Wholesale banking is a type of banking that focuses on providing financial services to other banks, financial institutions, and large corporations rather than retail customers. The primary activities of wholesale banks include:

1. money market Lending:– Providing loans to other banks and financial institutions.- Dealing in Treasury bills, repurchase agreements, and other money market instruments.

2. Loan Syndication:– Arranging loans for large borrowers by syndicating loans among multiple banks.- Providing credit risk sharing arrangements.

3. Foreign Exchange:– Providing foreign exchange services to banks and corporations.- Dealing in spot and forward foreign exchange markets.

4. Derivatives:– Offering derivatives products such as options, futures, and swaps to banks and corporations.- Hedging against interest rate, foreign exchange, and other market risks.

5. Cash Management:– Providing cash management services to banks and corporations, such as treasury management and payment systems.

6. Trade Finance:– Providing financing for international trade transactions.- Guaranteeing letters of credit and bills of exchange.

7. Investment Banking:– Providing investment banking services to corporations, such as mergers and acquisitions advisory.- Arranging capital raising transactions.

Key Differences from Retail Banking:

• Customers: Wholesale banks primarily deal with other banks and institutions, not retail customers.
• Products: Focuses on financial services for institutions rather than retail products such as loans and deposits.
• Transactions: Typically larger and more complex transactions than retail banking.
• Regulation: Subject to different regulatory requirements than retail banks.
• Competition: Highly competitive market with large banks dominating the market.

Examples of Wholesale Banking:

• Banks lending money to other banks to cover their own funding needs.
• A bank arranging a loan for a large corporation.
• A bank providing foreign exchange services to another bank.
• A bank offering derivatives to a corporation to hedge against market risk.

Wholesale banking plays an important role in the overall financial system by facilitating financial transactions between institutions and enabling large-scale economic activity.