Banks play a significant role in the economic growth of the country. Banks are the financial intermediaries between lenders and borrowers to fulfil their needs for funds and returns. Banks do several functions and provide various services to meet the needs of different customers.
Wholesale banking and corporate banking are interchangeably used, but there is a slight difference in their targeted customers.
Key Takeaways
- Wholesale banking deals with large corporate clients, financial institutions, and governments, while corporate banking deals with individual corporations.
- Wholesale banking provides underwriting, trading, and asset management services, while corporate banking provides services such as lending, treasury management, and debt capital markets.
- Wholesale banking services are provided to clients with high net worth, while corporate banking services are provided to individual corporations based on their creditworthiness and financial needs.
Wholesale Banking vs Corporate Banking
Wholesale banking provides financial services to major customers, including governmental organizations and multinational enterprises. While the focus of corporate banking is the financial needs of corporate. They provide loans, credit, savings accounts, and checking accounts to businesses.
Wholesale Banking provides services to those companies and banks that maintain strong financial statements. It provides cash management, intermediary services, 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: commercial banking, corporate banking, and investment banking.
Corporate banking is a wholesale banking segment targeting only large corporations. It provides all wholesale and commercial banking services to large or multinational companies.
It maintains a good relationship with corporate clients and supports them in their large projects and development strategies.
Comparison Table
| Parameters of Comparison | Wholesale Banking | Corporate Banking |
|---|---|---|
| Definition | Wholesale 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 returns | The services are provided to only limited customers and only in the name of the corporate company and not to individual customers. |
| Services | Cash management, intermediate payment products, short-term and long-term loans, syndicate lending, mergers and acquisitions, etc. | Treasury management, credit products, loans for projects, employer services, trade finance, and others. |
| Example | SBI is also a wholesale bank with 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. |
| Disadvantages | High 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 make profitable financial decisions and adds extra security to the promises made by customers.
Employees of 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 their businesses but also charges high processing fees. Customers get high returns on investments but at the same time have a fear of risks of exploitation and other financial risks.
What is Corporate Banking?
Corporate banking is one of the segments or divisions of wholesale banking that only provides banking services to large or medium cooperates. The corporate clients can be private or government authorities.
Corporate banking provides cash and asset management, advisory services, project investment, international trading services, currency exchange, liquidity management, risk management, and other banking services.
The customer must open a corporate account under the corporation’s name only.
The customer has to deposit a lot 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 higher salaries than other banks. This banking system has high customer and employee satisfaction than other banks.
Main Differences Between Wholesale Banking and Corporate Banking
- Wholesale banks offer financial services and products to their customers, from individuals to large corporations, whereas corporate banks offer financial products and services to only corporate companies.
- The services offered by wholesale banking are deposits, credits, cash management, syndicate banking, mergers and acquisitions facilities, international financial facilities, and others. Corporate banking services include employer services, treasury management, project loans, development loans, and other credit products.
- Corporate banks pay the highest returns to their customers than wholesale and other banking systems.
- Curate banks have limited customers, and wholesale banks have large customers.
- Corporate banks have the highest operational costs, and wholesale banks have lower operating costs.
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