Wholesale Banking
What Is Wholesale Banking?
Wholesale banking alludes to banking services sold to large clients, like different banks, other financial institutions, government agencies, large corporations, and real estate engineers. It is something contrary to retail banking, which centers around individual clients and small businesses. Wholesale banking services incorporate currency conversion, working capital financing, large trade transactions, mergers and acquisitions, consultancy, and underwriting, among different services.
Understanding Wholesale Banking
In its pith, wholesale banking is the financial practice of lending and borrowing between two large institutions. The types of services are given by investment banks that frequently also offer retail banking. ** **This means that an individual searching for wholesale banking wouldn't have to go to a special institution and could instead engage the same bank where he directs his personal retail banking.
The services that are thought of "wholesale" are reserved exclusively for government agencies, pension funds, corporations with strong financials, and other institutional customers of a similar nature. For elements require more service than an individual or a small business, and one that needs it on a large scale. Because of the large scale, the prices offered for these services are typically lower than what is offered to an individual.
Wholesale banking also alludes to the borrowing and lending between institutional banks. This type of lending happens on the interbank market and frequently includes very large amounts of money.
Example of Wholesale Banking
The easiest way to conceptualize wholesale banking is to think of it as a discount superstore, as Costco, that deals in such large amounts that it can offer special prices or scaled down fees, on a for each dollar basis. It becomes advantageous for large organizations or institutions with a high amount of assets or business transactions to engage in wholesale banking services rather than retail banking services.
For example, there are many occasions when a business with various locations needs a wholesale banking solution for cash management. Technology companies with satellite offices are a prime candidate for these services. Suppose that a SaaS (software-as-a-service) company has 10 sales offices distributed around the United States, and each of its 50 sales team individuals has access to a corporate credit card. The owners of the SaaS company also expect that each sales office keeps $1 million in cash reserves, totaling $10 million across the business. It's easy to see that a company with this profile is too large for standard retail banking.
Instead, the business owners can engage a bank and request a corporate facility that stays with all the's financial accounts. Wholesale banking services act like a facility that offers discounts assuming a business meets least cash reserve requirements and least month to month transaction requirements, the two of which the SaaS company will hit.
It is in this manner beneficial for the business to engage in a corporate facility that consolidates all its financial accounts and diminishes its fees, rather than keeping 10 retail checking accounts and 50 retail credit cards open.
Highlights
- Most standard banks offer wholesale banking services in addition to traditional retail banking services.
- Wholesale banking also alludes to the borrowing and lending between institutional banks.
- Wholesale banking alludes to banking services sold to large clients, like corporations, different banks, and government agencies.
- Wholesale banking is something contrary to retail banking, which services individuals and small businesses.
- Typical services sold are mergers and acquisitions, counseling, currency conversion, and underwriting.
