There are many banks and different types of banking systems in today’s world. Sometimes people get confused about some terms related to banking.
Banking is also needed when it comes to industries and public sector units. For them, there is a banking system called the Corporate banking system.
And for both public as well as private banking, there is another system called the Investment banking system. Financial support is always needed when someone is planning to start a new business or startups.
This support is done by the Corporate banking system. But when it comes to funding Investment banking system takes place.
Corporate Banking vs Investment Banking
The difference between Corporate banking and Investment banking is that Corporate banking provides a lot more facilities than Investment banking, like setting up portfolios and issuing loans etc. The corporate banking system provides loans for setting up corporates and provides all the required facilities needed for the setup. Corporate banking usually nourishes large scale industries with their facilities.
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The investment banking system does lots of services like they will guarantee payment if any loss occurs and helps businesses set up by raising funds for them.
It has both the selling and buying side. The selling system includes all the promoting events like monetary gain and creating portfolios etc.
And the buying system involves advisory services for investment relating problems like where to invest or how to invest.
The corporate banking system provides services like setting up portfolios and making significant investments. They also offer assistance with the help of which large Multinational companies can lower their taxes.
In Corporate Banking, deep research is done by the providers to avoid the risk of financial damage. They also provide their clients with full security service.
Investment banking and Corporate banking are good in providing security services, ensuring guaranteed payment if any financial loss occurs, but involves high risk because of weak regulatory requirements.
The responsibility of a Corporate banking system is to increase the value of their clients business or a corporate. And Investment banking system provides services to both private and public sectors.
Comparison Table
| Parameters of Comparison | Corporate Banking | Investment Banking |
|---|---|---|
| Primary services | Primary services are lending loans, setting up portfolios and making investments. | Primary services are selling advisory services, providing securities and underwriting etc. |
| Risk factor | In the Corporate banking system, the risk is low. | In the Investment banking system, the risk is high. |
| Customer base | The customer base is high. | The customer base is low. |
| Commission level | Commission level is usually low or moderate. | Commission level is high depending on the individual charge rate. |
| Examples | Examples are HDFC Bank, State Bank. | Examples are Goldman Sachs, RBS, UBS etc. |
What is Corporate Banking?
The corporate banking system mainly deals with large corporates and Industry related investments. This banking system provides lots of services like providing required loans to their clients and setting up portfolios for making their value more in the corporate sector.
The risk involved here is low and high financial security is provided to the customers.
Corporate banking does all the services that a corporate needs.
They also help large Multinational companies to lower their tax paying. Corporate banking also allows corporates to manage all changes related to foreign exchange rates, and by this, they provide surety to their clients that they get more profit.
Corporate banks earn money through the interest which they get from their clients after providing them loan services. They provide their clients with financial security by giving them guaranteed payment if any economic damage occurs.
What is Investment Banking?
The Investments banking system provides services to both the private and public sectors. They sell services like setting up portfolios and raising funds for large Corporates.
The investment banking system does both buy and sell services like the selling system, including promoting events like monetary gain and creating portfolios.
And the buying system involves advisory services for investment relating to problems like where to invest or how to invest.
The investment banking system does not have very high customer support because there is an increased risk in their banking system because of weak regulatory requirements.
As it deals with both public and private sectors, it maintains security very precisely by not disclosing any investment-related information.
Main Differences Between Corporate Banking and Investment Banking
- The corporate banking system is less risky than Investment banking as Investment banking has weak regulatory requirements.
- Corporate banking only deals with large Corporations, MNCs, and businesses, but Investment banking provides services to private and public sectors.
- Investment banks earn money through the charge they take after delivering advisory services. In contrast, Corporate banks make money through the interest they take from big Corporates after providing them required loans.
- Compared to the Investment banking system, the corporate banking system has good customer support because it is more secure, and no pre-investment is needed.
- Investment banking involves a high commission rate depending on their client as they charge for their services. But in Corporate banking, the low or moderate commission is involved as there is no pre-investment.
- https://link.springer.com/content/pdf/10.1007/978-3-540-93765-4.pdf
- https://search.proquest.com/openview/f0ee7a4b66ba2e6d9adec5edfb355f84/1?pq-origsite=gscholar&cbl=35193
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
