Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers. The term was originally used in the U.S. to distinguish it from investment banking, after the Glass-Steagall Act of 1933 separated the two activities. While the Act was repealed in the 1990s, corporate banking and investment banking services have been offered for many years under the same umbrella by most banks in the U.S. and elsewhere. Corporate banking is a key profit center for most banks; however, as the biggest originator of customer loans, it is also the source of regular write-downs for loans that have soured.
Products and Services – Retail Banking
Retail banking encompasses a wide variety of products and services, including:
Retail banking encompasses a wide variety of products and services, including:
- Checking and savings accounts – customers are generally charged a monthly fee for checking accounts; savings accounts offer slightly higher interest rates than checking accounts but generally cannot have checks written on them.
- Certificates of Deposit and Guaranteed Investment Certificates (in Canada) – these are the most popular investment products with conservative investors, and an important funding source for banks since the funds in these products are available to them for defined periods of time.
- Mortgages on residential and investment properties – because of their size, mortgages account for both a substantial part of retail banking profits, as well as the biggest chunk of a bank’s exposure to its retail client base.
- Automobile financing – banks offer loans for new and used vehicles, as well as refinancing for existing car loans.
- Credit cards – the high interest rates charged on most credit cards makes this a lucrative source of interest income and fees for banks.
- Lines of credit and personal credit products – Home equity lines of credit (HELOC) have diminished significantly in their importance as a profit center for banks after the housing collapse in the U.S. and subsequent tightening of mortgage lending standards.
- Foreign currency and remittance services – the increase in cross-border banking transactions by retail clients, and the higher spreads on currencies paid by them, makes these services a profitable offering for retail banking.
Retail banking clients may also be offered the following services, generally through another division or affiliate of the bank:
- Stock brokerage (discount and full-service)
- Insurance
- Wealth management
- Private banking
The level of personalized retail banking services offered to a client depends on his or her income level and the extent of the individual’s dealings with the bank. While a client of modest means would generally be served by a teller or customer service representative, a high net worth individual who has an extensive relationship with the bank would typically have his or her banking requirements handled by an account manager or private banker.
Read more: Retail Banking Vs. Corporate Banking | Investopedia http://www.investopedia.com/articles/general/071213/retail-banking-vs-commercial-banking.asp#ixzz4O9wtNmE7
Follow us: Investopedia on Facebook
No comments:
Post a Comment