Corporate Banking: Services, Loans & Financial Solutions

Corporate banking is a subset of business banking that involves a range of banking services that are offered only to corporates. The services include the provision of credit, cash management facilities, etc.

Corporate Banking Services

1. Credit

Loans and related credit products are offered to corporate customers. Credit facilities form the largest share of profits for commercial banksCommercial BankA commercial bank is a financial institution that grants loans, accepts deposits, and offers basic financial products such as savings accounts.. The interest rates imposed on the loans are significantly high due to the amount of risk prevalent in lending to corporate customers.

2. Treasury services

Treasury services are used by companies to manage their working capital requirements. Such services are extremely important for multinational companiesMultinational Corporation (MNC)A multinational corporation is a company that operates in its home country, as well as in other countries around the world. It maintains a as they facilitate currency conversion.

3. Fixed asset requirement financing

Fixed asset requirement financing services are important for corporates involved in capital-intensive industries such as transportation, information technology, and heavy machinery manufacturing. Banks facilitate customized loans and lease agreements for the purchase of equipment, machinery, etc.

4. Employer services

Commercial banks also provide services such as the selection of retirement plans and healthcare plans, as well as payroll facilities, for employees.

5. Commercial services

Banks also provide services such as portfolio analysis, leverage analysis, debt and equity restructuring, analyses of real assets, etc. Other services that are of importance to corporate clients include asset management services and underwriters for initial public offering (IPOs), etc.

The services are undertaken by the investment banking arm of the commercial bank. Investment banking and corporate banking were separated under the provisions of the Glass-Steagall ActGlass-Steagall ActThe Glass-Steagall Act, also known as the Banking Act of 1933, is a piece of legislation that separated investment and commercial banking. The Act came as an emergency response to the massive bank failures during the Great Depression, as it was thought that speculation by commercial banks had contributed to the crash.

To learn more about the different corporate banking services, see CFI’s Introduction to Banking course!

Characteristics of Corporate Banking

1. Clientele

A bank’s business banking unit usually serves small to middle-sized businesses and large conglomerates.

2. Authority

A company’s corporate banking accounts can only be opened after obtaining consensus from the board of directors of the company. It means that they must be authorized by an official vote or a corporate resolution. The company’s treasurer usually opens corporate accounts.

3. Liability

Since companies are recognized as separate legal entities under the law, all contents of corporate accounts are the property of the company and not of the individual board members. It means that there is a certain degree of independence to corporate accounts. It also indicates that the personal creditors of the board of directors are not entitled to the contents of the corporate account of a company.

4. Credit rating

The conduct or functioning of the corporate account forms part of the credit history of the company. It affects the valuation and share prices of the company, the interest rates applicable to loans extended to the company, etc.

5. Bankers

Corporate banking requires a degree of expertise in the industry. Thus, corporate bankers are extremely well paid. JP Morgan Chase, Bank of America Merrill Lynch, and Goldman Sachs are some of the largest commercial banks in the world.

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