Difference Between Corporate Banking and Investment Banking (With Table)

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.

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 Between Corporate Banking and Investment Banking

Parameters of ComparisonCorporate BankingInvestment Banking
Primary servicesPrimary services are lending loans, setting up portfolios and making investments.Primary services are selling advisory services, providing securities and underwriting etc.
Risk factorIn the Corporate banking system, the risk is low.In the Investment banking system, the risk is high.
Customer baseThe customer base is high.The customer base is low.
Commission levelCommission level is usually low or moderate.Commission level is high depending on the individual charge rate.
ExamplesExamples 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

  1. The corporate banking system is less risky than Investment banking as Investment banking has weak regulatory requirements.
  2. Corporate banking only deals with large Corporations, MNCs, and businesses, but Investment banking provides services to private and public sectors.
  3. 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.
  4. 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.
  5. 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.

Conclusion

In today’s world, everybody needs money because there are many banks and different types of policies. Large Corporates, MNCs also need capital to set up their business to fulfil their requirements. The corporate banking system is made. They provide them with required loans and helps them to increase their value in the market. Unlike Corporate banking Investment banking system supports both public and private sectors.

The investment banking system provides advisory services to their clients to get to know the right way of investment. But the risk involved in Investment banking is high as compared to the Corporate banking system. But both will provide their clients with financial security services.

In Corporate Banking, clients do not pay; instead, they get loans, but in the Investment banking system, services are delivered, and they charge some amount of money from their customers. For large corporates, Corporate banking is good.

References

  1. https://link.springer.com/content/pdf/10.1007/978-3-540-93765-4.pdf
  2. https://search.proquest.com/openview/f0ee7a4b66ba2e6d9adec5edfb355f84/1?pq-origsite=gscholar&cbl=35193
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