Difference Between Corporate & Commercial Banking

by Casey Reader; Updated September 26, 2017
Banks make much economic activity possible.

The banking sector has played a major role in the modern economy since its introduction during the commercial revolution of the 17th century, providing the basic infrastructure that underlies most economic activity. While the banking sector may appear at times to be largely homogeneous, this is far from the truth, with many specializations existing within the industry. The difference between corporate and commercial banking is largely the difference between the customers being served.

Commercial Banking

Commercial banking usually describes banking that is focused on the average consumer. These are mostly the services provided by any local savings and loan bank. Checking and savings accounts, as well as personal and small business loans, make up the core activities of commercial banking.

Corporate Banking

Corporate banking is generally used to describe those banking activities that deal with large businesses and corporations. Large-scale loans to businesses and major investments make up the largest part of this activity. Many large businesses would be unable to operate without the ready credit supplied by corporate banking. Corporate bankers issue short-term debt to large businesses in the form of "commercial paper," without which many businesses would be unable to operate and perform day-to-day operations.

Government

The federal government has come to play an extensive role in the activities of both corporate and commercial banking. Through the Federal Deposit Insurance Corporation, the federal government directly insures the money placed in every personal banking account. The federal government has been involved in the large-scale bailout of many banks to avert economic crisis. A system of regulation exists to regulate activities in both corporate and commercial banking.

Globalization

As the modern economy has become more global in nature, corporate banking has followed suit and become very much a part of an international network of investment and trade. Commercial banking has been much slower to follow this trend as consumers continue to prefer their local banks. The average consumers are much more likely to trust a bank that they are already familiar when it comes to securing their own personal savings.

About the Author

Casey Reader started writing freelance in 2010. His work appears on eHow, focusing on topics in history and culture. Aside from freelance work, Reader is actively pursuing a career in creative writing. He graduated from Centenary College of Louisiana with a Bachelor of the Arts in history and English literature.

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