Difference Between Wholesale Banking and Corporate Banking (With Table)

Banks perform a significant role in the economic growth of the country. Banks are the financial intermediaries between lenders and borrowers to fulfill their needs of funds and returns. Banks do several functions and provide various services to meet the needs of different customers. The terms Wholesale banking and corporate banking are interchangeably used, but there is a slight difference in their targeted customers.

Wholesale Banking vs Corporate Banking 

The main difference between Wholesale banking and corporate banking is that Wholesale banking provides financial services to other banks and non-banking financial institutions like government bodies, investors, small and large corporations. On the other hand, corporate banking is a subset of wholesale banking that provides financial services to only corporate companies, whether they are private or government.

Wholesale Banking provides services to those companies and banks that maintain strong financial statements. It provides services like cash management, intermediary services, and payment services, inter-banking between two or more banks, syndicated lending, and pension funding. It operates in both local and international markets.  Wholesale Banking consists of three segments one is commercial banking, corporate banking, and investment banking.

Corporate banking is one of the segments of wholesale banking that targets only large corporations. It provides all the services of wholesale banking and commercial banking to large or multinational companies. It maintains a good relationship with the corporate clients and supports them in their large projects and development strategies. 

Comparison Table Between Wholesale Banking and Corporate Banking

Parameters of ComparisonWholesale BankingCorporate Banking   
DefinitionWholesale Banking provides financial services to companies, government bodies, and other banking institutions in the wholesale market.Corporate banking provides financial services to only multinational corporations to support their projects and development plans.
Features  Low operational cost and high rate of returnsThe services are provided to only limited customers and only in the name of the corporate company and not to the individual customers.
ServicesCash management, intermediate payment products, short-term and long-term loans, syndicate lending, mergers and acquisitions, and others.Treasury management, credit products, loans for projects, employer services, trade finance, and others.
ExampleSBI is also a wholesale bank that has various divisions and channels for different customer segments like corporate, merchant, and commercial.SBI Corporate Internet Banking is a division that provides corporate banking services to large customers.
DisadvantagesHigh risks to the customers and need to deposit a large amount.It has a Dependency account, high investment risks, and risk of breaches.

What is Wholesale Banking?

Wholesale banking is a financial institute that circulates money among lenders and borrowers. The customers of wholesale banks are other banks, government institutes, small, medium, and large companies, and other individual customers.  The wholesale banks have different divisions that handle different levels of customers, such as commercial banking channel that handles individual customers and small companies, corporate banking channel that handles medium-sized cooperates and government bodies, and investment banking channel that handles multinational companies.

Wholesale banking offers various services to its customers like small deposits, loans, huge credits, long-term loans, mergers, and acquisitions. It helps corporations to make profitable financial decisions, and it also adds extra security to the deposits made by the customers. Employees of the wholesale banks are paid higher salaries based on their roles, and customers are given higher rates of returns based on their investment amounts. It also provides consulting services to build trust among different clients.

Wholesale banking provides opportunities for its clients to grow in their business but at the same time charges high processing fees.  Customers get high returns on investments but at the same time have a fear of risks of exploitations and other financial risks.

What is Corporate Banking?

Corporate banking is one of the segments or division of wholesale banking those only providing banking services to large or medium cooperates. The corporate clients can be private or government authorities. Corporate banking provides services like cash and asset management, advisory services, project investment, international trading services, currency exchange, liquidity management, risk management, and other banking services. The customer has to open a corporate account under the name of the corporation only.

The customer has to deposit a high amount of money to start obtaining services from corporate banking. The corporate banking segment has limited customers and provides delay-free services to its customers. It helps to increase the credit ratings of the customers. The corporate banking system recruits highly qualified and experienced employees and pays them the highest salaries than other banks. This banking system has high customer and employee satisfaction than other banks.

Main Differences Between Wholesale Banking and Corporate Banking 

  1. Wholesale banks offer financial services and products to their customers from individual to large corporations, whereas corporate banks offer financial products and services to only corporate companies.
  2. The services offered by wholesale banking are deposits, credits, cash management, syndicate banking, mergers and acquisitions facilities, international financial facilities, and others. The services of corporate banking are employer services, treasury management, project loans, development loans, and other credit products.
  3. Corporate banks pay the highest returns to their customers than wholesale and other banking systems.
  4. Curate banks have limited customers, and wholesale banks have large customers as a whole.
  5. Corporate banks have the highest operational costs, and wholesale banks have lower operational costs.

Conclusion

Banking systems play an important role in the economic development of the countries. Banks provide different loans and services to different segments of customers through different channels like wholesale, corporate, and commercial banking. Wholesale banking and corporate banking systems provide similar services to their customers but operate separately.

Wholesale banking has various types of customers from individuals to cooperate, and corporate banking has only corporate companies. Wholesale banking has risks of location stability and risks of client exploitation. Wholesale banking and corporate banking offer services to local and international clients. They run financial business in the local and international markets.             

References

  1. https://www.sciencedirect.com/science/article/pii/S1574004816000100
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