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Corporate Banking

Corporate Banking refers to the banking services for businesses. It relates specifically to those accounts that apply to corporate clients. The United States initially employed the term to separate it from the branch of banking activity known as investment banking following the congressionally passed Glass-Steagall Act of 1933. This act separated out the two different activities for more than half a century.

In the 1990s, Congress repealed this act and once again allowed for investment banking and corporate banking to be combined jointly under a single roof. Most banks jumped at the chance to become involved in both activities once again. Where the majority of banks are concerned, this banking for corporate customers proves to be a mainstay profit center. At the same time, this largest originator of customer loans also turns out to be the continuous source of routine write offs for loans that have not repaid. In fact, combing investment and retail banking again led to the root causes of the Global Financial Crisis.

The divisions of banks which handle corporate banking commonly help a large variety of customers. This might range from international multinational conglomerates with billions in revenues and offices around the world on down to medium-sized regional businesses that boast several million in income to small family run companies in only a single city. These commercial banks provide a significant range of services and products to companies and corporations, as well as other smaller financial institutions.

Treasury and cash management operations are a first key service. Corporations utilize these services to convert currency and manage their daily cash and working capital. There are also credit products and loans, often the largest segment of the corporate banking world. It is also among the greatest single sources of both risk and profit for the corporate banks. There will also be commercial real estate services offered involving portfolio evaluation, real asset analysis, equity and debt structuring.

Besides this, many such banks will provide trade finance such as bill collecting, letters of credit, and factoring. Equipment lending is another important arena as the commercial banks will structure specifically tailored loans as well as leases for a wide variety of different types of equipment which companies may need for various industries. Finally, employer services deliver group retirement plans and payroll services. They offer these through special subsidiaries of the bank.

The commercial banks will also offer to cross-provide a range of useful services through their investment banking divisions. These include securities underwriting and asset management.

Commercial banks prove to be crucially important to both national and global economies. Commercial institutions provide the loans which help businesses to expand and hire additional staff members. It is the fuel that allows the economy to grow larger. In the wake of the Global Financial Crisis of 2007 to 2009, banks suddenly stopped lending money to companies and corporations alike.

It led to an almost complete freeze in the worldwide lending and banking activities necessary to keep companies operating. This meant that the recession which ensued proved to be the most devastating and deep one since the Great Depression of the 1930s and early 1940s. The global economy suffered the total shock of a near-death experience. It woke up the global regulators and forced them to renew their regulatory focus on the biggest international banks which have since been considered to be “too big to fail” thanks to their critical importance to the global financial system.

The largest commercial banks in the United States (as of 2017) are JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and U.S. Bancorp. This contrasts with the largest American banks overall which include Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and U.S. Bancorp.

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