Corporate Banking

Definition

The term corporate banking refers to financial institutions that specialize in offering services to corporations and mid-to-large businesses.  The products and services offered by corporate banks can help businesses not only with their daily financial operations, but also longer term plans.

Explanation

While retail banks specialize in serving the needs of small businesses and individuals, corporate banks cater to mid-to-large businesses and can be the most profitable operating units of their holding companies.  Generally, writing loans is the largest source of profit for a corporate bank, while also being a significant source of risk.

The following is a list of the products and services offered by corporate banks:

  • Accepting Deposits:  includes establishing traditional checking and savings accounts.
  • Loans and Credit:  includes lending money on installment plans, overdraft protection, letters of credit, underwriting, and issuing securities such as bonds.
  • Treasury and Cash Management: includes processes such as cash concentration, zero balance accounting, payment processing, and automated clearing house functions.
  • Equipment Lending: includes leasing of equipment and customized loans to purchase machinery.
  • Employer Services:  includes the outsourcing of functions such as payroll and the management of retirement plans.
  • Risk Management:  includes identification, assessment, and prioritization of risk as well as providing mitigating product such as insurance.

Related Terms

depository bank, advising bank, investment bank, industrial bank