What do corporate banks do?

While the retail banking sector caters for small businesses, corporate banking provides financial services tailored to meet the needs of larger companies. Large banks such as HSBC, Barclays, RBS and other large non-UK banks usually maintain specific divisions for handling the needs of corporate clients, commonly with annual turnover exceeding £5 million, separate from consumer or retail banking activities for smaller customers.

Commercial banking requirements can be quite different when compared with small businesses, as the volume, size and complexity of transactions are significant and therefore potentially riskier. Important functions of corporate banking are as follows:

  • Management of foreign exchange risk and interest rate sensitivity, through specialist advice and the implementation of hedging strategies.
  • Provision of loans, leasing arrangements, asset finance and supplier finance, where the money is loaned by the bank to help businesses to grow and avoid cash flow constraints.
  • Products and services for international trade; loans and trade finance; letters of credit, indemnities and guarantees.
  • Cash payment and management: cash pooling, foreign exchange transactions, liquidity management, and bespoke online banking facilities.
  • Sector-specific financial advice, for example in agriculture, engineering¬†and construction.
  • Investment banking services to advise on and assist with raising finance in the capital markets (discussed in a separate section within this publication).

Each of these areas requires a specific kind of expertise, underpinned by a strong understanding of how economics, business strategy and financial management interact.

Commercial organisations can range from small and medium-sized enterprises (SMEs) to larger quoted companies; all are highly dependent on their banks. In particular, advisory roles require several years to build up knowledge and experience so that companies can trust the advice that they receive.

For all roles within corporate banking, it is important to develop strong professional relationships with commercial customers and keep up to date with both the financial markets and developments within industry.

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