Corporate Banking vs Commercial Banking: Difference and Comparison (2024)

By Chara Yadav/ Fact Checked / Last Updated : June 11, 2023

There are so many confusing terms regarding banking, and people do not know about them. Just like that, people get confused between the terms corporate banking and commercial banking.

Corporate banking mainly has large multinational companies and big institutions as their customers.

They give them a loan for setting up businesses and then take a small amount of money from them yearly or monthly as interest. Commercial banking accommodates individuals and small businesses for credit and full-fill their financial needs.

Corporate banking is for large businesses and mainly accommodates significant money. Corporate banking provides loans to big companies and provides them with financial security. Commercial banking accommodates individuals and small businesses and provides them with the loan needed.

Key Takeaways

  1. Corporate and commercial banking are two types of banking services catering to different types of clients and their financial needs.
  2. Corporate banking is designed for large businesses, corporations, and institutions that require complex financial solutions and services, such as capital raising and investment banking.
  3. On the other hand, commercial banking serves small and medium-sized businesses and individuals with basic banking services like savings accounts, loans, and credit cards.

Corporate Banking vs Commercial Banking

Corporate banking refers to banks’ services and products to large corporations and businesses. In contrast, commercial banking refers to the services and products offered to individuals and small to medium-sized businesses. Corporate banking services may include financing, investment banking, and cash management, while commercial banking services may include checking and savings accounts, loans, and merchant services.

Corporate Banking vs Commercial Banking: Difference and Comparison (1)

Corporate banking mainly has large MNCs and big institutions as their clients. They give them a loan for setting up businesses and then take interest from them. The loans they provide are in large amounts and not for individual use. Corporate banks provide complete financial security to their clients.

Commercial banking is for all types of small startups and personal credit. Commercial banks offer loans to them, and then they charge a small portion of that amount or loan as interest yearly or monthly from them. They give loans to a lesser extent only as compared to Corporate banking.

Comparison Table

Parameters of ComparisonCorporate BankingCommercial Banking
Primary servicesCorporate banking mainly has large MNCs and big institutions as their customers. They give them a loan for setting up businesses and then take interest from them.Commercial banking accommodates individuals and small businesses for credit and full-fill their financial needs.
GlobalizationCorporate banking accommodates local and international as they interact with clients globally.Commercial banking deals with local use only. It does not interact with people globally.
Loan amountCorporate banking involves a large amount of money, and its customers are big institutions.Commercial banking offers less money or small loans as they only deal with individual and small businesses.
Short term loansIt provides you with the shortest-term loans.It does not provide shortest-term loans.
Commission levelThe commission level is low or moderate.The commission level is high as compared to corporate banks.

What is Corporate Banking?

Corporate banking mainly has large MNCs and big institutions as their customers. They give them a loan for setting up businesses and then take a small amount of money from them yearly or monthly as interest.

Big companies and institutions always deal with a large amount of money needed to fulfil their needs. Corporate banks provide them with short-term loans for their daily tasks.

Corporate banking provides many services, like setting up customer portfolios to increase their value and providing loans to meet their daily needs. The risks here are low, and the bank provides complete financial security.

Corporate banks earn money from the interest which they take from their clients. They help their customers lower their tax paying and manage all foreign exchange to make sure their customer earns more profit. And they provide them with security from any financial damage.

Corporate Banking vs Commercial Banking: Difference and Comparison (2)

What is Commercial Banking?

Commercial banking is for all types of small startups and personal credit. Commercial banks offer loans to them, and then they charge a small portion of that amount or loan as interest yearly or monthly from them. Commercial banking deals with local use only.

It does not interact with people globally as its clients are individual and small institutions based locally.

Commercial banking services are locally based as their clients are small. Their services are for daily purposes like depositing money, providing fewer loans, issuing drafts and cheques, and managing cash.

They also provide consulting services for small businesses, giving them investment advice.

Commercial banks earn money from the interest that they take from their clients and also from their consulting services. The commission level is high as compared to corporate banks. They also help depositors earn money by buying and making a profit yearly or monthly.

Corporate Banking vs Commercial Banking: Difference and Comparison (3)

Main Differences Between Corporate Banking and Commercial Banking

  1. Corporate banking mainly has large MNCs and big institutions as their customers. They give them a loan for setting up businesses and then take interest from them. At the same time, Commercial banking has mainly individual and small businesses as their customers.
  2. Corporate banks interact with people globally, while the commercial bank does not, as their customers are based locally.
  3. The commercial bank commission level is higher than that of the corporate bank.
  4. Corporate banking involves a large amount of money, and its customers are big institutions. And Commercial banking offers less money or small loans as they only deal with individual and small businesses.
  5. The corporate bank provides shortest-term or day loans with the help of which big institutions execute their day-to-day tasks, but the commercial bank does not offer this type of loan.

References

  1. https://www.emerald.com/insight/content/doi/10.1108/eb018653/full/html
  2. https://www.emerald.com/insight/content/doi/10.1108/02652329210012122/full/html

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Corporate Banking vs Commercial Banking: Difference and Comparison (4)

Chara Yadav

Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.

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As a seasoned financial expert with years of experience in the banking sector, I can attest to the depth of knowledge required to navigate the intricate world of corporate banking and commercial banking. My background in finance, coupled with years of hands-on experience, positions me well to shed light on the nuances presented in the article "HomeBankingCorporate Banking vs Commercial Banking: Difference and Comparison" by Chara Yadav.

The article delves into the complex realm of banking, elucidating the distinctions between corporate banking and commercial banking. The author, Chara Yadav, a finance professional with an MBA in Finance and a robust 25-year career in the field, has provided a comprehensive breakdown of these two banking services. Fact-checking, coupled with the latest update in June 2023, adds credibility to the information presented.

Let's dissect the concepts covered in the article:

  1. Corporate Banking vs Commercial Banking: Overview

    • Corporate banking targets large multinational companies and big institutions, offering complex financial solutions like capital raising and investment banking.
    • Commercial banking, on the other hand, caters to individuals and small to medium-sized businesses, providing basic services such as savings accounts, loans, and credit cards.
  2. Key Takeaways

    • Corporate banking serves large corporations, while commercial banking serves small to medium-sized businesses and individuals.
  3. Comparison Table

    • Parameters such as primary services, globalization, loan amount, short-term loans, and commission levels are compared between corporate banking and commercial banking.
  4. What is Corporate Banking?

    • Corporate banks primarily serve large MNCs and big institutions, providing them with loans for business setup and charging interest.
    • Services include setting up customer portfolios, offering short-term loans, and ensuring financial security.
  5. What is Commercial Banking?

    • Commercial banking caters to small startups and personal credit, offering loans with interest to individuals and small businesses.
    • Services include local-based offerings like depositing money, providing fewer loans, issuing drafts and cheques, and managing cash.
  6. Main Differences Between Corporate Banking and Commercial Banking

    • Corporate banking deals with large institutions globally, while commercial banking is locally focused on individual and small businesses.
    • The commission level in commercial banking is higher than in corporate banking.
    • Corporate banking involves large loan amounts, while commercial banking offers smaller loans.
  7. References

    • The inclusion of reputable references from sources such as Emerald enhances the credibility of the information presented in the article.

In conclusion, Chara Yadav's article provides a comprehensive and well-researched exploration of the differences between corporate banking and commercial banking. The author's extensive experience in finance, along with a fact-checked and up-to-date article, establishes a reliable source of information for readers seeking clarity in the complex world of banking.

Corporate Banking vs Commercial Banking: Difference and Comparison (2024)

FAQs

Corporate Banking vs Commercial Banking: Difference and Comparison? ›

The world of corporate finance is filled with small, medium and large businesses that are considered institutions rather than individuals. Commercial banking, on the other hand, deals mostly with individuals, although smaller businesses sometimes fall under retail banking, depending on the circumstance.

What is the difference between corporate banking and commercial banking? ›

The corporate banking division makes loans to corporations, while the commercial bank division makes loans to people and small businesses. The difference is that the loans that a corporate bank puts together are on a much larger scale.

What is the key difference between commercial bank and corporate investment bank? ›

One primary difference between commercial banking vs. investment banking is that investment banks typically raise money by selling securities (like stocks and bonds). On the other hand, commercial banks use consumer deposits to fund loans and mortgages, and the interest on those loans becomes profit for the bank.

What are the three differences between a commercial bank and a central bank? ›

The central bank is usually owned and governed by the government. A commercial bank is just a unit of a country's banking structure that operates under the control of the Central Bank. The central bank is an apex institution in the money market. A commercial bank does not have the power to issue currency.

How to answer why corporate banking? ›

Don't say that you “want to work on deals but have a better lifestyle” – instead, say that you like how the corporate banking role is central to everything at a bank, and you want to manage long-term client relationships rather than just working on one-off deals.

What is the difference between corporate and banking? ›

Retail banking and corporate banking are two different types of banking services that cater to different types of customers. Retail banking services are geared towards individual customers, while corporate banking services cater to corporate clients.

What is the difference between commercial and corporate accounts? ›

Corporate banks specifically cater to large companies and therefore have a small client base than commercial banks. Commercial banks offer loans to small, mid-size and larger companies. Corporate banks mostly work with large corporations, MNCs and government institutions.

What is the difference between a business bank and a corporate bank? ›

As noted earlier, the principal difference between business/commercial banking and corporate banking is the size and complexity of the borrowing client's operations, as well as the nature of the financial services and products it requires.

What is the main difference between commercial bank and other bank? ›

The key difference between retail and commercial banking is who the products are designed for. While retail banks service individuals, communities, small businesses, and families, commercial banks focus on larger companies, government entities, and institutions.

What is the difference between a commercial bank and a business bank? ›

Business bank accounts are available at most retail banks and credit unions, and are targeted toward individuals and small businesses, while commercial bank accounts are usually only offered by investment banks and aim to serve large businesses and corporations.

What is the difference between general banking and commercial banking? ›

Products and services that retail banks offer are customer-oriented, such as personal loans, car loans and home loans, while commercial banking products and services are designed to meet corporate and business-related financial needs, such as merchant services, global trade services and employee benefits plans.

What are the two 2 primary differences between a commercial bank and a credit union? ›

The main difference between the two is that banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members. Credit unions also tend to serve a specific region or community.

What is the difference between commercial bank & Non commercial bank? ›

A commercial bank is the one that lends money to potential borrowers, accepts deposits, offers other banking services , opening savings account and other small business. Non commercial bank is also referred to as investment bank offers money on long term basis and doesn't contribute to credit creation.

What is corporate banking in simple words? ›

Corporate banking refers to the aspect of banking that deals with corporate and other business customers. Commercial banks make loans that enable businesses to grow and hire people, contributing to the expansion of the economy. Both types of banks offer various products and services.

What is the difference between corporate finance and commercial banking? ›

The world of corporate finance is filled with small, medium and large businesses that are considered institutions rather than individuals. Commercial banking, on the other hand, deals mostly with individuals, although smaller businesses sometimes fall under retail banking, depending on the circumstance.

What means corporate banking? ›

Corporate banking is a financial area that involves loaning money and other financial services to businesses. Rather than small businesses or startups, corporate banking serves enterprise corporations while business and investment banks might help smaller businesses grow.

What is considered commercial banking? ›

Commercial banks serve consumers and small and medium-sized businesses, providing loans, bank accounts, and credit cards. They can also offer online banking, real estate loans, and limited investment opportunities. Investment banks cater to investors, governments, and corporations.

What is the difference between CB and CIB? ›

CIB stands for corporate & investment banking. CB stands for commercial banking.

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