Retail Bank, Wholesale Bank, Investment Bank - Definition, Example

Bank is a business organization that allows people to deposit money, take loans and act as an financial intermediary.

Types of Banking:

There are many types of banking services. We can sort them all in three types. They are,

• Retail Banking
• Wholesale Banking
• Investment Banking

Retail Banking:

It is also known as Consumer Banking. It mainly involves with individual unlike wholesale banking. Banks generally offers certain services to certain class of people.

For example: In Bangladesh, Banks offer credit card to the people who earns good amount of money per month. The banks are doing business with people not with any other business. This is the main feature of retail banking. For another example: We deposit money either for fixed term or demand term. When we don't create account for business purpose, it is part of retail banking.

Wholesale Banking:

Wholesale banking mainly involves with business organization such as Larger customers or organizations such as mortgage brokers, large corporate clients, mid-size company, real estate developers and investors, and institutional customers ( For example: Provident fund).

For example: A business organization wants to create a current account. As this account creator is a business organization, the banking service will be wholesale banking.

Investment Banking:

It helps a company to find investment and helps various entities such as institutions, firms etc to invest in certain companies in another word underwriting services to companies who are seeking investment. It also provides mergers and acquisitions (M&A) advisory services to various customers.

Underwriting Services of investment banking:

• Firm Commitment: The underwriter agrees to buy the entire issue and assume full financial responsibility for any unsold shares.
• Best Efforts: Underwriter commits to selling as much of the issue as possible at the agreed-on offering price but can return any unsold shares to the issuer without financial responsibility.
• All-or-None: If the entire issue cannot be sold at the offering price, the deal is called off and the issuing company receives nothing.

I hope everything is clear now. Hope this helps.End.