businesses and then take a small amount of money from them yearly or monthly as interest. Big companies and institutions always deal with a large amount of money need to fulfil their needs. Corporate banks provide them with short-term loans for their daily tasks.

Corporate banking provides so many services like setting up their customer portfolios for making their value more and providing them loans to meet their daily needs. The risks here are low, and full financial security is provided by the bank.

Corporate banks earn money from the interest which they take from their clients. They help their customers to lower their tax paying and also manages all foreign exchange to make sure that their customer earns more profit. And they provide them security from any type of financial damage.

What is Commercial Banking?

Commercial banking is for all types of small startups and personal credit. Commercial banks offer loans to them, and then they charge a small portion of that amount or loan as interest yearly or monthly from them. Commercial banking deals with local use only. It does not interact with people globally. As their clients are individual and small institutions that are based locally.

Commercial banking services are locally based as their clients are small. Their services are for daily purposes like depositing money, providing a less amount of loans, issuing drafts and cheques, and managing cash. They also provide consulting services for small businesses in which they give them investment advice.

Commercial banks earn money from the interest which they take from their clients and also from their consulting services. Commission level is high as compared to corporate banks. They also help depositors to earn money by buying funds and earning profit yearly or monthly.

Main Differences Between Corporate Banking and Commercial Banking

  1. Corporate banking mainly has large MNCs and big institutions as their customers. They give them a loan for setting up businesses and then take interest from them. Whereas Commercial banking has mainly individual and small businesses as their customers.
  2. Corporate banks interact with people globally, while the commercial bank does not, as their customers are based locally.
  3. The commercial bank commission level is higher than the corporate bank.
  4. Corporate banking involves a large amount of money, and mainly their customers are big institutions. And Commercial banking offers less money or small loans as they deal with individual and small businesses only.
  5. The corporate bank provides shortest term loans or one day loan with the help of which big institutions execute their day-to-day tasks, but this type of loan is not offered by the commercial bank.

Conclusion

These banking terms are so much confusing, but for trading and investing, one should always be aware of every term. The corporate bank invests and provides credit to only big institutions. It helps businesses to set up and earn more profit by increasing their value in the market. And commercial banks are for common people and small startups. Commercial banks provide loans and consultancy services to their customers.

Corporate banks interact with people globally, while the commercial bank does not, as their customers are based locally. Therefore the customer base of corporate banks is high as compared to commercial banks. Corporate banks also provide short-term loans, which are very useful assets for big institutions.

References

  1. https://www.emerald.com/insight/content/doi/10.1108/eb018653/full/html
  2. https://www.emerald.com/insight/content/doi/10.1108/02652329210012122/full/html
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