Question

Briefly discuss the business of wholesale banking, including the main products and services, as well as the customer base. What are the key challenges in the wholesale banking market?

Answer 1

Wholesale banking is the banking practice that takes place between large institutions. For institutions with large financial needs the banks provide the banking services along with additional services at a lower base price as compared to what is being provided to the retail clients.

Wholesale banking involves lending and borrowing between institutional banks and is often carried on in the interbank market and often includes large sums of money.

The services provided by the whole sale banks include:-

• Banking services such as currency conversion.
• Underwriting.
• Mergers & acquisitions.
• Wholesale financing.
• large trade transactions.
• Market Making.
• Consultancy.
• Trade finance.
• Prime brokerage.

Major clients as far as wholesale banking goes are comprised of government agencies, pension funds, financial institutions as well as the merchant banks.

Some Challenges in the wholesale banking market

• The clientele of the Whole banks is very niche as the products offered are very highly customized as per the needs of the individual clients as a result it becomes really challenging sometimes to fulfill the exact requirements.
• The pace of innovation in the whole sale banking has been relatively slow as compared to the retail counterpart.
• Unlike retain banking where customer demand is the primary factor for the disruption it is the regulatory and compliance based factors which leads to disruptions for eg: Emergence of CCPs and Central securities consolidation as well as the regulatory trends such as new capital, BASEL NORMS, liquidity etc.